Fleet News

Diesels 'still have a future' despite tax penalty plan

CAR manufacturers have promised that diesel cars have a long future in the company car parc, despite the likelihood of the Government penalising diesel-engined cars under the proposed carbon dioxide-based company car taxation system. Peugeot, the leading supplier of diesels to fleets, has accused the Government of failing to keep pace with innovations in engine technology that by 2002, when the new taxation system is introduced, will leave its 'get tough' on diesel policy redundant.

The Inland Revenue is likely to announce that diesel cars will be hit with an additional 3% tariff on their CO2 rating when the new benefit-in-kind tax system is introduced, in order to account for the impact they have on pollution in urban areas through emissions of nitrogen oxide and particulates. The new tax system is to be based on a proportion of a car's list price starting at 15% for the lease polluting cars - those with a CO2 rating of 135g/km or below - and rising by 1% per 5g/km of CO2 emitted to a maximum of 35% of list price.

The shock revelation flies in the face of early indications that because of their relatively low CO2 emissions compared to petrol-engined cars, diesel cars would be favoured under the new system. The Inland Revenue, however, says it would be 'perverse' to give diesel lower rates of tax when they emit far more local pollutants than other fuels.

Geoff Benney, Peugeot's wholelife cost manager, said: 'I was under the impression the Government was keeping the new system simple. Now, it seems they have been listening to the green lobby too much and are turning the system into a minefield By the time the new taxation system comes in, with this additional penalty, the Government's argument will be redundant.'

A Citroen spokesman said: 'The 3% taxation penalty should be offset by the pence per mile savings HDi diesel vehicles achieve over petrol cars, and once particulate filters are introduced as standard on diesel cars no one will have a tangible argument, on pollution grounds, against them.'

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