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First principles assessment
Why introduce Vehicle Ownership Taxes
Above and beyond a basic level of purchase tax, vehicle ownership tax
is levied to constrain growth of the motor vehicle population at a predetermined
annual rate (Phang & Asher, 1997). This rate is based on the percentage
of expected growth that is deemed tolerable, and scrapage rates for that
year, where they too are dictated. (It is possible to dictate that vehilces
are srapped after x years through licencing and taxation schemes.
This is done to ensure that individuals do not automatically own a car
for life after their first purchase, and to make sure that the vehilces
on the road have reasonably up to date pollution control, and possibly
pricing, technology.) Vehilce ownership taxation is generally applied
on a national basis. The desire to control growth in car ownership stems
from the need to minimise congestion and other associated negative impacts
of car use. Control of car ownership levels is generally only considered
in the most extreme cases, where other demand management policy instruments
have failed to adequately control car use. Vehicle ownership taxes are
based on an assumption that everybody will travel by car unless they are
prevented from doing so.
It is also worth noting that as ownership taxes form part of the fixed
outlay necessary to purchase a vehicle, they may encourage drivers to
drive more to obtain value for money if that outlay is particularly high,
and usage costs are not prohibitive.
Demand impacts
|
Response |
Reduction
in road traffic |
Expected in situations |
| 
|
- |
|
| 
|
- |
|
| 
|
- |
|
| 
|
|
|
| 
|
|
Where vehicle scrappage after x
years is part of the system, and purchase tax (for a replacement
vehcile) has become prohibitive. |
| 
|
|
Where taxation forms part of a quota
system that specifies duration of ownership. |
| 
|
- |
Assuming the taxation is applied on
a national basis. |
 |
=
Weakest possible response, |
 |
=
strongest possible positive response |
 |
= Weakest
possible negative response, |
 |
= strongest
possible negative response |
 |
= No response
|
Short and long run demand responses
The responses in this table are based on an ownership tax that at least
keeps pace with annual inflation and does not have any associated scrappage
or duration of ownership controls. It is also assumed that usage costs
are high enough to prevent drivers from driving as much as possible to
obtain ‘value for money’ from the initial purchase outlay. Further to
this, responses over time are based on would be drivers not entering the
car market and existing owners not replacing old vehicles that need to
be scrapped due to prohibitive vehicle ownership tax levels.
| Response |
- |
1st year |
2-4 years |
5 years |
10+ years |
|
|
- |
- |
- |
- |
- |
|
|
- |
- |
- |
- |
- |
|
|
Change job location |
- |
|
|
|
| - |
Shop elsewhere |
- |
|
|
|
|
|
Compress working week |
- |
|
|
|
| - |
Trip chain |
- |
- |
- |
- |
| - |
Work from home |
- |
|
|
|
| - |
Shop from home |
- |
|
|
|
|
|
Ride share |
|
|
|
|
| - |
Public transport |
- |
|
|
|
| - |
Walk/cycle |
- |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
- |
|
|
|
|
=
Weakest possible response, |
|
=
strongest possible positive response |
|
= Weakest
possible negative response, |
|
= strongest
possible negative response |
|
= No response
|
Supply impacts
Where vehicle ownership tax constrains ownership levels below the market
level, supply will fall to be in line with demand.
Financing requirements
There are no financing requirements assuming that means of collecting
indirect taxes are in place.
Expected impact on key policy objectives
| Objective |
Scale of contribution |
Comment |
| 
|
|
Where the vehicle tax controls growth
of the vehicle stock to the extent that congestion is reduced below
that which whould result from the market level of taxation. |
| 
|
|
Where reductions in congestion result
from the tax. |
| 
|
|
Where reductions in congestion and pollution
result from the tax. |
| 
|
|
Those with a low income will be most
affected by an ownership tax. |
|
 |
|
Where reductions in traffic levels result
from the tax. |
| 
|
|
Where reductions in congestion result
from the tax. |
| 
|
|
|
|
= Weakest
possible positive contribution, |
|
= strongest
possible positive contribution |
|
= Weakest
possible negative contribution |
|
= strongest
possible negative contribution |
|
=
No contribution |
Expected
impact on problems
| Contribution to alleviation of key problems |
| Problem |
Scale of contribution |
Comment |
| Congestion-related delay |
|
Where the vehicle tax controls growth
of the vehicle stock to the extent that congestion is reduced below
that which whould result from the market level of taxation. |
| Congestion-related unreliability |
|
Where the vehicle tax controls growth
of the vehicle stock to the extent that congestion is reduced below
that which whould result from the market level of taxation. |
| Community severance |
|
Where the vehicle tax controls growth
of the vehicle stock to the extent that the number of vehicles in
use is reduced below that which whould result from the market level
of taxation. |
| Visual intrusion |
|
Where the vehicle tax controls growth
of the vehicle stock to the extent that the number of vehicles in
use is reduced below that which whould result from the market level
of taxation, and less road building is undertaken. |
| Lack of amenity |
- |
|
| Global warming |
|
Where the vehicle tax controls growth
of the vehicle stock to the extent that the number of vehicles in
use is reduced below that which whould result from the market level
of taxation. |
| Local air pollution |
|
Where the vehicle tax controls growth
of the vehicle stock to the extent that the number of vehicles in
use is reduced below that which whould result from the market level
of taxation. |
| Noise |
|
Where the vehicle tax controls growth
of the vehicle stock to the extent that the number of vehicles in
use is reduced below that which whould result from the market level
of taxation. |
| Reduction of green space |
|
Where the vehicle tax controls growth
of the vehicle stock to the extent that less road building is required. |
| Damage to environmentally sensitive
sites |
|
Where the vehicle tax controls growth
of the vehicle stock to the extent that the number of vehicles in
use is reduced below that which whould result from the market level
of taxation, and less road building is required. |
| Poor accessibility for those without
a car and those with mobility impairments |
- |
|
| Disproportionate disadvantaging of
particular social or geographic groups |
|
Those on low incomes will be most affected. |
| Number, severity and risk of accidents
|
|
Where the vehicle tax controls growth
of the vehicle stock to the extent that the number of vehicles in
use is reduced below that which whould result from the market level
of taxation. |
| Suppression of the potential for economic
activity in the area |
|
Where the vehicle tax controls growth
of the vehicle stock to the extent that congestion is reduced below
that which whould result from the market level of taxation. |
|
= Weakest
possible positive contribution, |
|
= strongest
possible positive contribution |
|
= Weakest
possible negative contribution |
|
= strongest
possible negative contribution |
|
=
No contribution |
Expected winners and losers
| Group |
Winners / losers |
Comment |
| Large scale freight and commercial traffic
|
|
Where the vehicle tax controls growth
of the vehicle stock to the extent that congestion is reduced below
that which would result from the market level of taxation. |
| Small businesses |
|
Where the vehicle tax controls growth
of the vehicle stock to the extent that congestion is reduced below
that which would result from the market level of taxation. |
| High income car-users |
|
Where the vehicle tax controls growth
of the vehicle stock to the extent that congestion is reduced below
that which would result from the market level of taxation. |
| People with a low income |
|
those on a low income will be affected
most. |
| People with poor access to public transport
|
|
|
| All existing public transport users
|
- |
|
| People living adjacent to the area targeted
|
- |
NA. |
| People making high value, important
journeys |
|
Where the vehicle tax controls growth
of the vehicle stock to the extent that congestion is reduced below
that which would result from the market level of taxation. |
| The average car user |
|
|
|
=
weakest possible benefit, |
|
=
strongest benefit |
|
= weakest
possible disbenefet, |
|
= strongest
possible disbenefit |
|
= neither
wins nor loses |
Barriers to implementation
| Barrier |
Scale |
Comment |
| Legal |
|
Legislation may be required for a new
tax in some countries. |
| Finance |
- |
|
| Political |
|
Significant public opposition is likely
from imposition of such a tax. |
| Feasibility |
- |
Assuming means of collecting indirect
taxes are already in place, there are no obvious practical problems. |
|
=
minimal barrier, |
|
=
most significant barrier |
Text edited at the Institute for Transport Studies,
University of Leeds, Leeds LS2 9JT
|
