SMMT urges careful evolution in motoring taxation - new report
Wed 29 April 2015
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While government policy allied with industry action have been effective in delivering rapid cuts in average new car CO2 emission values, this success will cause a challenge in the form of declining future revenues from the motor sector. To help address this, the SMMT launched a new report, by the Centre for Economics and Business Research (CEBR) which considers the future of motoring taxation, focusing primarily on the role of vehicle excise duty (VED).
Launched alongside the latest annual SMMT report on UK New Car CO2 emissions, the new report - The future of motoring taxation - says that the combined revenue from the two major motoring taxes, VED and fuel duty, has stood at over £30 billion since 2007. In 2013/14, of the total tax take of £33bn, VED from all vehicles contributed almost £6bn, compared with £27bn from fuel duty (excluding VAT charged on top of fuel duty). The report says that revenues from VED were equivalent to 1.2% of all tax receipts last year.
The report says that VED has been a highly effective and successful policy tool in incentivising the uptake of lower carbon vehicles.
Around two-thirds of new vehicles registered are now not liable for VED in the first year. With sustained progress in cutting emissions, revenues from VED are expected to fall substantially without a revision in the bandings.
While the report comments that VED 'is not the only instrument available in the Government's toolbox' it is fundamental to ensure that the elements of VED policy that have proven to be beneficial are retained.
The report comments that while vehicle manufacturers are sympathetic to the need for change, many advocate modest change rather than an ovehaul of the entire motoring tax system. They favour signifiancant advanced notice of change and gradual phasing-in of new policies.
The CEBR report recommends a gradual evolution of VED bandings for cars, particularly segmentation of the current top band A (as seen in the company car tax system). The report also recommends the retention of the current first-year or 'showroom tax' as a reliable tool for influencing consumer choices.
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