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Governments should address negative tax impact of new car emissions test, says ACEA

Governments should address negative tax impact of new car emissions test, says ACEA

Governments, including in the UK, have been urged to ensure that introduction of a new car emissions test “will not negatively impact vehicle taxation”.  

From 1 September, the Worldwide harmonised Light vehicles Test Procedure (WLTP) replaces the long-established New European Driving Cycle (NEDC).  

The WLTP is designed to provide a more realistic real-world driving picture of vehicle fuel consumption and carbon dioxide (CO2) emissions than the laboratory-based NEDC and is being billed as “the world’s toughest-ever emissions standard”.

However, using MPG figures based on real-world driving conditions will result in CO2 emission increases.  

Industry experts suggest that CO2 figures on a car-by-car basis could increase by about 20% with introduction of the WLTP and that will impact on vehicle taxes, including in the UK company car benefit-in-kind tax, vehicle Excise Duty and capital allowances.  

The WLTP will officially apply to all new car types - models that are introduced on the European market for the first time. One year later, from September 2018, the test will be extended to all new cars sold across the European Union.  

With less than a month left, Europe’s auto manufacturers have said that drivers should not be faced with increased car taxation following the introduction of this new test.

Currently, 19 European Union member states apply CO2 taxation to cars, based on the CO2 values from the NEDC test.  

Simply because it is more rigorous than the old test, WLTP will result in a higher CO2 value for a specific vehicle compared to NEDC. However, as the performance of the car itself will not be affected, the European Automobile Manufacturers’ Association (ACEA) has called on national governments to ensure that the transition to WLTP will not negatively impact vehicle taxation.  

But, said ACEA, even though WLTP will come into force in September, not all European Union member states were adequately prepared for its introduction.  

If they just apply existing CO2-tax schemes to the new WLTP values, they will effectively put a new car type introduced to the market after September in a higher tax band than a similar car hitting the market just before that date.  

“National governments need to act to ensure that CO2-based taxation will be fair, since WLTP will result in a higher CO2 value for the one and same vehicle compared to NEDC,” said ACEA secretary general Erik Jonnaert. “If they fail to do so, the introduction of the new test procedure could increase the financial burden on consumers.”  

For example, as of September 2017 one car model might still have a value of 100g/km of CO2 using the old NEDC test, but a recently approved car might come in at around 120g/km under the new WLTP test. The cars were nearly identical, except one had the latest test results. If a country’s CO2-tax scheme were to remain unchanged, it would unjustly increase the tax burden on certain consumers and lead to overall confusion, said ACEA, which added: “Taxation systems need to be adapted to avoid this scenario.”