The impact of road tax changes in the UK
Europe has been changing the taxing system on cars to adapt it to emissions. As a general rule, the more CO2 a car emits through the tailpipe, the higher its taxes are. In general, cars in Europe pay two types of taxes. One type is the purchase taxes, which depends a lot on the country. Then you have the road tax (or circulation tax): besides tolls, you need to pay a certain amount to drive your car.
The UK has a very specific tax system, in which there are different levels that depend on the CO2 emissions for both the purchase and road. The system is being changed for 2008. The most that Britons will have to pay for a car that falls in band G (the highest) is 2000 GBP (that's about $4,000US). Cleangreencars.co.uk has announced that this is a band that does not make luxury car buyers use the greenest options available. Band G is for cars that produce 225 CO2 g/km upwards.
In numbers: if you purchase an Audi A6 it doesn't matter if you purchase a smaller engine such as the 3.2 liter or the RS8. What's even more inadequate according to that website, a Renault Espace 2.0 T pays the same tax as Range Rover Supercharged.
Therefore, they're proposing the creation of an additional Band for the most polluting cars, called Band H. This Band would have a road tax figure of 500 GBP and would be for cars producing more than 275 CO2 g/km. The choice of raising road tax in front of purchase tax is that the high cost of luxury cars make the purchase tax irrelevant, because it's the price of an extra option of the car and it's only paid once, whereas a road tax is paid through the lifespan of the vehicle.
Luxury cars with lower emissions would benefit from this measure while real gas guzzlers would be more affected. Currently, the British luxury market has a high growth rate.
Related:
- Guido Reinking: Germany should Just Say No to a CO2 tax
- London congestion charge going to £25 per day for gas guzzlers
- Changing taxes to reduce pollution: Spain finally adopting CO2-dependant tax system
[Source: Cleangreencars.co.uk]
Reader Comments (Page 1 of 1)
Christian Micallef 10:23PM (7/16/2008)
Hi,
My wife and I are thinking of moving to the UK next year,
Could you please give me an idea on how much it costs to run a 1.0L engine vehicle? Taxes, insurance, fuel costs and maintenance included..
Kind Regards,
Christian
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rgseidl 5:58PM (9/21/2007)
Don't forget about fuel taxes, easily the most effective way to achieve higher fleet average fuel economy and lower average annual mileage. It's just that you cannot change fuel taxes quickly, because people cannot switch cars or move house at the drop of a hat. Instead, you have to ramp them up slowly, predictably and irreversibly. If you cut VAT (sales tax) to compensate, people are no worse off. In time, they figure out ways to minimize fuel cost to maximize their disposable income.
In continental Europe, there's the additional complication of fuel tourism, especially to Luxembourg. Taking a detour to save a few euros on a tank of gas increases miles driven and upsets the finance ministers of neighboring countries, for whom fuel taxes are a major source of revenue. EU member states jealously guard their sovereignty over tax rates, so unanimity is required to raise the EU-wide minimum rates.
The UK's road tax plans are punitive because the country no longer has a domestic auto industry (except for engineering consultants and niche manufacturers). That means a lot of money is spent on imported premium goods instead of circulating in the local economy like tax revenue does. Holland and Denmark also maintain high purchase taxes. Any environmental benefits are basically just icing on the cake.
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