VAT Exemptions for Company Cars does it effect the Environment in the Czech Republic? Adam Helebrant Department of Economic Instruments MoE
Scope Evaluation made by MoE, no precise case study (as was EU study in 2009) Comparison of economic and environmental indicators Regulation Impact Assessment (env. conditions not obligatory) Concentration on corporate behavior before and after VAT law (input tax block rule) in 2009 - contemplation
Data Sources Czech Statistical Office(www.czso.cz) Czech Environmental Information Agency (www.cenia.cz), MoE Automotive Industrial Association AIA (www.autosap.cz) Ministry of the Interior Central Car Registry (www.registr-vozidel.cz) Corporate Vehicle Observatory (www.corporate-vehicle-observatory.com)
Taxes and Fees What burdens have to be faced by a company Direct Taxes Indirect Taxes Income tax Road tax VAT Excise tax Road toll Environment fee (registration of old cars) Vehicle running costs
Allowances What relieves can be used by a company Depreciation VAT input tax block rule Employees benefits (car for private use is not counted as a part of gross income, welfare and health insurance contribution) Subtraction of costs from income tax
Change of VAT Law Amended Act no. 235/2004 Coll., on VAT Following Public Directive on technical eligibility Came into force in 1. April 2009 Introduced input tax block rule changes - VAT as deductable item by purchasing company car in all categories included category M1=car up to 3,5 tons Before, just category N1=light CV up to 3,5 tons was freed from VAT Categories N,M according to Directive 97/27/EC (amended by 2001/85/EC and 2003/19/EC)
Categories M, N
Categories M, N
How it worked Companies changed M1 cars into N1 cars and use VAT advantage Construction change by installing unremovable grid between passenger room and cargo room Some extreme cases (Lexus, Maybach) statistically unimportant Since amended Act was released in IX/2008, companies hesitated in buying new cars waited till IV/2009 In total numbers of PC in 2009 no substantial changes Decrease in N1 category registration caused more by financial crisis than by VAT
Economic Indicatorsnumber of cars
II III IV V VI VII VIII IX X XI XII 3 8658 12272 11986 11858 12217 10288 9535 9945 9589 10490 11147 3 7844 11057 12668 13384 13214 10043 10527 8681 10327 10347 10341 1 8462 11285 11479 13231 11505 9904 10111 8869 10979 10775 9566 7 9192 11766 11974 12829 12652 11552 10420 9177 12120 11162 10551 2 10646 12298 14782 11852 13795 12941 10470 12134 12973 11384 10304 2 9823 12410 17592 14277 16284 14150 12174 12196 14121 14975 14815
I II III IV V VI VII VIII IX X XI XII 1634 1610 2339 2274 2411 2805 2455 2249 2285 2279 2957 3637 2192 2016 2815 3144 3447 3680 2882 3292 2831 3681 4115 4952 3371 3082 3992 3668 4488 4713 3672 4078 3455 4716 4878 5378 4369 3800 4655 4764 5145 5309 4688 4593 4421 6149 6467 7678 5778 4532 4898 5821 4993 5649 5203 4073 5025 5006 4284 4724 3634 2946 2629 1565 961 1137 1037 955 965 1070 1332 1196
Registration of cars
VEHICLE PARC OF THE CZECH REPUBLIC data valid at 2010-12-31 Vehicle category Parc in units Average year of production Average age Cars 4 496 232 1997,30 13,70 Commercial Vehicles (Total) 681 540 2000,31 10,69 of it: Trucks 584 921 2001,24 9,76 Road Tractors 12 096 1997,93 13,07 Special vehicles 36 660 1984,88 26,12 Motorcycles 924 291 1979,00 32,00 Buses 19 653 1996,62 14,38 Trailers for CVs Trailers for Cars Trailers for Agricultural Tractors 266 866 483 866 92 871 2001,65 1985,92 1975,63 9,35 25,08 35,37 Semitrailers 53 637 2001,82 9,18 Agricultural tractors 153 289 1981,62 29,38 Other Vehicles 49 698?? TOTAL: 7 221 943 1993,89 17,11
Total Numbers Total number of PC: almost 4,5 million, 74% petrol (gas), 26% diesel Average age 13,7 yrs, 60% is older than 10 yrs Ratio of company cars on first registration in 2009 was 41,28% Ratio of company cars on total number of PC is about 14%
Environmental Indicators blems in the transportation sector include the ever increasing transpo acity, which is the source of most greenhouse gas emissions, and the avourable composition of both the passenger and freight fleets (a lar ber of older vehicles that do not comply with EURO 2 4 emission ndards).
Environmental Indicators Road traffic produces NOx, SPM and VOC. At this current time the production of the total emissions is still reasonably in decline, but there are concerns about an increasing trend in the emissions SPM and NOx from mobile (especially from road traffic) and small sources, i.e. in particular from domestic heating. Also over the decline of all emissions from the year 2000, the air quality is stagnant.
State Budget Total tax revenue in 2008 37 196 mil. EUR VAT revenue in 2008 7 113 mil. EUR (19%) Total tax revenue in 2009 33 329 mil. EUR VAT revenue in 2009 7 069 mil. EUR (21%)
Corporate Behavior VAT allowance as a financial source More cars, bigger cars, representative function Better equipment Fleet management services, insurance Corporative Vehicle Observatory study (less greening of fleet in CZ, less operational leasing)
Conclusions Total number of cars constantly growing Car usage growing, but not connected with VAT Structure of company cars changing, impacts: positive age of cars, new engine design, negative life cycle, more transport env.burden Environmental impacts in general steady no improvement More fiscal effects of input tax block rule (loss of tax revenue was estimated on cca 30 mil. EUR)
Conclusions In the future (2012), there are plans to excuse road tax for SMEs 2010, road tax 192 mil. EUR, half of it from PCs There are worse harmful subsidies and incentieves than simple VAT changes for corporation cars (selective state aid, scrappage schemes) Legislature change in 2009 had no great influence on behaviour of companies (unlike credit crisis)
Thank you for your attention Contact me at: e-mail: adam.helebrant@mzp.cz phone: +420 267 122 273