The kilometre charge would replace road tax and purchase tax in 2012. The idea is to cut CO2 emissions while halving traffic jams in what is one of Europe's most congested road networks.
The transport ministry expects the number of kilometres travelled to drop by 15% as the charge on the distance driven will lead people to opt more readily for public transport. This would reduce carbon and fine particle emissions by over 10%, it estimates.
The amount of the tariff will depend on the CO2 emissions produced by a passenger car, or on weight for other vehicles. Certain vehicles like taxis, buses and motorcycles will be exempt from the charge, while an alternative system will be set up for foreign vehicles.
A driver of a standard car would initially be charged three cents per kilometre, increasing to 6.7 cents in 2018, according to the proposed law. Legislation introducing rush-hour surcharges specific to a location could be introduced later on, the Ministry of Transport said.
The kilometres will be tracked with a GPS device to be installed in every vehicle. This will record each journey and send the information to a billing agency.
Nevertheless, most people will end up paying less, as the charge will not exceed current taxes and the abolition of the purchase tax will slash a quarter off a car's price, the ministry argues. All the revenue collected from the charge would go directly to building roads, railways and other transport infrastructure.
The kilometre charge has been hotly debated for years due to privacy concerns, but the transport ministry offered assurances that information sent via the GPS would be "legally and tecnically protected".
"The authorities will not have access to any journey details and will not be able to track any vehicles. So the privacy of road users will be guaranteed," it said in a statement.
But environmentalists argued that future transport IT to help cut emissions will ultimately not be any more invasive than the ability to send a text via mobile phone.
"People will worry that the system heralds the arrival of Big Brother, but our mobile phone handsets already double as a highly-effective means of tracking our movements," said the UK Environmental Transport Association (ETA).
