Benefits of company cars are under-taxed

An OECD policy brief shows that perverse tax incentives in many countries are encouraging company car owners to drive up to three times as much as people with private cars. On average, OECD governments only tax about half the benefits accrued by employees from company car use under personal income tax regimes. A separate OECD study, “The Diesel Differential”, argues that applying lower tax rates to diesel goes against efforts to reduce emissions and air pollution.

“The cost of driving a car today does not properly reflect the impact on the environment and to society. Taxing diesel fuel and company cars correctly would help to fix this,” said OECD Environment Director Simon Upton. “Governments should stop offering financial incentives to drive cars and to run them on fuels with a heavy environmental footprint.”


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