The hidden costs of company cars

After some quiet summer months, cars are back in full force to Brussels since September. If traffic in Brussels drives you a bit mad, it is normal: the city is in the top 10 of most congested cities of Europe. Linked to this is the story of company cars, some 550,000 of them in Belgium. The situation is well summarised by La Libre.

Historically the company car was introduced at a time when car manufacturers were still big employers, in a country where the cost of salaries is very high. Indeed, for an employee to have a net salary of 2,000 Euros the employer must pay around 5,000. Tax exempt benefits are therefore considered as a financially sound way of offering a higher salary to employees.

Even if you don’t have a car, you might be benefiting from tax-free benefits, such as Tickets restaurant or Eco-chèques. The case for cars is harder to make though. The cost of traffic in lost time alone is estimated at 100 million Euros in Brussels. Not taking into account the effects on the environment, physical and mental health, additional road degradation etc. And because these cars do not pay tax, they represent some 2 billion Euros in lost taxes (or 0.5% of the GDP) in Belgium. When adding the indirect costs the total figure increases to around 4 billion Euros. Of course if company cars were not exempt from tax, it is unlikely that they would be replaced with an equal numbers of private cars, so the figure might be somewhat overestimated.

Furthermore, 50% of company cars are owned by the 10% of top earners in Belgium but their cost is supported by all. Companies argue that the company car is a cost-effective way of offering a higher salary and benefits package. While there is a point to this, it is questionable that we should subsidise a mode of transport with so many negative consequences on the environment and quality of life of Brussels’ inhabitants.

Change is usually painful, but it is coming. A cash mobility allowance will be available from 2018: employees who have had a company car for 12 months will now be able to opt out of a vehicle while benefiting from a monetary compensation. While this is hardly a revolution, it is a step in the right direction. Baby steps have brought us where we are today when a few decades ago the Grande Place was but a giant parking space.

grand place

If you do own a car, company or not, and are daily annoyed by traffic, remember you are not stuck in it, you ARE traffic. Cycling to work is also subsidised by most employers, meaning that you actually earn money by getting to work. If you do not own a bike, you can always access the city’s Villo network, or rent an electric bike with your smartphone so getting to the office sweaty is no longer an excuse.