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Company car taxation to contribute to the deficit of European countries
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 When the going gets though, the car taxation gets going. The car has proven an indispensible milk cow in the past and with CO2-emissions, politicians have found a politically correct way of increasing taxes. In many countries company cars are subject to tax increases, increasing the Total Cost of Ownership (TCO) of international fleets. Including taxes and the effect of taxes in your strategy pays more than ever.
After another though 2011, many look at 2012 as a year where things should settle again providing a stable atmosphere for good life and work. Nevertheless, the Euro and the banking crisis has left big deficits and there is a possibility that all of us will need to contribute to get this budget in balance again. Through our company car, we will contribute a bit more in most of the countries. Driven by a social and environmental objective, company cars, higher end cars and polluting cars will contribute the most.
Many countries have increased its VAT rate with 1%, mostly 2%. For those countries that block the VAT deduction on car cost, this adds immediately to the TCO of fleet. Greece (+2% to 23%, no VAT recovery), Ireland (+2% to 23%, no (or partial) VAT recovery), Italy (+2% to 23%, in principle 40% VAT deduction), Spain (+2% to 18%, in principle 50% VAT deduction), UK (+2.5% to 20% temporarily, in principle 50% VAT deduction) are just some examples. There is not a lot you can do to lower this extra burden besides lowering your consumption, or making sure that all expenses that could be kept out of the taxable basis for VAT are indeed excluded. Examples are insurance premiums, registration and annual road taxes, fines…
Lower CO2-bands
Most countries, having based their car taxation to the CO2-emissions of the car, are increasing the taxes by lowering the CO2-emission bands. Due to the changing buying behavior and the increased production of low CO2-emission cars, governments saw tax income decreasing. France with increased TVS (taxe sur les véhicules de sociétés), Ireland, UK, …. are some examples where existing taxes will increase. Further changing buying behavior and introducing best in class vehicles when it comes to CO2-emissions can limit the extra cost. This will take some time although for “gas guzzlers” it could be worth to look at the cost/benefit of early replacement.
Some countries have introduced new mechanisms for taxing cars. Greece has introduced in 2011 some car taxes based on CO2-emisions; Belgium will introduce a benefit in kind taxation based on catalogue price varying with the CO2-emission of the company cars and an increase of the non-tax deductible cost with the employers. Understanding the dynamics of these new ways of taxing is detrimental for your local car policy.
To develop insight
As a conclusion we could state that the changes in taxes relating to company cars were never as important as in 2012. Getting insight in the increase in cost will help the international fleet manager to set proper objectives based on a correct base line. Getting insight in the dynamics of these car taxes will allow to set an effective strategy. Taking into account the current economic environment, only few companies will allow increased spending in car fleet. We all will need to downsize in cost and/or CO2-emissions and sustainability will be part of any fleet strategy; sustainability in terms of environment but also in terms of proper use of the company car in order to make sure that no unnecessary costs are to be born.
To cut one’s coat according to one’s cloth will be applicable for all of us…. And on the positive, no one ever died from that before.
| 29/12/2011 |
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