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Company car taxation

FACT SHEET NO.: Cat.-No. 2 / Subcat-No.2.2-2

General Information

Title

FACT SHEET NO.: Cat.-No. 2 / Subcat-No.2.2-2

Category

2. Taxation

Subcategory

2.2 Transport taxation

Transport policy measure (TPM)

Company car taxation

Description of TPM

Providing cars for private use is usually a low-tax way of employee remuneration. (The reason is that a car is only a cost item in the company accounting, not a salary with taxes, insurance etc) As a result, nowadays approx. 50% of new cars are bought or leased by companies, although the majority (e.g. 70-80% in Belguim and the Netherlands) of company car mileage is non-business use. Besides the large losses in state revenues, this "subsidy" leads to undesirable environmental and traffic effects, therefore taxation of company cars would be socially beneficial.

Implementation examples

Already implemented in most European countries (including Hungary)

Objectives of TPM

Reduce the tax burden gap between free private use of company cars and other ways of employee remuneration, in order to moderate undesirable environmental and traffic effects and state revenue losses.

Choice of transport mode / Multimodality

No mode choice impact mentioned, however experts estimation says increase might be expected due to less car usage

Origin and/or destination of trip

shorter commuting distances

Trip frequency

no impact mentioned but is it possible that the company car taxation will decrease the possibility of non-business car usage and the trip frequency

Choice of route

no impact

Timing (day, hour)

no impact

Occupancy rate / Loading factor

no impact (possibly affecting the occupancy rate due to an increase of fellow passengers due fewer company cars)

Energy efficiency / Energy usage

decrease in fuel consumption

Main source

[1] Næss-Schmidt, S., Winiarczyk M.: Taxation papers(2010): Company Car Taxation. Working paper no. 22. Copenhagen Economics
[2] HM Treasury and HM Revenue & Customs (2007): Modernising tax relief for business expenditure on cars: a consultation update.
[3] John Healey (2004): Report on the evaluation of the company car tax reform. In: Inland Revenue

Traffic Impacts

Passengers 

         

Transport operators 

           

Unassigned 

         

Travel or transport time

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Risk of congestion

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Vehicle mileage

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Service and comfort

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Overall impacts on social groups

Implementation phase

Operation phase

Summary / comments concerning the main impacts

- When employees face low-cost (or free) commuting by their company car, the average distance between their home and workplace is getting longer. It causes congestions on main roads from the suburbs. In some cases even free fuel can be povided for private routes without paying additional (or higher) fuel taxes, which also leads to excessive car use. [1]

Quantification of impacts


Economic Impacts

Passengers 

         

Transport operators 

           

Unassigned 

         

Transport costs

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Private income / commercial turn over

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Revenues in the transport sector

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Sectoral competitiveness

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Spatial competitiveness

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Housing expenditures

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Insurance costs

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Health service costs

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Public authorities & adm. burdens on businesses

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Public income (e.g.: taxes, charges)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Third countries and international relations

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Overall impacts on social groups

Implementation phase

Operation phase

Summary / comments concerning the main impacts

- At the moment EU governments lose tax revenues in average 0,5% of GDP due to unequal taxation of company cars and other ways of remuneration. [1] Hence, a taxation will significantly increase the public income and lower the private income.

Quantification of impacts


Social Impacts
Environmental Impacts

Passengers 

         

Transport operators 

           

Unassigned 

         

Air pollutants

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Noise emissions

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Visual quality of the landscape

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Land use

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Climate

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Renewable or non-renewable resources

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Overall impacts on social groups

Implementation phase

Operation phase

Summary / comments concerning the main impacts

- The average value of company cars are significantly higher than private ones. While there is a strong correlation between a car's value and its GHG emissions (as well as fuel consumption), high company car taxes may reduce average car size, pollution and consumption. (the more high tech engine the lower consumption and higher prize)
- Lower car usage and traffic loads will have positive effects for residents at heavy loaded arterial roads concerning air pollutants and noise emissions.
- 3rd level impact: Lower demand regarding car usage affects the land usage positively due to a decreasing demand of roads.

Quantification of impacts


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