Economic Policy and Infrastructure

Taxes and Import Duties

The coalition agreement between the political parties CDU, CSU and SPD contains no major tax-policy plans for the 18th parliamentary session (2013 to 2017). Instead of structural tax reforms, the coalition is concentrating principally on maintaining the status quo and safe-guarding its tax revenue.

Company car taxation

The current taxation of private usage of company cars using either the 1% rule or the total-costs method (log-book method) is appropriate and has proved valuable in practice. Orienting this taxation on ecological aspects would lead to contradictions in tax law. Earnings tax legislation is not the place for environmental demands on automobiles. The law regulating the reduction of CO2 output is the EU’s CO2 Regulation for passenger cars. It already governs CO2 requirements in a very ambitious manner. Therefore the Finance Committee of the German Bundestag, after its hearing on 7 November 2012 (motion from Alliance 90/The Greens, BT-Drs. 17/8462), decided not to pursue any further ecological reform of the taxation on company cars.

The Federal Fiscal Court, too, has declared the current taxation of private usage of company cars using either the 1% rule or the log-book method to be in accordance with the constitution (judgement of 13 December 2012 – VI R 51/11). The Court regards the 1% rule as constitutional, since taxpayers have the choice of using the log-book method to determine the benefit-in-kind received from their employer and therefore the amount of tax they have to pay on it.

Industrial and employment-policy considerations also speak against reforming the taxes on company cars. The company car segment is dominated by the German vehicle manufacturers: 86 per cent of company vehicles registered in Germany are from German group brands (in 2013).

Ecological reform of company vehicle taxation is also not essential for reasons of climate policy. For example, since the beginning of 2008 average CO2 emissions from newly registered company cars have come down by nearly 35 g/km (from 171.2 g to 136.7 g). The difference between commercially and privately used vehicles has shrunk during the same period, from 10 g to now only 3.6 g.

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