How Belgium’s mobility budget will affect company cars
It’s official: Belgium finally has a legal framework for mobility budgets. Under the new rule, company cars can be replaced by a greener, broader range of mobility alternatives. Will it change corporate mobility? Here’s what fleet professionals have to say.
For fiscal reasons, corporate mobility is big in Belgium. The country counts around 450,000 company cars. The Belgian government hopes the mobility budget, which went into effect on 1 March, will eventually reduce that number by about a quarter. That would be a great contribution towards reducing traffic congestion and pollution (pictured: rush hour traffic on the Rue de la Loi/Wetstraat in Brussels). Belgium is the first country in Europe to offer a legal framework for mobility budgets.
What is it?
So what does the mobility budget actually entail?
- Employers may offer a mobility budget to their employees with company cars. Employee participation is voluntary.
- If they do participate, employees get an annual mobility budget equivalent to the annual cost of their company car.
- They may spend that budget on any or all of three pillars: a replacement car, mobility alternatives, and a cash payment.
- The replacement car must be ‘green’, i.e. electric or with a CO2 emission no higher than 105 g/km (100 g/km in 2020 and 95 g/km from 2021).
- The mobility alternatives include:
- the purchase, rent or leasing (plus maintenance) of bicycles, e-bikes, mopeds, electric motorbikes and assorted equipment;
- subscriptions to public transport (and public parking) and shared mobility (including carpooling, car sharing, bike sharing, taxis, chauffeur-driven cars); and
- car rental (for up to 30 days a year).
- This second pillar can also include corporate bikes and even
- the option of financing the rent or mortgage of a house within 5 km of work (as the crow flies).
- Whatever budget is left (if any) will be paid out in cash. This balance is subject to a special tax of 38.07%.
Cash for car
So, will it be a success? Not if previous experiments are anything to go by. In January 2018, the Belgian government introduced a ‘Cash for Car’ measure, allowing employees to exchange their company car for a cash payment.
The presumed incentive was that the cash payment would be taxed at the same rate as the company car, which is more advantageous than paying the same amount as higher wages – this is the reason why company cars are so popular in Belgium. The average cash payment under the ‘cash for car’ measure was calculated as €525 (gross) per month.
However, more than a year after the introduction of ‘Cash for Car’, SD Worx, the payroll service provider for one in three privately-employed Belgians, counted no more than 142 employees who had opted for the formula. Still, that doesn’t mean the formula may not become more successful as time goes on, says Veerle Michiels, mobility expert at SD Worx: “It takes a while for employers to modify their mobility strategy. Often, a change of policy will be timed to coincide with the end of a vehicle lease.”
Or perhaps with the introduction of the mobility budget, the second component of the Belgian government’s policy to redirect corporate mobility away from the company car, towards more sustainable solutions.
Whereas Cash for Car was aimed mostly at employees with benefit cars (42% of company car drivers in Belgium), the mobility budget formula – by offering both another car and/or mobility alternatives – is also aimed at sales reps, technicians and other employees with job-required cars (41% of the total; the remaining 17% have cars with both benefit and tool aspects).
Renta: “Answers a real need”
“The mobility budget is a good idea because it answers a real need,” says Frank Van Gool, Director-General at Rental the Belgian Vehicle Leasing and Rental Association. “Until now, employees were ‘locked in’ to the use of their company car, even if alternative forms of commuting are actually more efficient.”
It’s very good that the mobility budget not only offers a wider choice but also adapts the Belgian tax system towards Mobility as a Service, Mr Van Gool adds. But there’s still plenty of room for improvement: “It would have been better to make the mobility budget available to all employees, not just those entitled to a company car. Also, all motorcycles except electric ones are excluded, which is a missed opportunity. And it’s virtually impossible to include an electric vehicle (EV) in a mobility budget, due to the high total cost of ownership of EVs.”
But even with those drawbacks, Mr Van Gool thinks the present system will attract some interest: “Employees who either live close enough to work or who have a good connection into work and have limited travel needs of their own – plus another car in the household – may choose a mobility budget without a car. Others will use the mobility budget to opt for a smaller car.”
Is that enough to make an impact? “In all, less than 15% of all company car drivers are currently considering a mobility budget. And that's not saying they will decide for it, or that their employers would agree.”
Carglass: “Fix public transport”
"We've had no interest from any of our employees in the Cash for Car formula. Neither have we had any requests for information on the mobility budget option - but it's still early days", says Ronny Van Den Driesch, Audit & Vehicle Manager at Carglass®.
He agrees with Mr Van Gool that the mobility budget is an attractive formula for a certain type of benefit car driver: “If you have a salary car and don’t drive that many kilometres with it, I can totally see the appeal of a mobility budget that gives you access to public transport and provides you with a bike, in exchange for a smaller car. Especially if you’re in a household where your partner has – and keeps – their company car.”
However, for sales and service personnel, the option will have limited appeal, he suspects: “If you spend countless hours on the road, you’re going to want to keep your car as large and luxurious as possible. So I don’t see this type of employee hand in their company car for a smaller one.”
But whether or not the mobility budget will be a success depends on one other crucial government initiative: “First, they have to fix public transport. Our HQ is located near a city centre, yet a recent survey we’ve had done shows that only 4% of our employees have the ability to reach our building by public transport. Public transport is a problem even in Brussels: the frequency of trams declines when it’s a school holiday, for instance. Not to mention the fact that the timetables trams, buses and trains are not coordinated with each other.”
Provide enough mobility alternatives, and there’s scope for the mobility budget to become a success, Mr Van Den Driesch says. There is plenty of scope for improvement – and need for it too: “I remember 20 years ago, it took me half an hour in the morning to cover a small distance from Dilbeek to Vilvoorde via the Brussels Ring. That same distance can now easily take an hour and a half."