Spot on!!
Make it unavoidable, and not exactly tough to work out a reasonable fair system. The annual average mileage (15000km) and average tax (500) and added the average motor/MPG (Focus/40mpg) and put that on fuel.
If you are a petrol head with 3 cars, doing 20000km per annum, you get to run a daily 520d, the weekend M3 and the classic car.
If you are a Biddy with a Yaris getting a litre of milk and do 2000 km per annum
- The coffers improve as it can be avoided.
- Can't afford the fuel, you walk or use public transport.
- There is not need for a motor tax office and all that goes with it; put the employees to use in another sector; admin in health
Heck, a transferable tax disc would be an improvement, once it met or exceeded the required payment for the car you are using it for.