£93million road tax woes

You may have read the headlines in July, “Abolished paper tax disc cost the government £93million in lost revenue” – but did it?

Since the paper road tax disc was abolished in 2015, the DVLA has lost £93 million in vehicle excise revenue, but are the two facts linked.  The national media seem to think so!

A DVLA spokeswoman explained why they think there is a £93m deficit: “We have introduced direct debit to help customers spread the cost of paying for their tax disc, and more than 10 million people have taken advantage of this, so there is a lag in when we receive the money.  In addition, there are more clean cars on the road paying lower tax.”

The papers were quick to point out the £93m was higher than the £80m forecast deficit.  The RAC has said that this amount is significant, and needed further investigating.

However, to put the £93m into context:

  • Total road tax revenue for 2015/16 is £5.93bn
  • The £93m is 1.5% of total revenue
  • The previous year (2014/15) also saw a decrease – of 1.6% (£96m)
  • The cost of administering paper road tax discs each year is estimated at £10m

As can be seen from this chart, from 2010 to 2013, revenue from the Vehicle Excise Duty (VED) rose.

road-tax-chart

However, in 2013 when the government introduced a sliding scale based on theoretical CO2 emission rates per kilometer, the revenue began to decrease (by 1.6%).

It could be argued that the emissions changes in 2013 would level out after the first year due to the charges being the same in subsequent years, which would then result in a different causation of the £93million deficit in 2015/16.

If this is the case, then based on the government’s estimate of an average car VED being £166, then this means a staggering 560,241 owners have not renewed their electronic tax disc.

It is difficult to prove whether the DVLA are correct in their supposition that low emission vehicles account for a lot of the £93m.  In 2015, there was an 89% increase in the number of new low emission vehicles being registered, equating to just under 30,000 vehicles.  Based on the governments average £166 duty, this would equal just under £5m of ’lost revenue’.

So, if we play with the figures a bit and say £5 million is accounted for with low emission vehicles, and say £5 million to account for the people paying with monthly payments, this still leaves us with £83 million deficit.  This still equates to half a million drivers with no road tax.

So maybe the headlines were a bit sensational, but they were not all that far out!

 

 

 

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