30 September 2014: The Organisation for Economic Co-operation and Development (OECD) is urging governments to cease subsidizing company cars and to phase out the tax differential that exists between diesel and petrol. Research released by OECD concludes that developed countries are causing an increase in carbon emissions, traffic congestion and air pollution by under-taxing company cars and diesel fuel, often at lower rates than wages, which tends to encourage more driving.

The study, which analyzed 27 OECD countries and South Africa, finds that under-taxing company cars is equivalent to an average annual €1,600 subsidy per car (from €57 in Canada to €2,763 in Belgium), and €26.8 billion in lost tax revenues.

The environmental and social costs of under-taxation are estimated to be approximately €116 billion, and contribute to climate change, local air pollution, health ailments, congestion and road accidents. An OECD policy brief, titled ‘Under-taxing the benefits of company cars,’ underscores that perverse tax incentives encourage company car owners to drive up to three times as much as people with private cars.

In addition, 33 of 34 OECD countries tax diesel at a lower rate than petrol, despite the fact that diesel contains approximately 18% more carbon per liter than petrol and remains the most used vehicle fuel in most OECD countries.

Another OECD study, titled ‘The Diesel Differential: Differences in the Tax Treatment of Gasoline and Diesel for Road Use,’ says that lower tax rates on diesel counter efforts to curb emissions and air pollution. [OECD Press Release] [Publication: Under-taxing the benefits of company cars: A driver of social costs] [Publication: The Diesel Differential: Differences in the Tax Treatment of Gasoline and Diesel for Road Use]