Low Co2 ‘starving Gov’t’

Time 9:31 am, November 28, 2012

AS vehicle emissions become increasingly lower, CAP is warning of a Government ‘tax trap’.

Under the current taxation system, says the firm, Whitehall is being starved of revenue. As more buyers strive to buy lower emission vehicles, the government is losing out both in VED and fuel tax – something that they’re unlikely to leave unchanged.

As an example, says CAP, today’s most popular Mercedes C-Class is a diesel. Against 2009’s favourite – a petrol – it’s set to cost owners £450 less in tax discs and £1,200 less in fuel duty over a three year period.

CAP says a trend towards such diesel models is partially to blame, as consumers quite logically select the engine choice with the least emissions. Multiply that over the entire new vehicle market, and the loss in revenues is likely to run into ‘hundreds of millions of pounds’.

The question, then, is how the treasury will handle this move towards tax-reduced vehicles. CAP are suggesting that car owners keep a close eye on proceedings around December fifth – the day of the chancellor’s autumn statement.  It’s then, says the firm, that we’ll see how George Osbourne attempts to stop the tidal wave of lost income.

‘Innovations in engine design together with the Government’s reliance on CO2 emissions as a basis on which to tax vehicles have led to this problem because cars are now using substantially less fuel and emitting less CO2,’ commented CAP’s Mike Norman.

‘Our analysis shows the scale of the emerging problem and the question now is not whether the Chancellor will act to stem this flow of revenues, but how. Maybe we will learn that, when he makes his Autumn Statement on December 5.’

It’s unlikely though, says Norman, that the treasury will look to the discussed ‘road tolling’ system – facing too much resistance from the public.’The only realistic areas he can look at to fully address the problem are; taxing the fuel, taxing the car and taxing road use,’ he commented.

‘However, taxing fuel is partially self-defeating because motorists tend to respond by using less, as we have seen over the past couple of years. Taxing the roads is a political nightmare and there is no reason to think politicians are ready to grasp that nettle.

‘Clearly the whole issue is a minefield and the only certainty is that whatever option the Chancellor chooses will be fraught with difficulties and ultimately prove unpopular with motorists.’

Jon Reay's avatar

Staff Writer Jon is one of the Car Dealer team's newest members. You can also find him contributing to AOL Cars.

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