Cars and Diesel Not Taxed Enough

October 15, 2014 International Tax Cooperation

PARIS – Under-taxing cars and fuel is costing more than EUR 140 billion per year in the countries of the OECD.

Earlier this month the Organization for Economic Cooperation and Development issued a new report showing that diesel fuel and company cars are under taxed, effectively encouraging taxpayers and businesses to drive further, significantly damaging the environment.

The finding detailed in the report are based on the information about the taxation of diesel and company cars across all OECD countries in 2012.

According to the OECD, as company cars are taxed at a lower rate than wages, the difference is effectively a tax subsidy for car drivers, amounting to an average of EUR 1 600, but rising to as much as EUR 2 763 per year in some countries.

Adding to the environmental concerns, it is also noted that in almost all OECD countries, diesel is taxed at a lower rate than petrol, despite the fact that diesel produces approximately 18 percent more carbon per liter than petrol.

The under-taxing of diesel and company cars costs as much as EUR 26.8 billion in foregone tax revenues, and, in addition, the resulting carbon emissions result in EUR 116 billion in costs from healthcare, congestion and motor accidents.

Photo By: The Tire Zoo