Netherlands to Reinvent Car Taxes

November 16, 2009 Taxation in Netherlands  No comments

The Netherlands government is looking to eliminate car sales and road-user taxes, replacing them with distance taxes, calculated from GPS-devices.

The Dutch cabinet passed legislation on November 13th that proposed to replace traditional annual road user charges and sales tax on cars with one system that will levy drivers based on distance driven. The new scheme will implement GPS-tracking devices in every car, which will record the driven distance, time of drive and time taken. The information will be automatically sent off and an appropriate bill will be sent out.

If passed by the Dutch parliament, the distance tax will come into effect in 2012, and begin charging at a base rate of €0.03 per kilometer. The levy will vary depending on the weight of the vehicle and whether it was driven at peak traffic times or on congested roads. The tax is scheduled to rise every year until 2018, when it will be €0.067. Provisions have been made to increase the tax load if the initial figures fail to have enough influence on traffic usage. Taxis, buses, motorcycles and vehicles owned by the disabled will be exempt from the distance levy.

The distance tax will be offset by reduced costs of vehicle purchases. Currently, one quarter of the price of a new car in the Netherlands is comprised of taxes, which are scheduled to be dropped with the tax implementation. Dutch government estimates claim that the switch from universal road user charges to user specific charges will benefit six out of ten Dutch motorists, by shifting the tax load to heavy road users. There will also be a 15% drop in regular road usage and a 50% reduction in rush-hour congestion. Carbon emissions and fatal car accidents are claimed to also be reduced by 10% and 7%, respectively.

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