Due to an expected decline in revenue from vehicle taxes, the government in Switzerland is planning a new tax on electric vehicles (EV). As drivers in Switzerland make the switch to EVs, the Federal Council says they will need to replace the funding generated by fuel and mineral oil levies.

Electric car sales in Switzerland mean lower tax revenue for government

Like most of Europe, Switzerland plans to be climate neutral by 2050, which means all drivers will have to switch from combustion engines to electric. To achieve this goal, the government has made electric vehicles cheaper through financial incentives like tax breaks.

This approach has worked, with sales of electric vehicles skyrocketing in Switzerland in the last few years. However, as more people buy electric cars, revenue from fuel and mineral oil taxes - which used to net the government 3 billion francs a year - is declining, leaving the state without a key revenue source to maintain the road network.

Price-per kilometre tax proposed for electric cars in Switzerland

To combat the loss in revenue, the Federal Council has announced a “replacement fee” that will be levied on vehicles that use alternative sources of energy, like electric cars. The tax will be a fixed amount per kilometre driven and will probably be calculated using recording devices in cars, a system that is currently used by lorries.

The move has been applauded by the Touring Club of Switzerland, which said the plan will plug the funding gap for Swiss roads and motorways for decades to come. Spokesperson Daniel Graf said that while he agreed with the idea, the Federal Council will have to ensure drivers won’t pay more in vehicle taxes than they do now.

New tax expected to be enforced by 2030

However, the largest political party in Switzerland, the Swiss People’s Party (SVP), said it “firmly rejects a kilometre tax on electric cars.” National Councillor Thomas Aeschi called for roads to be funded through regular taxes, saying, "It shouldn't be the case that every kilometre of road traffic is billed individually, while public transport is financed from general federal funds and thus from taxpayers."

On June 29, the council instructed the Departments of Environment, Transport and Finance to come together to determine what a “replacement tax” will look like. The Federal Council expects the law to be implemented in 2030, although it will need a constitutional amendment, and therefore a referendum, to successfully pass.