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Study on Company Car Tax by T&E: Removal Brings an Additional One Million Electric Cars

The NGO is doubling down and demanding that climate-damaging subsidies for combustion-engine company cars be phased out. This could bring up to one million additional electric vehicles onto the roads by 2030.

Doubly sensible: T&E expects that eliminating company car privileges for internal combustion engines will lead to more electric vehicle registrations - and higher tax revenues. | Graphic: T&E
Doubly sensible: T&E expects that eliminating company car privileges for internal combustion engines will lead to more electric vehicle registrations - and higher tax revenues. | Graphic: T&E
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Johannes Reichel

The European environmental umbrella organization Transport & Environment (T&E) has further fueled the debate on climate-damaging subsidies in the transportation sector after their advocacy for a mix of measures and presented a study on abolishing company car privileges for combustion vehicles. According to the study, a reform of company car taxation in Germany would ensure that by 2030 an additional one million new electric cars would be on the roads. Over their entire lifespan, more than 40 million tons of CO2 could be saved, according to the forecast of the umbrella association, which includes VCD, DUH, and Nabu in Germany. Additionally, the reform would generate an increase in tax revenue of 42 billion euros. For the upcoming government, this would be one of the most cost-efficient ways to achieve decarbonization and meet Germany's climate targets, advocates the NGO.

"For instance, the FDP argues that e-mobility is too expensive and purchase premiums should be ended. What is truly costly for the state, however, are climate-damaging subsidies for combustion-engine company cars. The current policy subsidizes the climate crisis and does so at the taxpayer's expense," criticizes Friederike Piper, E-Mobility Advisor at Transport & Environment Germany.

In their exploratory paper, SPD, Greens, and FDP declared that they wanted to review the current budget for "unnecessary, ineffective, and environmentally and climate-damaging subsidies and expenditures," the organization further points out. The study results show that there is no way around reforming company car taxation. Company cars are taxed far less than private vehicles, yet they account for 63 percent of new registrations in Germany. Because there are few financial incentives to purchase an electric vehicle, the majority of company cars are powered by combustion engines, the organization further criticizes. This makes the current company car regulation a subsidy that almost exclusively benefits cars with fossil fuel engines.

"This policy has led to Germany having the most climate-damaging company car fleet in all of Europe. Companies can write off car purchases as business expenses for tax purposes," the NGO complains.

If companies provide these cars to their employees as a benefit in kind, additional tax advantages arise because the benefits in kind from company car use are taxed less compared to actual salary. Employees also benefit from significant tax savings compared to private owners under the 1-percent rule for private use of these company cars.

Even Greater Effects via the Used Car Market

The projected increase of one million fully electric cars could alone save nearly 15 million tons of CO2 by 2030, T&E calculates. Overall, the savings and thus the benefits for the climate would be much greater, as company cars typically enter the used car market after only four years, making them an important source of affordable electric used cars.

"Abolishing subsidies for combustion and plug-in hybrid company cars is one of the fairest ways to decarbonize transportation, as it brings millions of affordable electric cars to the market. This is one of the fastest, simplest, and most efficient methods to significantly reduce Germany's emissions," the NGO appeals.

The Greens and the SPD have so far been unable to assert themselves on the issue of climate protection in transportation; now they must at least put an end to the current climate-damaging policy in this area and end subsidies for climate-damaging company cars, demanded Friederike Piper.

Translated automatically from German.
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