Government officials and representatives from the business sector, academe and civic organizations are discussing the issue in Berlin at a conference organized by Germany-based policy reforms association Green Budget Europe.
The discussion follows through on research commissioned by the European Commission’s DG Taxud in 2010. The research, conducted by Copenhagen Economics, concluded that tax subsidies for company cars account for as much as half of the E.U.’s gross domestic product in lost tax revenues.
The study indicates that company cars induce overpurchasing of cars and influence consumers to buy high-emitting and less efficient vehicles because of the large subsidy.
Tax subsidies reportedly run to 54 billion euros ($74.57 billion) in tax revenue losses every year for governments, according to the study.
“At a time when member states need to be consolidating their budgets, it makes no sense to continue subsidizing company cars to the tune of 54 billion euros,” said Green Budget Europe president Anselm Gorres.
“This preferential tax treatment of company cars has shown to increase fuel use and encourage purchasing decisions unrelated to engine efficiency, all leading to more cars, more pollution and more emissions,” he explained.
The study indicates that “the level of subsidy rises significantly when private use increases, especially in the case of cheaper cars.”
A research from VU University in Amsterdam indicated that company cars represent 40 percent of all new cars on the market.
“Under its Europe 2020 Strategy, Europe is looking to phase out environmentally harmful subsidies. It can start here, by reforming the tax on company cars,” Mr. Gorres said.
The study noted that company car tax reform in Britain, where a percentage of tax is determined by an approved carbon dioxide emissions figure resulted in lower emissions.
The British reforms, introduced in 2002, resulted in reduced carbon dioxide emissions of between 0.4 to 0.9 million tons of carbon emissions by encouraging people to choose cars with lower carbon dioxide emissions.
