The potential for further changes to the personal taxation regime to encourage modal shift. Final report for Department of the Environment, Transport and the Regions, London, June

This project was commissioned by the DETR to fulfil a commitment made in the 1998 white paper onintegrated transport, A New Deal for Transport: Better for Everyone. This was to carry out research onthe influence of the existing tax system with a view to seeing whether changes could be effective inpromoting the use of more environmentally friendly forms of transport.The report includes a review of the UK tax treatment of commuting benefits, which is compared tothose of other countries with a different tax regime. Key points include:• A general tax concession for all commuting trips creates negative transport and environmentalimpacts; it tends to stimulate car commuting and trip lengthening and is costly to the stateconcerned. A capped commuting concession would reduce these problems.• In countries with a similar tax treatment of commuting as exists in the UK, targeted taxconcessions upon employer-provided Travel Plan benefits have featured. This add private sectorresources to the tax concession and enhances the modal shift effect.The most effective Travel Plan measures involve direct financial incentives and disincentives. Ingeneral the car use reduction effects of different Travel Plans is:• Zero for information-only Travel Plans• 5% for schemes consisting mainly of carpooling;• 8 - 10% for those incorporating financial incentives to use alternative modes, and• 15%+ for those that included financial disincentives to car use.In the UK, many of the most effective measures are affected by the personal tax system.A survey of employers developing Travel Plans was conducted, which concluded that:• Although information and guidance may appear an appropriate response where there is a lack ofunderstanding of the tax liability of Travel Plan measures, the use of such an approach would beineffective without being spearheaded by actual tax reform.• The issue of tax clashes with a company’s ‘tax-efficient’ culture is of most significance whenorganisations are trying to develop their Travel Plans from their initial, fairly ineffective stages, tobe more effective by the use of financial incentives and disincentives.• There is evidence that tax does reduce the effectiveness of Travel Plan measures and that somemodest and targeted reform measures could both eliminate most of the negative tax impacts andease the development of Travel Plans within a company’s dominant culture ...