Grant Klein, PwC transport leader, said: “There are roughly 40m licensed vehicles in the UK, which are a huge supporting contributor to the public purse and a shrinking fuel duty tax base will be cause for alarm as the current fiscal position remains stretched.
“It is difficult to imagine the Treasury giving up its substantial current fuel duty revenue without a replacement in mind. It is now more important than ever for policymakers to think about long-term sustainability of tax revenues, and how increasingly dated taxation mechanisms can be replaced.”
PwC suggested a pay-per-mile tax on EVs, a policy that has already been introduced in Iceland and New Zealand.
In Iceland, drivers with EVs and plug-in hybrid vehicles must pay 5.4p for every mile they drive. Drivers use an app to report the odometer reading on their vehicles and are invoiced every month.
A UK system could be done automatically through geolocation trackers or through self-reporting like in Iceland.
Think tanks including the Policy Exchange, the Centre for Policy Studies and the Resolution Foundation have all put forward similar proposals.