The Norwegians have things sorted out

This opinion piece was published in the Belgian newspaper De Morgen, August 24th 2017 and is translated to English by Henri van Soest.

The company car is turning into a Belgian icon. Today, there are around 770.000 company cars on Belgian roads. In addition, the amount of newly registered company cars during the first three months of 2017 was about 10% higher than during the same period last year. Unfortunately, almost all of these company cars have an internal combustion engine.

A legislative proposal drafted by Flemish liberal party Open VLD wants to address the issue, by slowly reducing the (para)fiscal benefits for polluting company cars. From 2027 onwards, internal combustion company cars would be taxed as normal wages. In its place would come new benefits for electric and hydrogen cars. This change is long overdue, because in its current form, the system provides an untenable subsidy for internal combustion cars. Belgium is the most generous country in the OECD, with no less than 2.763 euro subsidy per company car per year.

Intervening in the structure of the tax system is one of the most powerful tools a government has at its disposal. Despite all the good intentions, in the end it is still the wallet that talks. When the Belgians started buying diesel cars in the nineties, they did not do so because diesel cars where supposedly better for the environment, but because of the lower excise duties on diesel fuel and its cheaper use. To ensure that the electric car really breaks through, we need to apply the same logic: tax what is undesirable, give benefits to what is desirable.

Belgium can get inspiration in Norway. In June of this year, no less than 42% of the newly registered cars in Norway were electric or hybrid. The Norwegians are certainly quite environmentally aware, but the most important reason for these figures is no doubt the fiscal benefits that electric cars receive. First of all, the taxes on electric company cars are calculated on 50% of the purchase price, instead of 100% in the case of internal combustion cars. In addition, there is no VAT on the purchase of electric cars, drivers of electric cars do not pay toll on Norwegian roads, and electric cars can be charged for free at public charging points. Furthermore, electric cars receive a lot of non-monetary benefits: they are allowed to drive on bus- and taxi lanes, and charging stations are ubiquitous, even in the most remote parts of Norway.

Belgium is not Norway of course, but other countries (without oil wealth), such as the Netherlands, France and Sweden, are also following the Norwegian example. If we want to meet the climate goals set out in the Paris Agreement, the Norwegian way is certainly the future.

The Norwegian example also shows that tweaking the tax on company cars alone will not solve the problem. We need a general tax shift away from electric cars towards internal combustion cars. In addition, the non-monetary benefits for electric cars need to be extended.

Despite all this, the question rises whether the proposal by Open VLD is not addressing the symptoms, rather than the cause of the problem. Whether the system favors internal combustion cars or electric cars, it does not change the fact that the concept of the company car does not belong in this day and age anymore. It makes driving a car a lot cheaper than it actually is, at the expense of other forms of transport, thereby only worsening the Belgian mobility problems.

However unpopular it might be, the situation where every Flemish family owns one, two or even three cars is untenable. We have to approach mobility in a different way. Here again, Belgium can learn from the Norwegians: starting in 2019, the Oslo inner city will be made permanently car free.

By Henri van Soest
Published Sep. 1, 2017 10:37 PM - Last modified Sep. 1, 2017 10:47 PM