Tax instruments for the mobility transition: Examples from Europe

Various examples from other European countries show how the right tax instruments can move the mobility transition forward.


Car registration tax in the Netherlands

Anyone who owns a car in the Netherlands has to dig deep into their pockets. Drivers of vehicles with high CO2 emissions in particular have to pay significantly higher taxes than in Germany. In the Netherlands, every gram of CO2 emitted by a car has its price.

If drivers want to register a new vehicle in the Netherlands, they have to pay two different taxes: the annual vehicle tax and a so-called registration tax, which depends on CO2 emissions.

The vehicle tax depends on the type, weight and drive system of the vehicle and is many times higher than in Germany - for a mid-range car with an internal combustion engine, the costs are between 600 and 1000 euros. The CO2-dependent registration tax, on the other hand, is only payable once when the vehicle is registered, but can make owning a car very expensive: an SUV with emissions of 180 g CO2/km costs around 27,000 euros in registration tax, while a mid-range petrol car with 110 g CO2/km costs around 4,000 euros. Electric cars and vehicles with fuel cell drives are exempt from registration tax.

These two tax instruments have different objectives. While the annual vehicle tax means constant and predictable revenue for the Dutch government, the CO2-dependent registration tax makes low-emission and emission-free vehicles much more financially attractive than vehicles with combustion engines. Above all, it has a steering effect in favour of more climate-friendly mobility. Statistics show that this calculation works for the Netherlands: the average CO2 emissions of newly registered vehicles in the Netherlands were 98.4 g/km in 2019, compared to 131.2 g/km in Germany.

The Netherlands also constantly adjusts tax rates and conditions. A significant difference to the rigid German motor vehicle tax. For example, not only electric cars but also plug-in hybrids were initially exempt from registration tax in the Netherlands. As a result, a particularly large number of hybrid vehicles were registered as company cars. However, it turned out that hybrid vehicles are less climate-friendly than fully electric vehicles, as they only avoid emissions if drivers consistently drive them electrically. As a result, since 2017, buyers of plug-in hybrids have also had to pay a registration tax of 25 to 83 euros per g CO2/km. Since 2020, the Dutch government has also levied a surcharge of 366 euros per g CO2/km for every newly registered car, and a further 78 euros per g CO2/km for diesel vehicles. Here too, zero-emission electric cars are the only exception to this surcharge.

The policy of CO2-based taxes is having an effect: by 2020, more than one in five newly registered vehicles in the Netherlands was a fully electric car.

Expensive company cars in the Netherlands

The Netherlands also relies on tax instruments when it comes to company cars in order to achieve a steering effect towards more climate-friendly mobility.

The same applies to company cars in the Netherlands as in Germany: anyone who uses a company car privately has a considerable non-cash benefit. Employees have to pay tax on this benefit. However, while the tax rate in Germany - based on the list price of a vehicle - is just one per cent per month or 12 per cent per year, making the private use of company cars attractive for many, the private use of a company car is taxed at a much higher rate in the Netherlands. In the Netherlands, the tax rate is almost twice as high - at 22 per cent of the vehicle list price per year or 1.83 per cent per month. This makes company cars in the Netherlands considerably more expensive. Only those who can prove that they drive less than 500 km per year in their company car can be exempt from tax.

Zero-emission electric cars or fuel cell vehicles are also taxed significantly higher in the Netherlands than in Germany, at 0.67 per cent per month or 8 per cent per year. Germany only taxes electric cars at 0.25 per cent.

The tax advantage for electric cars in the Netherlands also has limits. Since 2019, the lower tax rate has only applied up to a certain gross list price, above which the regular rate of 22 per cent applies and the tax advantage for company cars with electric motors has been continuously reduced in several stages. Since January 2021, the annual tax rate has been 12 per cent and only applies to models up to 40,000 euros. From 2026, the regular tax rate of 22 per cent will also apply to electric cars.


Bonus and malus in France

Alongside the Netherlands, France has also introduced a tax model that consistently taxes CO2-intensive vehicles at a higher rate. A so-called bonus-malus system has been in place in France since 2007. France was one of the first countries in the EU to respond to the introduction of Europe-wide fleet limits. In addition, an engine performance-related registration fee is payable on registration.

Anyone who registers a vehicle in France that exceeds a certain CO2 emission value must pay a one-off surcharge - the malus. On the other hand, anyone who registers a particularly low-emission car receives a bonus from the state. Thanks to this instrument, the average CO2 emissions of new vehicles in France in 2019 were significantly lower at 113.7 g/km than in Germany at 131.2 g/km.

The principle originally envisaged that the malus would finance the premiums, making the system self-sustaining. However, France had to adapt the bonus-malus system as the purchase premiums cost French taxpayers an additional 200 to 300 million euros per year in the first few years.

In 2020, France significantly modified the basis for the calculation. Since March 2020, the CO2 emissions of the vehicle according to the newer WLTP test procedure have been decisive for calculating the malus for registration. WLTP records the emissions of a vehicle more realistically and therefore shows higher values. Since 2021, a penalty must be paid for each additional gram above the limit value of 133 g CO2/km. Between the CO2 values of 133 g/km and 219 g/km, the total penalty increases from 50 euros to a maximum of 30,000 euros. The bonus has also been changed accordingly. The bonus of 6,000 euros, which was previously paid out for all electric cars and hybrids with emissions of less than 20 g CO2/km, will only be paid in full to private households from 2020 and only up to a list price of less than 45,000 euros.

However, it is clear that the existing bonus-malus model has a rather limited steering effect towards zero-emission electric cars, as the threshold values of 110 g CO2/km according to the old NEDC measurement method and 133 g CO2/km according to the current WLTP method are set quite high. As a result, the malus only takes effect quite late and does not cover a significant proportion of newly registered vehicles with combustion engines in France.

Statutory mobility budget in Belgium

In addition to higher taxation of private vehicles and company cars, alternatives such as a mobility budget can also be subsidised by the state. Belgium is the most advanced country when it comes to mobility budgets. The mobility budget has been enshrined in law there since 2019. A revision of the law was implemented in 2022. One of the aims of this measure is to encourage employers and employees to use sustainable mobility instead of the company cars that are widely used in Belgium.

In Belgium, employees can receive a mobility budget if they own a company car or are eligible for one. If employees are not entitled to a company car, they cannot make use of the statutory mobility budget. The Belgian state provides tax relief for the mobility budget.

For the employer, the statutory mobility budget is tax-free, but not exempt from social security contributions. They must provide a mobility budget of at least 3,000 euros per year. A maximum of one fifth of the gross salary or 16,000 euros per year is possible. Employees can exchange their company car for a mobility budget, which they can use tax-free for alternative mobility options.

The Belgian model provides three pillars for the mobility budget: In the first pillar, employees can choose a more environmentally friendly vehicle instead of their current company car. In the second pillar, the part of the budget not used for a new, more environmentally friendly company car is used as a classic mobility budget to buy, rent or lease a bicycle, e-bike, moped or e-motorbike. It is also possible to purchase public transport tickets and season tickets (commuting to work and private journeys) and cover the costs of car pools, car sharing solutions, taxi services and car hire.

A special feature of the Belgian concept: housing costs, i.e. rent and mortgage interest, for a flat within a radius of 10 kilometres from the place of work can also be covered by the budget. This is intended to promote short journeys to work in order to avoid emission-intensive commuting.

Under the third pillar, unused amounts are paid out to employees at the end of the year at favourable tax rates.


References

Federal Environment Agency (2021): Rethinking mobility

Stefan Wendering
Stefan is a freelance writer and editor at NAVIT. Previously, he worked for startups and in the mobility cosmos. He is an expert in urban and sustainable mobility, employee benefits and new work. Besides blog content, he also creates marketing materials, taglines and content for websites and case studies.

Various examples from other European countries show how the right tax instruments can move the mobility transition forward.


Car registration tax in the Netherlands

Anyone who owns a car in the Netherlands has to dig deep into their pockets. Drivers of vehicles with high CO2 emissions in particular have to pay significantly higher taxes than in Germany. In the Netherlands, every gram of CO2 emitted by a car has its price.

If drivers want to register a new vehicle in the Netherlands, they have to pay two different taxes: the annual vehicle tax and a so-called registration tax, which depends on CO2 emissions.

The vehicle tax depends on the type, weight and drive system of the vehicle and is many times higher than in Germany - for a mid-range car with an internal combustion engine, the costs are between 600 and 1000 euros. The CO2-dependent registration tax, on the other hand, is only payable once when the vehicle is registered, but can make owning a car very expensive: an SUV with emissions of 180 g CO2/km costs around 27,000 euros in registration tax, while a mid-range petrol car with 110 g CO2/km costs around 4,000 euros. Electric cars and vehicles with fuel cell drives are exempt from registration tax.

These two tax instruments have different objectives. While the annual vehicle tax means constant and predictable revenue for the Dutch government, the CO2-dependent registration tax makes low-emission and emission-free vehicles much more financially attractive than vehicles with combustion engines. Above all, it has a steering effect in favour of more climate-friendly mobility. Statistics show that this calculation works for the Netherlands: the average CO2 emissions of newly registered vehicles in the Netherlands were 98.4 g/km in 2019, compared to 131.2 g/km in Germany.

The Netherlands also constantly adjusts tax rates and conditions. A significant difference to the rigid German motor vehicle tax. For example, not only electric cars but also plug-in hybrids were initially exempt from registration tax in the Netherlands. As a result, a particularly large number of hybrid vehicles were registered as company cars. However, it turned out that hybrid vehicles are less climate-friendly than fully electric vehicles, as they only avoid emissions if drivers consistently drive them electrically. As a result, since 2017, buyers of plug-in hybrids have also had to pay a registration tax of 25 to 83 euros per g CO2/km. Since 2020, the Dutch government has also levied a surcharge of 366 euros per g CO2/km for every newly registered car, and a further 78 euros per g CO2/km for diesel vehicles. Here too, zero-emission electric cars are the only exception to this surcharge.

The policy of CO2-based taxes is having an effect: by 2020, more than one in five newly registered vehicles in the Netherlands was a fully electric car.

Expensive company cars in the Netherlands

The Netherlands also relies on tax instruments when it comes to company cars in order to achieve a steering effect towards more climate-friendly mobility.

The same applies to company cars in the Netherlands as in Germany: anyone who uses a company car privately has a considerable non-cash benefit. Employees have to pay tax on this benefit. However, while the tax rate in Germany - based on the list price of a vehicle - is just one per cent per month or 12 per cent per year, making the private use of company cars attractive for many, the private use of a company car is taxed at a much higher rate in the Netherlands. In the Netherlands, the tax rate is almost twice as high - at 22 per cent of the vehicle list price per year or 1.83 per cent per month. This makes company cars in the Netherlands considerably more expensive. Only those who can prove that they drive less than 500 km per year in their company car can be exempt from tax.

Zero-emission electric cars or fuel cell vehicles are also taxed significantly higher in the Netherlands than in Germany, at 0.67 per cent per month or 8 per cent per year. Germany only taxes electric cars at 0.25 per cent.

The tax advantage for electric cars in the Netherlands also has limits. Since 2019, the lower tax rate has only applied up to a certain gross list price, above which the regular rate of 22 per cent applies and the tax advantage for company cars with electric motors has been continuously reduced in several stages. Since January 2021, the annual tax rate has been 12 per cent and only applies to models up to 40,000 euros. From 2026, the regular tax rate of 22 per cent will also apply to electric cars.


Bonus and malus in France

Alongside the Netherlands, France has also introduced a tax model that consistently taxes CO2-intensive vehicles at a higher rate. A so-called bonus-malus system has been in place in France since 2007. France was one of the first countries in the EU to respond to the introduction of Europe-wide fleet limits. In addition, an engine performance-related registration fee is payable on registration.

Anyone who registers a vehicle in France that exceeds a certain CO2 emission value must pay a one-off surcharge - the malus. On the other hand, anyone who registers a particularly low-emission car receives a bonus from the state. Thanks to this instrument, the average CO2 emissions of new vehicles in France in 2019 were significantly lower at 113.7 g/km than in Germany at 131.2 g/km.

The principle originally envisaged that the malus would finance the premiums, making the system self-sustaining. However, France had to adapt the bonus-malus system as the purchase premiums cost French taxpayers an additional 200 to 300 million euros per year in the first few years.

In 2020, France significantly modified the basis for the calculation. Since March 2020, the CO2 emissions of the vehicle according to the newer WLTP test procedure have been decisive for calculating the malus for registration. WLTP records the emissions of a vehicle more realistically and therefore shows higher values. Since 2021, a penalty must be paid for each additional gram above the limit value of 133 g CO2/km. Between the CO2 values of 133 g/km and 219 g/km, the total penalty increases from 50 euros to a maximum of 30,000 euros. The bonus has also been changed accordingly. The bonus of 6,000 euros, which was previously paid out for all electric cars and hybrids with emissions of less than 20 g CO2/km, will only be paid in full to private households from 2020 and only up to a list price of less than 45,000 euros.

However, it is clear that the existing bonus-malus model has a rather limited steering effect towards zero-emission electric cars, as the threshold values of 110 g CO2/km according to the old NEDC measurement method and 133 g CO2/km according to the current WLTP method are set quite high. As a result, the malus only takes effect quite late and does not cover a significant proportion of newly registered vehicles with combustion engines in France.

Statutory mobility budget in Belgium

In addition to higher taxation of private vehicles and company cars, alternatives such as a mobility budget can also be subsidised by the state. Belgium is the most advanced country when it comes to mobility budgets. The mobility budget has been enshrined in law there since 2019. A revision of the law was implemented in 2022. One of the aims of this measure is to encourage employers and employees to use sustainable mobility instead of the company cars that are widely used in Belgium.

In Belgium, employees can receive a mobility budget if they own a company car or are eligible for one. If employees are not entitled to a company car, they cannot make use of the statutory mobility budget. The Belgian state provides tax relief for the mobility budget.

For the employer, the statutory mobility budget is tax-free, but not exempt from social security contributions. They must provide a mobility budget of at least 3,000 euros per year. A maximum of one fifth of the gross salary or 16,000 euros per year is possible. Employees can exchange their company car for a mobility budget, which they can use tax-free for alternative mobility options.

The Belgian model provides three pillars for the mobility budget: In the first pillar, employees can choose a more environmentally friendly vehicle instead of their current company car. In the second pillar, the part of the budget not used for a new, more environmentally friendly company car is used as a classic mobility budget to buy, rent or lease a bicycle, e-bike, moped or e-motorbike. It is also possible to purchase public transport tickets and season tickets (commuting to work and private journeys) and cover the costs of car pools, car sharing solutions, taxi services and car hire.

A special feature of the Belgian concept: housing costs, i.e. rent and mortgage interest, for a flat within a radius of 10 kilometres from the place of work can also be covered by the budget. This is intended to promote short journeys to work in order to avoid emission-intensive commuting.

Under the third pillar, unused amounts are paid out to employees at the end of the year at favourable tax rates.


References

Federal Environment Agency (2021): Rethinking mobility