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The costs of subsidising company cars

July 22, 2010

Company cars are generally undertaxed in the EU, distorting the economy, adding welfare costs to society including greater CO2 emissions, and generating artificial demand for larger cars.

[mailchimp_signup][/mailchimp_signup]These are among the conclusions of a new Danish study into the tax treatment of company cars, which presents new, nearly-EU-wide estimates of the levels of subsidies to company car users. The study, ‘Company Car Taxation’ by Copenhagen Economics, says direct revenue losses may be close to 0.5% of the EU’s GDP (€54 billion), with Belgium and Germany topping the charts with 1.2 and 0.9% respectively. It says evidence from Belgium and the Netherlands suggests that pure business use represents only 20-30% of company car use, the rest being private use.