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First moves on company cars

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The Commission says it is taking the first steps towards tackling the problem of tax subsidies that come through favourable treatment of company cars. Its draft transport white paper identifies company car taxation as a problem, and earlier this month it co-hosted a seminar to discuss the issue.

Research commissioned by Brussels and conducted by a Danish economics consultancy shows that company cars represent roughly half of Europe’s car sales, and that tax breaks for these cars and fuel represent a subsidy of €54bn and increase CO2 emissions from Europe’s cars by 4-8%. The damage to the environment is caused by two behavioural factors: an artificially high demand for large and fuel-consuming vehicles, and a greater number of kilometres driven, both because the car ‘owner’ doesn’t have to pay.

T&E director Jos Dings said: ‘It’s good this massive hidden subsidy to the car and oil industries and to white-collar employees is finally on the table. Europe cannot afford such schemes any more – it should scrap them and lower labour taxes simultaneously so that we have less pollution and more jobs.’

There is no harmonised European approach to company car taxation. Until recently Greece had no tax at all on company cars, while Belgium and Germany tax very little. Great Britain and Sweden were Europe’s original large-scale promoters of company cars. The British now have a scheme that offers tax incentives for energy-efficient cars, but the EU’s Danish study recommends that all subsidies should be withdrawn.