Many vehicles in Germany are registered as company cars. The company car policy grants employees a tax advantage, as their employer provides them with a company car that they can use not only for work but also for private purposes. The aim of the research project is to close the data gaps on professional and private use of company cars. The actual amount of the tax advantage provided by company car taxation (the so-called company car privilege) will be surveyed and its effects on mobility behavior, the environment, and social justice will be empirically quantified. Reform proposals will be developed on this basis.
Research approach
The empirical study follows a mixed-methods approach that combines qualitative and quantitative methods. First, the ISOE research team conducts focus groups with people who use a company car provided by their employer for professional and private purposes or who use a company car as self-employed persons. The aim is to gain a sound understanding of actual usage practices – both professional and private – as well as tax accounting.
This will be followed by a Germany-wide quantitative survey. The purpose of this survey is to systematically analyze the behavior patterns of company car users and compare them with those of private car users. To this end, new data on user groups, vehicle characteristics, usage patterns, tax classification, emissions, and operational conditions will be collected and evaluated.
Based on these empirical results, the project partner RWI – Leibniz Institute for Economic Research will simulate realistic case scenarios with regard to vehicle value, private use, mileage, and fuel costs. This will allow the fiscal effects, social distribution effects, and ecological impacts of the current company car taxation system to be quantified. Based on this, reform options are developed that take financial, ecological, and social objectives into account in equal measure.
Background
The policy of company car taxation has been the subject of debate in Germany for many years. In particular, the existing system has been criticized for raising questions of distributive justice, as it primarily benefits higher-income employees and self-employed people. In addition, it creates incentives for intensive professional and private car use, which is problematic from an environmental and transport policy perspective and hinders the mobility transition. Despite this criticism, there is a lack of reliable empirical evidence. In particular, there is insufficient data on the actual proportion of private use, the amount of individual and aggregate tax advantages, and possible behavioral effects.
There is therefore a considerable need for research to quantify the fiscal, social, and environmental effects of company car taxation in a consistent and empirically sound manner. On this basis, scientifically sound reform proposals can be developed that take into account distribution policy as well as climate and transport policy objectives.
Research and project partners
RWI – Leibniz Institute for Economic Research (project management)
Institute for Social-Ecological Research (ISOE)
Client
The project “The company car privilege: An analysis of the tax, environmental, and social impacts” was commissioned by the German Federal Environment Agency (UBA).
