5 Dec 17

To diesel or not to diesel: a tax question

With diesel the black sheep of individual transport, policymakers are hurrying to introduce LEZ or even ban the sales of diesel cars altogether in the near future. Erwin Boumans, Tax Partner at BDO Belgium, explained during the fifth session of the Remarketing Forum that such decisions are not always thought through.

The European tax shift

Diesel used to be the preferred fuel for fleets because it enjoyed a better tax regime than petrol cars. Less CO2 meant less taxes: it was as simple as that. No matter the use made of the car – short distances in an urban environment or long-distance motorway driving – benefit in kind and road tax always played in the hand of diesel.

Today, Europe’s former favourite fuel is penalised from a tax perspective. At the same time, petrol engines are catching up from an efficiency point of view, posting lower CO2 figures and still carrying a lower price tag. Diesel’s share is expected to decline from 56,1 percent in 2011 to just 30 percent of the European new car market in 2030.

Impact of diesel declining

On the one hand, diesel is being replaced by petrol, which complicates matters for OEMs in terms of CO2 targets. On the other hand, switching to electric and hybrid lowers a carmaker fleet’s carbon dioxide emissions. According to a S&P report, this could lead to a reduction of the leasing and renting operations of large companies.

Also, a massive shift to plug-in hybrid and electric cars basically just shifts the problem from tailpipe emissions to pollution related to mining cobalt and lithium, building and recycling batteries, and producing electricity to feed the batteries.

Mr Boumans concluded his session with two recommendations. If we must move away from diesel, governments need to close the gap with petrol. Even more importantly, we need to rethink the role of the company car in corporate mobility and shift the focus to other ways of moving around.

Authored by: Dieter Quartier