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Car Industry giving mixed messages on green taxes

The Society of Motor Manufacturers and Traders (SMMT) has issued a warning to the Chancellor ahead of the budget on 21st March, not to increase the regulatory and tax burden on UK car manufactures and component suppliers amidst fears of higher costs and threats from emerging markets.

The SMMT has also warned against changes to the graduated Vehicle Excise Duty rates.

“Motorists already pay the penalty for higher emitting cars through fuel duty, company car tax and the seven-band VED scheme. Together these taxes send a strong message to drivers who choose higher-polluting vehicles. However, the chancellor must be mindful that many drivers with large families, as well as business users, need a larger vehicle, and that a budget-by-budget bidding war on the value of the top rate is unnecessary and unhelpful.” SMMT

However ACEA (the European automobile Manufacturers Association) has called for the expansion of CO2 related car tax systems across Europe believing that “CO2 taxation measures could lead to 5% lower car fleet average emissions”. Currently 11 EU member states, including the UK, have some degree of CO2 taxation.

Among the detailed recommendations ACEA proposes that “there should be a linear proportionality to emitted CO2 g/km without cap, or in other words: every gram of CO2 emitted should be taxed the same, to avoid arbitrary thresholds”. Currently the UK’s VED system is based on thresholds with a maximum rate of £215 for diesel cars emitting 226 g/km or more. Therefore vehicles emitting 226 g/km pay exactly the same as vehicles emitting 500 g/km.

Currently there is little incentive for manufacturers to reduce CO2 emissions within each tax band, whereas under ACEA’s proposed scheme every gram reduction would translate into reduced VED.

ACEA represents PSA Peugeot Citroen, MAN, Volkswagen Audi Group, Fiat Group, Renault, Scania, DAF, GM, BMW Group, Ford, Porsche, Volvo and Daimler Chrysler.

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