21 sep 17

Time the taxman got serious about mobility budgets

If you want to build a mobility policy for your corporate fleet that is both innovative and comprehensive, you need a mobility budget. Mobility budgets, in turn, require a clear fiscal and social security framework. “Unfortunately, not a single European country has worked one out yet”, laments Erwin Boumans, vehicle taxation specialist at BDO. 

As corporate mobility shifts from company cars to a range of mobility modes, the logical solution is to transform the car allowance into a mobility budget. Such a budget can then be spent in a way that reflects the needs and wants of each individual employee. 

Mobility cocktail
Yes, a good part of that mobility budget may still go to a company vehicle (although perhaps a shared one), but the employee will also be able to spend part of their mobility budget on public transport, taxis, Uber and smart mobility solutions such as bike sharing, carpooling, or even homeworking. In short, anything that solves their mobility issues. Ideally, this cocktail of mobility solutions is faster, easier, cheaper and better for the environment than the current, car-centric approach. 

The operative word here is ideally, because the concept of a mobility budget collides with practical problems of a fiscal nature. “Car taxation rules tend to run behind the times”, says Boumans. “Most fiscal regulations concerning mobility focus on the company car. Very few legislatures have taken note of the fact that the world has changed – that we're moving from fleet management to mobility management, from a car-centric to a multimodal approach. Even fewer legislatures have taken effective action”. 

Fiscal disconnect
Why does this matter? Because the disconnect between company car taxation and the reality of corporate mobility creates chaos. “We're faced with a lack of uniformity – and I do not only mean between the various European countries. Each has their own fiscal setup, for social, economic and budgetary reasons, and that will continue to be the case. No, I also mean internal uniformity and consistency”, says Boumans. 

Each country will have a set of rule guiding the taxation of company cars. If a company car costs a company, say, €500 per month, the rules will be fairly clear. But what if you replace that single mode of transport with the aforementioned cocktail of mobility options? “If there is no clear framework for managing such a mobility budget, it then falls to each individual fleet management team to work out what the fiscal and also social security implications are of each mobility cocktail – and because each is different, the results will vary accordingly. This is a very complex matter, and it will impose such a huge extra burden on fleet administration that a lot of corporates still shy away from implementing a mobility budget”.

Cafeteria plans
“True, there are various countries with so-called 'cafeteria plans', which allow employees to choose from a range of fiscally advantageous options, but these are not exclusively nor exhaustively linked to mobility, they include options like childcare, group insurance or extra holidays for instance”, Boumans indicates. “However, as of yet, there isn't a single European country that has a system in place for a fiscally transparent treatment of the mobility budget”.

A number of private companies have jumped at the opportunity, he says: “These facilitator companies – from the leasing sector and beyond – may sometimes reach some kind of deal with their country's tax authorities, which enables them to offer a mobility budget solution to fleet customers. Nevertheless, the lack of a comprehensive fiscal construct means that even these solutions remain relatively complex”. 

Nordic countries
Boumans thinks that these comprehensive fiscal constructs will arrive – in the long run if not sooner: “Belgium is an interesting point in case. The government proposed a cash-for-car solution, but the social partners (representatives from both the employers and the employees) argued that the proposal should have been expanded to include a mobility budget. In the end, however, the solution is much closer to the cash-for-car idea than the mobility budget idea. Other countries are moving in the direction of mobility budgets. It seems likely that the first ones to realise it will be those countries that are traditionally in the lead when it comes to mobility innovation – I'm thinking of the Netherlands and the Nordic countries”.

But creating the fiscal framework for mobility budgets is not just a matter of political will. “It's also an economic issue, and a social one. It would be fair to assume that introducing a mobility budget framework will lead to a reduction of tax receipts. Which means that governments would need to have some budgetary room to introduce these measures”. Ultimately, since mobility budgets are a key instrument in forging the corporate mobility of tomorrow, politicians need to look beyond the here and now. “If they want to shape the conditions for a progressive, innovative mobility policy that reduces pollution and congestion, they need to get serious about mobility budgets”. 

Image: public domain

Authored by: Frank Jacobs