Fleet News

New car list price inquiry threat to tax calculation

PRESSURE for a complete overhaul, or even the abolition of official new car list prices threatens to undermine both the current company car tax regime and the new system scheduled for 2002. The Inland Revenue expects the new regime to use list price, as now, as a basis for calculating company car drivers' benefit-in-kind tax, with the tax charge graduated by a car's carbon dioxide emissions.

But the long term freedom for manufacturers to set official list prices is in jeopardy as the Competition Commission's New Cars Inquiry turns its attention to the role of recommended retail prices in encouraging or distorting competition. An earlier investigation by the Monopolies and Mergers Commission into the white goods market ruled that RRPs reduced price competition, and they were subsequently outlawed.

Similarly, the Office of Fair Trading's investigation into car pricing, which led directly to the CC inquiry, found that: 'In the absence of strong competitive pressure there is little incentive for dealers to sell at prices other than the RRP. Furthermore the industry has adopted a standard practice for calculating trade prices as a discount from the RRP.'

The Competition Commission has asked manufacturers and importers to respond to the OFT's finding, in its preliminary questioning, asking: 'What would be the effect on final prices if list prices were to be abolished?' While the Commission accepts that transaction prices are more relevant than list prices, it has still asked manufacturers and importers 23 detailed questions, many of them with sub-sections, on their pricing policy. The Commission's report will be published on December 16.

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