In the run-up to the formation of a new cabinet, the Ministry of Finance outlines the possible policy changes when it comes to car taxes. The Vehicle Taxes Choice Guide outlines a number of interesting options, even without road pricing.
It is good to emphasize in advance that the Vehicle Taxes Choice Guide does not reflect fixed policy, but is intended as an overview of the challenges and opportunities faced by policymakers. The document does not appear to be intended to push those policymakers in any particular direction, although concrete proposals are indeed made here and there. In the accompanying letter, State Secretary of Finance Hans Vijlbrief puts it this way:
“This Choice Guide is an official process without political guidance to outline the policy tasks and possible policy options in the field of car taxation for the formation. Much has been drawn on existing studies and reports. The added value of the report lies mainly in the coherent presentation of the material and the demonstration of the effects and the trade-offs and synergies of the policy options. ”
It is still okay before 2030
The main theme of the choice guide is undoubtedly how the government should deal with car taxes if the vehicle fleet slowly but surely becomes electric. After all, EVs have nothing to do with bpm and excise duties, which are based on CO2 emissions and fuel respectively. This threatens a huge setback for the government, which collected 13.2 billion in car taxes in 2020.
Yet that problem is less acute than it seems. The Keuzewijzer does not foresee any problems at all for 2030, because the fleet is growing and the motor vehicle tax (MRB) will also apply to EVs from 2025. Electric cars are on average heavier than traditionally powered ones, so this somewhat compensates for the lack of income in other areas.
Structurally -4.7 billion
However, that will change rapidly when all new cars sold are fully electric from 2030, as the target dictates. If that plan is successful, the government will lose billions annually, starting from 1.1 billion in 2030 and increasing to 4.7 billion per year from 2050. As a plaster on the wound, the provinces will collect more in this calculation, because the mrb income as said, it will rise.
Various options are mentioned to absorb those 4.7 billion. The first is the introduction of a pay-as-you-go system. Some form of road pricing remains a recurring theme in the Netherlands and, according to the report, can be a good way to also levy tax on electric cars. That is why the option is again mentioned to apply this ‘road pricing’ only to EVs.
Intermediate solutions
However, the report also recognizes that the implementation of such a system is complex and time consuming. That is why it is argued that a simpler, temporary or non-temporary solution is desirable for the shorter term. Examples of this are increasing the existing mrb or increasing the fuel tax. The abolition or (further) simplification of the tax-free commuting allowance could also be a solution.
A surprising last option is to absorb the loss of income ‘outside the car domain’. In other words: the government accepts that greening the vehicle fleet means less tax revenue and compensates for this elsewhere. The argument put forward for this is that the ‘social costs’ of car mobility are much lower with a (relatively) clean EV than with a fuel car.
Simplify the tax system
The Ministry generally advocates a simplification of the car tax system. In particular, the complicated construction around the bpm for import and export is seen as susceptible to fraud and laborious, but the many exceptions and special regulations do not make things any clearer, according to the Choice Guide.
EV share growth
The Keuzewijzer also extensively examines the possibilities of keeping the growth of EVs at a level that makes the (environmental) objectives of the government feasible. Increasing the bpm is mentioned as an effective option. An increase in bpm would lead to the sale of more EVs. A lowering of bpm, which is sometimes referred to as a means to rejuvenate and thus ‘change’ the vehicle fleet, would actually have a negative effect.
Delivery vans
Finally, the Vehicle Tax Selection Guide focuses specifically on the company car. The proposal is to bring the taxes on company cars more ‘into balance’ with those on diesel passenger cars. After all, where normal diesel cars are taxed very heavily, this does not apply to businesses when it comes to delivery vans. The proceeds from this can be used to stimulate the purchase and use of electric company cars.
If you want to study the full document, you can use the Choice Guide Vehicle Taxes download here.