29 Apr 15

Alexander Unfried, PwC: The Connected Car may lead to new taxes

Company car taxation is complex, and upcoming technologies are likely to make it more confusing. We asked Dr. Alexander Unfried, Global Automotive Tax Sector Lead at PwC, to navigate us through this potential minefield – and look into his crystal ball for the tax consequences of the Connected Car.

What are the main trends impacting company car taxation in Europe in 2015?
“The overall focus is still on CO2 taxation and the tax incentives for the electrification of the automotive powertrain, although of course the details vary between different countries. However, governments are facing a fine balancing act between getting the tax income they need for their transport infrastructures and stimulating the growth of the market for electric vehicles. So we are already seeing some countries limiting their incentives, and other countries are expected to follow.”

Why is it important that corporates take company car taxation into account in their policy?
“Tax has a direct and significant impact on the cost of a vehicle fleet. What’s more, the cost of running a car fleet – taking into account tax, insurance, purchase price, fuel, leasing etc. – is likely to be 5-10% higher in 2015 than last year. So anything a fleet manager can do to reduce cost will be beneficial. And if you can save taxes while improving your company’s sustainability image, so much the better!”

What elements will impact car taxation in the upcoming years?
“It is estimated that by 2020, four of every five new vehicles manufactured will be wirelessly connected to the Internet. Real-time connectivity between car, driver and a whole host of partners – such as insurance providers, fuel companies, OEMs, retailers and tax authorities – is a very real possibility. It will be interesting to see how the inevitable rise of the Connected Car impacts fleet car taxation. I can foresee a future where the growing popularity of electric vehicles will reduce revenues for road maintenance. The concept of taxing drivers based on distance travelled is therefore likely to be an appealing alternative model for governments to consider. And the data transmitted by the Connected Car makes this possible.”