French Government Eyes €100m Windfall from 'Politically Motivated' Car Tax Proposal

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September 17, 2013 11:56 PM EST

President Hollande's government "doesn't have deep pockets," according to Jean-François Belorgey (Reuters)

France is expected to raise €100m from a proposed increase in the maximum tax on high emission cars, according to newspaper Les Echos.

The levy on the purchase of high emission cars is expected to increase to €8,000 (£6,705, $10,666), up from €6,000.

The new measure, which applies to vehicles that admit 200g CO2/km and more, is part of a two-pronged tax system which was introduced in 2008 under former president Nicolas Sarkozy.

The policy aims to encourage the purchase of low-emission vehicles and discourage the buying of high emission cars.

For example, a €200 subsidy is available if a person purchases a vehicle which emits between 91 and 105g C02/km.

The scheme also means that buyers of electric and hybrid vehicles can enjoy a €7,000 reduction because of the vehicle's low emissions.

But purchasers could face a penalty between €100 and €6,000 per vehicle for cars emitting more than 135g C02/km.

Driving Financial Health

The scheme has created a €52m deficit for the French government, but the proposed new tax bracket is expected to improve the policy's financial health.

"The French government doesn't have deep pockets any more, they are trying to limit the costs of the scheme," said Ernst & Young's French car tax expert Jean-François Belorgey.

"One way to do that is to reduce the money you give and to increase the money you get."

But Belorgey argued that the proposed increase was also politically motivated.

He added: "The current French government has a smaller and smaller majority and, in view of its pretty poor popularity, they need more and more support from the green party to continue managing the country.

Belorgey stressed that a tax on car emissions was a "typical" strategy to win favour with environmentally minded voters and politicians.

"I'm not sure that [cars] are polluting most," Belogrey explained. "Various studies have shown that car pollution is only 15 to 20% of C02 emissions in mature economies, but [the proposed levy] is highly visible and politicians love symbols."

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