Motoring Taxation Costs
COLIN BUCHANAN AND PARTNERS
Planning, Transport, Economics Software, Market Research
Final Report
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Prepared by: AB/JS |
Verified by: AW |
Approved by: |
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Status: Final |
Issue no: 2 |
Date: 30/10/00 |
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Directory & File Name: J:52781 Comparison of Motor Taxation Costs Across EuropeWordReportsReport_30_10.doc |
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1.1 Background
1.2 Layout of Report
2.1 Presentation of the Results
3. METHODOLOGY AND ASSUMPTIONS
3.1 Introduction
3.2 Purchase Taxes
3.3 Ownership Taxation
3.4 Use Tax
3.5 General Issues
4.1 Introduction
4.2 Purchase Tax
4.3 Ownership Tax
4.4 Use Tax
5.1 Key Findings
APPENDICES
APPENDIX FOUR: VEHICLE TAXATION EXCLUDING PURCHASE TAX
APPENDIX FIVE: DETAILED CALCULATIONS
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1.1 Background
1.1.1 Colin Buchanan and Partners (CBP) have been commissioned by the Scotland Office to undertake a comparison of motoring taxation costs across Europe. This has included a comprehensive analysis of the taxation cost components across the European Economic Area (EEA). In particular, the study has provided breakdowns for Scotland as a whole and, within that, the Scottish Highlands and Islands, which allows comparison of these specific areas to the other parts of the EEA.
1.1.2 The report covers the taxation costs for petrol-fuelled cars only.
1.2 Layout of Report
1.2.1 In Section 2, the results of the report are presented clearly in the form of a summary table. This shows the rankings of the United Kingdom, Scotland and the Scottish Highlands relative to the other countries and regions of Europe that have been included in this study.
1.2.2 Section 3 discusses the methodology that has been applied and outlines the key assumptions that have been made in the process of creating the summary tables. The detailed calculations are included in an appendix.
1.2.3 In Section 4, the data sources that have been used for the study are presented.
1.2.4 Section 5 summarises the main findings of the study.
2.1 Presentation of the Results
2.1.1 The results are presented in the form of a table showing the rankings of the countries (and areas) included in this comparison. The methodology and assumptions are discussed in Section 3, with the detailed calculations being included in Appendix Four. The aim of this section is thus to show the results in a concise and easily interpreted manner.
2.1.2 In these tables, the costs are given in pounds sterling per annum as at 2000 and based upon the assumptions and methodology outlined later in this report. In particular, insurance and inspection taxes have not been included in these summary tables but these are negligible compared with the other taxes.
2.1.3 Table 1 shows the ranked table for all motoring taxation. While the rankings of the United Kingdom, Scotland and Scottish Highlands vary slightly depending upon the vehicle engine size, it can be seen that these three countries/areas are grouped together and are ranked in the centre of the table.
2.1.4 It is apparent that there is a negligible difference between the taxation costs at either the Scottish or Scottish Highlands level within the United Kingdom. Scotland as a whole is almost identical to, though very slightly cheaper than, the United Kingdom average. The Scottish Highlands are slightly more expensive, though their total taxation costs are only approximately one per cent higher than that for the United Kingdom as a whole.
2.1.5 In terms of all taxation, it is clear that Scotland and the Scottish Highlands are considerably cheaper than the Scandinavian countries of Finland and Norway. However, taxation costs in Sweden are considerably lower than those for Scotland and the Scottish Highlands.
Table 1: All Taxes (£ per annum; 2000) excluding Insurance and Inspection Taxes),
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Ranked Engine Size |
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1000cc |
1600cc |
2000cc |
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Denmark |
1795 |
2966 |
5627 |
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Eastern Finland |
1313 |
1753 |
3040 |
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Northern Finland |
1311 |
1752 |
3038 |
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Finland |
1311 |
1751 |
3037 |
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Netherlands |
1082 |
1509 |
2637 |
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Norway |
1121 |
1400 |
2458 |
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Ireland |
884 |
1380 |
2217 |
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Portugal |
688 |
1272 |
2259 |
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France |
998 |
1227 |
1598 |
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Scottish Highlands |
887 |
1217 |
1604 |
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United Kingdom |
878 |
1205 |
1590 |
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Scotland |
878 |
1205 |
1591 |
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Sweden |
807 |
1048 |
1446 |
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Belgium |
690 |
966 |
1439 |
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Austria |
673 |
930 |
1732 |
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Italy |
684 |
896 |
1311 |
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Greece |
542 |
893 |
2058 |
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Germany |
607 |
831 |
1150 |
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Spain |
513 |
682 |
1212 |
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Luxembourg |
433 |
596 |
863 |
N.B. Countries are ranked according to taxation cost for 1600cc engine
3. METHODOLOGY AND ASSUMPTIONS
3.1 Introduction
3.1.1 This section outlines the methodology that has been applied and details the key assumptions that have been made. It focuses on the three main taxation components, which are purchase taxes, ownership taxes and taxes based upon vehicle usage. A number of general issues are highlighted at the end of the section.
3.1.2 The report covers the taxation costs for new (privately-owned) petrol-filled cars only. The calculations are based on the average GB car mileage. That is, the analysis is based on what the cost would be to a GB motorist if each European country's taxes were levied in the UK.
3.2 Purchase Taxes
3.2.1 The calculations were undertaken for three different models, which were chosen to represent the typical price within each engine size, namely:
- Vauxhall Corsa (1000cc);
- Vauxhall Astra (1600cc);
- Vauxhall Omega (2000cc).
3.2.2 In most countries purchase taxes are a straight ad valorem tax based on the pre tax sales values. However, in Finland and Greece components of the purchase tax are levied on the cif value (i.e. the value of the car at the dockside when it is imported into the country) as opposed to the pre tax sales value. In these cases it was not possible to accurately calculate this element of the purchase tax although it was possible to estimate it on known pre and post tax values of the cars in each country.
3.2.3 In addition to VAT and purchase taxes there are often one-off registration/number plate taxes paid when the vehicle is first registered. Reductions in the level of taxes levied are often allowed on environmental and or safety grounds, for example, in Denmark the taxable price of the car is reduced for each airbag fitted.
3.2.4 It has been assumed that the average 'purchase life' of the cars used is 5 years. The amount of purchase tax was therefore divided by five to calculate the annual tax element. Whilst this is an oversimplification it avoids the issue of calculating average lifetime vehicle mileage and the issue of purchase tax on second hand cars which exists in some countries.
3.3 Ownership Taxation
3.3.1 Ownership taxation is generally a lump sum tax calculated according to a number of factors depending on the levying country. Such factors include:
- Engine size;
- Engine power (the engine power of the model cars are used);
- Fuel emissions (fuel emissions are assumed to be Euro 3);
- CO2 emissions (assumed to be 140g per Km as per the EU target for the average car in Europe); and
- Car weight (the car weight of the model cars are used).
3.3.2 In a number of countries road tax varied according to region. These included France, Spain and the Netherlands. In this case a simple average was taken. For the Netherlands the average tax used was that applicable in Utrecht. The general pattern was that taxes tended to be higher in the most densely populated areas.
3.4 Use Tax
Road Tolls
3.4.1 Whilst toll roads are common in some countries for example, Austria, France and Spain the estimated annual expenditure on tolls is relatively minor part of total motoring taxes. The amount spent on tolls was calculated in the following manner.
3.4.2 The total length of toll roads is known in each country as is the cost of using each toll road. From this data the average amount paid per mile travelled on a toll road can be calculated. Given that toll roads are generally motorways or dual carriageways the next step was to calculate the proportion of motorways/dual carriageway that are tolled in each country.
3.4.3 Using the annual average distance travelled on motorways and major roads by car in Great Britain it is then possible to estimate the number of miles that would be travelled on toll roads in each country and multiply this by the average toll paid per mile travelled to arrive at an estimate for the total amount paid in tolls.
Fuel Tax
3.4.4 Average annual expenditure on fuel tax was calculated using the following method:
Average annual motor vehicle miles (Great Britain) divided by fuel consumption for each engine class.
Multiplying the above by tax paid per litre of petrol.
3.4.5 Variations in fuel prices within the relevant regions of Scotland and Finland were noted. Our source in Sweden (Svenska Petroleum Institutet) noted that there was no significant variation in fuel prices within Sweden, explaining that urban areas in effect subsidise rural areas, and no other regional taxes appear to be relevant.
3.5 General Issues
Time Periods
3.5.1 Car prices and taxes on car purchase are those used by the European Union for May 2000.
3.5.2 Petrol prices and excise duties are those published by the European Commission for September 2000.
3.5.3 The exchange rate used is the average exchange rate for September 2000.
Insurance/Inspection Taxes
3.5.4 Where it has been possible to obtain data on these additional taxes, the rates are given in Appendices One and Two respectively. The problems associated with incorporating these additional taxes are also highlighted, though the impacts on total vehicle taxation will be minimal.
Iceland
3.5.5 Comprehensive data for Iceland were not available within the timescale of this study. However, Appendix Three provides details of those elements of vehicle taxation for which information has been obtained.
4. DATA SOURCES
4.1 Introduction
4.1.1 This section details the principal sources of information that have been utilised in this study.
4.2 Purchase Tax
4.2.1 The main sources used were as follows:
ACEA: Motor Vehicle Taxation in Europe
European Union: Competition DG, Manufacturer Price Tables May 2000
Vauxhall
4.3 Ownership Tax
4.3.1 The main data sources were:
ACEA: Motor Vehicle Taxation in Europe
The Society of Motor Manufacturers and Traders
4.4 Use Tax
4.4.1 The data sources utilised were as follows:
Fuel Tax
International Energy Agency: Energy Prices and Taxes 2000
ACEA: Motor Vehicle Taxation in Europe
EC Oil Bulletin (4/10/2000)
Statistics Finland
Statistics Sweden
Svenska Petroleum Institutet
Road Tolls
Moto Europa
DETR: Transport Statistics
European Union: Transport in Figures
4.5 Exchange Rate
Bank of England
5. CONCLUSIONS
5.1 Key Findings
5.1.1 This report has presented the findings of the comparison of motoring taxation costs across Europe, with a particular focus on the relative position of Scotland as a whole and the Scottish Highlands and Islands in particular when compared to other areas of the European Economic Area.
5.1.2 The analysis has highlighted the major differences that exist both in the overall level of vehicle taxation between the various countries (and specific sub-areas) in Europe and in the components of the total for each country.
5.1.3 In terms of total taxation, excluding insurance and inspection taxes, the United Kingdom (together with the sub-areas of Scotland and the Scottish Highlands and Islands) is ranked just below the middle of the countries included in the study. This was shown in Table 1.
5.1.4 Overall, very little difference has been found for the specific cases of Scotland and the Scottish Highlands and Islands when compared to the United Kingdom as a whole. While the total taxation cost in the Scottish Highlands and Islands was found to be slightly higher, this was only approximately one per cent higher than the United Kingdom average. Other motoring costs may of course be higher.
5.1.5 For the comparable areas to Scotland (i.e. the Scandinavian countries), the total taxation is generally considerably higher than that in Scotland. Total taxation costs in Finland are between 45 and 90 per cent higher than Scotland, depending upon engine size, due to very high purchase taxes. In Norway the costs are between 16 and 55 per cent higher. However, Sweden's total costs are between 8 and 13 per cent lower than Scotland's, again dependent upon engine size.
APPENDIX ONE: INSURANCE TAX
A number of countries impose taxes on insurance policies. However, it has not been possible to obtain comparative data on the cost of insurance polices across Europe so these costs have been excluded. It is generally acknowledged, however, that UK insurance premiums are amongst the lowest, or perhaps actually the lowest, in Europe. Existing insurance tax rates are as follows:
Belgium (9.25 %)
Denmark (50%)
Germany (16%)
Spain (6%)
France (33.5%)
Italy (12.5%)
Luxembourg (4%)
Austria (11%)
UK (5%)
Generally inspection taxes were covered by V.A.T in each of the relevant countries. This varies between 16% and 25%. The number of compulsory inspections varies between countries. It proved impossible to compute an average tax rate due to the fluctuations in the cost of M.O.T.
In the time available it was not possible to obtain comparative car prices for Iceland
PURCHASE TAXES
1. Commodity Tax
<1600cc: 30%
1601 - 2500cc: 40%
2. V.A.T
24.5%
3. Registration Fee
5475 Icelandic Kroner (ISK)
OWNERSHIP TAXES
1. Annual Weight Tax
0 - 1000 kg : 12 ISK per Kg
> 1000 Kg : 16.20 ISK per Kg
USE TAX
1. Fuel Tax
Excise duty: 39.1 ISK per litre
V.A.T: 24.5%
APPENDIX FOUR: VEHICLE TAXATION EXCLUDING PURCHASE TAX
Table 2: Vehicle Taxation Excluding Purchase Tax (£ per annum; 2000) excluding Insurance and Inspection Taxes),
N.B. Countries are ranked according to taxation cost for 1600cc engine
APPENDIX FIVE: DETAILED CALCULATIONS
Comparison of Motoring Taxation Costs Across Europe