The scheme to introduce a special tax on large 4x4 vehicles in city centres has demonstrated how a simple idea becomes more complicated in practice.
The basic idea is simple. There is no need to have large, thirsty, polluting 4x4 vehicles in city centres so if people want them they should pay a premium price. This would certainly be met with approval from the Mayor of London who has called the owners of such vehicles “complete idiots”.
So the French government propose a tax from January 2005 of over £2000 p.a. on new models over a certain size. At the same time tax credits or cash-back lump sums of up to £500 for smaller, cleaner vehicles would encourage people to be more environmentally aware.
The first problem arose when the financial incentive for the smaller vehicles was identified as a possible ongoing burden for the French administration and the realisation that it would require the approval of a number of departments of the EU Commission before it could be passed. There is also confusion over where and who will pay the tax credit or cash-back lump sum. The situation isn’t helped by the fact that fewer than half of French households actually pay income tax.
Then the details of the classification of gas guzzlers has its own pitfalls. The scheme would divide France’s 2m new cars into five categories with the majority of medium sized cars neither attracting a tax penalty nor a credit. But the two largest French car manufacturers both specialise in this class of motor vehicle and while unfair competitive advantage may not be the aim of the scheme it is certainly the result. In a market where both manufacturers saw their sales fall significantly in the first half of 2004 such a fillip would be more than welcome. Larger, foreign car manufacturers like BMW and Toyota both saw their sales increase by over 13% in the same period.
While that is a consensus that large cars like a Toyota Landcruiser emitting 405g of the green house gas carbon dioxide for every kilometre driven are hugely damaging to the environment compared to 148g for a three door Peugeot 206 the answer may not be as simple as just taxing the large and rewarding the small.
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