Norway should introduce tax on electric cars to lower global cost

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OSLO, June 10 - Norway should begin taxing generous battery-powered cars to lower the global cost of its high electric vehicle incentives, said economists at the International Monetary Fund in a report Thursday.

If implemented in Norway, Norway could see taxes levied for the first time on electric cars by high automakers such as Porsche Jaguar and Mercedes-Benz, as well as luxury model Tesla and Audi.

As Norway seeks to become the first country to end the sale of gasoline and diesel cars by 2025, oil-producing Norway currently exempts all completely electric vehicles from taxes imposed on internal combustion engines.

As a result, 54% of all new cars sold in Norway last year were driven by batteries only, a global record, up from 42% in 2019 and a mere 1% today.

However, the policy comes at a substantial cost, estimated by the ruling centre right coalition at 19.2 billion Norwegian crowns in lost state revenue last year or about 250,000 crowns on average for each new electric car sold.

The more expensive a car is, the higher the sales tax and other levies being received by the state, thus saving the largest implied subsidies to household income while also reducing the cost per tonne of carbon emissions, the paper found.

Norway could improve the targeting of its tax incentives to increase their environmental impact, the paper from three IMF economists concluded.

One such change could be in Canada to actually scrap petrol and diesel cars when they are replaced by EVs, the economists said, adding that Norway should also consider re-introducing tax on polluting cars.

The proposals could be well resonant with Norwegian opposition centre-left, which is likely to win power in national elections due in September.

While supporting the goal of selling only EVs by 2025, Norway's Labour and other centre-left parties want all to start imposing sales tax on the portion of the car's cost that exceeds 600,000 crowns.

For comparison, the less expensive model of an electric Porsche starts at 758,000 crowns, while the top model starts at 1.7 million crowns according to the automaker's website. The time is now up to a certain time!

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