A legal challenge against Victoria's electric vehicle tax has begun in the High Court. 

A levy was introduced in Victoria in July 2021 to charge road users based on how much they travel.

The tax means electric vehicle users can be charged about 2 cents per kilometre, over a distance declared by the owner in the annual registration process.

But the High Court is being urged to strike out the law on the basis that the state does not have the power to impose such a charge.

Under the constitution, only the Commonwealth can impose an ‘excise’ charge, so road users are trying to convince the court that the charge can be considered an excise. 

All states and territories have lined up in support of Victoria's right to impose the charge.

Drivers and the Commonwealth both argue that the Zero and Low Emission Vehicle Distance based Charge Act, known as the ZLEV charge, imposes a tax on goods.

“An excise is in essence a tax on some step taken in dealing with goods,” the Commonwealth submissions said.

“The tax … is calculated by reference to the quantity of the consumer's usage of a ZLEV. It imposes an excise.”

The criteria defining an excise includes a tax on goods that is imposed before consumption and which alters the price of the goods.

The states argue that the charge is not an excise, because it is not imposed on any goods, but rather an activity.

Because the High Court is being asked to draw the line on what can and cannot be taxed by the states, the case may have wider implications for all levels of government.