A faction within Germany’s Social Democratic Party (SPD) is pushing for a significant overhaul of the taxation system governing company cars, a proposal that risks sparking controversy within the ruling coalition and drawing criticism from the automotive industry. According to a policy paper obtained by “Handelsblatt”, the SPD is advocating for adjustments intended to incentivize the transition to electric vehicles while curbing perceived loopholes exploited by businesses.
The proposed changes would see the flat-rate tax levied on company cars with internal combustion engines increase to as high as 1.5% of the vehicle’s list price, a substantial rise from the current rate of 1%. Simultaneously, the reduced tax rate – presently at 0.5% – for plug-in hybrid vehicles would be drastically tightened. Under the new rules, eligibility for the reduced rate would be contingent on demonstrating a significantly higher proportion of electric driving.
Critics point out that while plug-in hybrids offer the appearance of reduced emissions, real-world data suggests their average fuel consumption remains considerably higher than initially projected. Studies consistently indicate consumption averaging around 3 liters per 100 kilometers, effectively diminishing the environmental benefit.
The initiative, spearheaded by SPD members of parliament Isabel Cademartori, Sebastian Roloff and Jakob Blankenburg, frames the proposed changes as a necessary complement to the European Union’s CO2 fleet emission regulations. Their policy paper emphasizes that electrifying company car fleets is a critical element in achieving the EU’s climate goals within the transportation sector.
However, this agenda is not without its political complexities. The automotive industry is already grappling with the shift towards electric mobility and further financial penalties on conventional and hybrid vehicles could face strong opposition. Moreover, within the German government itself, potential disagreements could arise concerning the economic impact of these regulations and their effects on both businesses and employees who rely on company car benefits. The proposal highlights a growing tension between ambitious climate targets and the practical realities of transitioning a powerful industrial sector.
