VW Questions Germany's Diesel Tax Break

by Ulrika Lomas, Tax-News.com, Brussels

12 December 2017

Matthias Muller, the Chief Executive Officer of German auto giant Volkswagen, has said that tax breaks on diesel fuel would be better spent by the Government on promoting clean energy sources.

Diesel-engined vehicles, which typically produce less carbon emissions than petrol cars, have been promoted heavily to consumers in Germany, and while the annual tax on a diesel car is higher than for a petrol equivalent, this is more than offset by the lower cost of diesel itself, which is approximately EUR0.18 (USD0.21) per liter cheaper than gasoline because it is subject to lower tax.

The diesel tax subsidy is said to cost the German Government EUR7-8bn per year in lost revenue. Noting that it has recently been found that diesel engines produce higher rates of dangerous particulates in their emissions, Muller told Handelsblatt in an interview that subsidies should be refocused away from diesel and towards cleaner technologies.

"I've become convinced that we should question the sense and purpose of the diesel subsidies," he told the paper. "If the switch to environmentally friendly e-cars is to succeed, diesel combustion engines can't continue to be subsidized the way they have been forever."

The German Government has declined to increase tax on diesel in the wake of the Volkswagen emissions testing scandal.

However, governments in other countries at national and sub-national level are considering new or higher taxes on diesel, or restrictions on diesel-engined cars in urban areas, to encourage consumers to switch to less-polluting alternatives.

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