European
Federation for Transport and Environment
Secretariat
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Paying properly – not paying differently
Towards a taxation of
passenger cars that addresses both car-ownership and -usership
Harmonising road transport taxes in Europe improves
the Internal Market and can be an important step towards achieving transparency
in the ways by which to levy charges and taxes for road and car use. But will
such tax harmonisation be of benefit to the environment? What are the
environmental implications of the Commission’s recent attempts to alter and
harmonise existing car taxation systems? This T&E position paper provides
answers to the above questions and sheds a critical light on the recent
Commission Communication on the Taxation of Passenger Cars in the EU. The
position paper argues that apart from properly charging the use of private cars
it is necessary to continue to charge car-ownership. Only by charging both user-
and ownership can passenger transport become more sustainable!
The
European Commission is currently calling for significant changes in the way
passenger cars are taxed. The intention is to gradually apply the user pays
principle to motorised transport. According to DG TAXUD, the envisioned
taxation system will ensure a more appropriate internalisation of the external
costs of private cars – an important principle for which T&E has long been
arguing.
In
general, this Communication carries a potential to make transport more
sustainable, because it allows for charging the actual use of cars. The
Commission calls for the abolition of car Registration Taxes (RT) in favour of
higher Annual Circulation Taxes (ACTs). It argues that “vehicle tax bases need
to be restructured in order to establish a more direct relation between
taxation levels and the CO2-emissions of new passenger cars. Both RT
and ACT should be turned into entirely CO2 based taxes, or at least
a CO2 sensitive element should be added to both of them.” Because of its positive emphasis on CO2
efficiency and charges on the actual use of cars this Communication
clearly needs to be welcomed. But there are also a number of environmental
problems that DG TAXUD does not capture with the fiscal measures it suggests.
Particularly, the ever-growing number of cars in urban areas, as well as an
ever-increasing amount of land that is being dedicated to road transport
infrastructure are two completely neglected issues. Therefore, we argue that a
harmonised car taxation as it is proposed by DG TAXUD ought to address at least
two problems: on the one hand it needs to charge car-use based on emissions,
and on the other hand it needs to charge car ownership based on land take.
Taxing
the actual use of private cars is an important step towards sustainable
transport. But charges on car usership ought to complement the already
existing taxation of car ownership, and not just replace it. A full
internalisation of all environmental costs of cars must recognise the problems
that result from the still growing sum total of cars on Europe’s roads. Road
capacity in many European regions has reached its limits – a fact that is most
illustratively expressed by the continuous congestions on national highways and
trunk roads. Capacity limits are reached as well in almost all urban areas,
where evermore space is consumed by car-infrastructure such as parking spaces, car-dealers
or car repair-, maintenance- and washing-facilities – not to mention streets
themselves. (The land-take that results from road-construction in newly
developed suburban areas often amounts to as much as 50%).
Therefore
a taxation system is needed that restricts both private user- and ownership by
making sure that road passenger transport pays for its external costs. The
positive response with which European carmakers have welcomed (and had lobbied
for) the abolition of registration taxes illustrates how auto-friendly the
proposed legislation eventually may be. ACEA has cherished the fact that the
new tax strategy will be “revenue-neutral”, which is to say higher road and
fuel taxes will compensate for the loss of registration taxes. This, however,
means that transport in general will not become more expensive – but that
the sector will just pay differently and still not properly.
In
order to ensure that road passenger transport pays properly for the hazards it
inflicts upon human health and the environment, this Commission Communication
on Taxation of Passenger Cars will have to take a number of aspects into
account. Against this background, the Commission needs to
§
provide fiscal sticks and carrots to enable modal
shift.
If the Commission does not provide for the necessary
penalties and incentives that are needed to implement demand-oriented mobility
management, then private car ownership, transport volume and hence
environmental problems, will continue to rise. Future charging and taxation
efforts must be directed towards the overall ecological impact of motorised
transport and not just the harmonisation of different European taxing systems.
They ought to take all environmental impacts of transport into consideration
and not just focus on one single (although important) indicator, such as CO2
emissions.
§
charge both the car user and the owner.
In order to promote more environmentally sound
motorised transport, the Commission should not abolish Registration Taxes, but
reform them. It should introduce a way to levy vehicle taxes in such a way that
they comprise two components: one that charges the actual use of cars and
another that charges private car-ownership. While the former must be based on
emissions, the latter ought to refer to the land that is used for road
transport. This second component takes into account the consumption of space by
motorised transport in the specific city or region where the car is registered
and used. The tax varies depending upon the amount of land that is dedicated to
motorised individual transport in that city or region. In other words, having
more space for the private car is equivalent to paying higher taxes. This
taxation system should also provide for an incentive to shift from owning a car
to using one, whenever other modes are not available. It is important to
provide a legal framework that allows for a more-environmentally sound form of
both car-user and ownership, such as car sharing or car pooling.
To
conclude, harmonisation will make the economy more efficient, but does not
automatically entail environmental improvement. As they stand now, the plans of
the Commission to replace Registration Taxes by Annual Circulation Taxes may
partially reduce private car use and thus lower the annual emissions of a
single car. However, they will not provide any incentive at all to refrain from
owning a car. In fact, the opposite is the case, because abandoning
registration taxes will further stimulate the production and consumption of
cars. This will be most tangible in countries like Denmark that were able to
limit the growth of motorisation rates and maintain a “greener” modal split by
ways of higher registration rates. What this proposed Directive will do is
stimulate the purchase and private ownership of cars – cars that might be
driven less, but still parked in places that could be used for better things.
T&E Position paper on taxation of
passenger cars. ©T&E,
October 2002
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