It’s time Norway taxed luxury electric cars, say IMF economists

Electric cars can be seen at the Tesla charging station in Gulsvik, Norway, March 17, 2019. REUTERS / Terje Solsvik / File Photo

Norway should start taxing high-end battery-powered cars to lower the overall cost of its generous electric vehicle (EV) incentives, International Monetary Fund (IMF) economists said in a working paper Thursday.

If implemented, taxes on electric cars from luxury car manufacturers such as Porsche (PSHG_p.DE), Jaguar (TAMO.NS) and Mercedes-Benz (DAIGn.DE) as well as high-end Tesla (TSLA.O) and Audi (VOWG_p.DE) models.

With the goal of being the first country to stop selling gasoline and diesel cars by 2025, oil-producing Norway is currently exempting all fully electric vehicles from taxes on internal combustion engines. Continue reading

As a result, 54% of all new cars sold in Norway last year were battery-powered, a world record, up from 42% in 2019 and just 1% a decade ago. Continue reading

But the policy comes at a significant cost, estimated by the ruling center-right coalition to be 19.2 billion Norwegian kroner ($ 2.32 billion) in lost government revenue last year, or an average of about 250,000 kroner for every new electric car sold.

The more expensive a car, the higher the sales taxes and other levies that the state waives, which means that high-income households receive the largest implicit subsidies while increasing the cost per ton of CO2 emissions saved.

“Norway could improve the alignment of its tax incentives to increase its environmental impact,” concluded the paper by three IMF economists.

One such targeted change could be to offer subsidies for the scrapping of gasoline and diesel cars when they are replaced with electric vehicles, the economists said, adding that Norway should also consider increasing taxes on polluting cars.

The proposals could be well received by Norway’s center-left opposition, which wants to win power in the national elections coming up in September.

While Norway’s Labor and other center-left parties support the goal of selling only electric vehicles by 2025, they all want to start levying sales taxes on that portion of the cost of a car that exceeds DKK 600,000.

For comparison, the cheapest model of an electric Porsche costs 758,000 crowns, while the top model starts at 1.7 million crowns, according to the automaker’s website.

($ 1 = 8.2823 Norwegian crowns)

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