TREASURY revenue from company car taxes has increased by 73% over the past five years, from £2.2billion in 1996 to £3.8billion in 2001.

The staggering increase is shown in Motor Industry Facts 2002, compiled by the Society of Motor Manufacturers and Lex Vehicle Leasing, and combines benefit-in-kind tax on company vehicles and BIK on free fuel, as well as National Insurance contributions on the benefits.

The figure consists of £2.8 billion of benefit from cars and £940 million from fuel benefit - both totals including National Insurance contributions.

The total has risen steadily over the past five years and is growing at a faster rate than the Chancellor's income from car Vehicle Excise Duty, which has risen from £3.5billion to £4.3billion in the same period.

Combined with VAT from vehicles approaching £10billion a year and fuel duty reaching more than £22billion a year, the Treasury's total income from vehicle taxation in 2001 reached £41billion.

SMMT chief executive Christopher Macgowan said: 'Industry taxes amount to 11% of the Government's total revenue from taxation.

'While the recent budget brought some positive news for industry and motorists, we would be keen to see more incentives to encourage the purchase of cleaner vehicles, rather than more punitive taxes.'

The Inland Revenue's own estimates of income from vehicle taxation for 2000 was £3.36billion, against the SMMT's figure of £3.58billion.

The SMMT suggests that the price of motoring through high fuel costs and taxation has driven people to choosing smaller cars with superminis overtaking lower-medium cars in market share for the first time in 2001.

However, lower-medium cars were still firm fleet favourites despite the downsizing trend which has seen the sales of small cars rise against a decline in market share for lower-medium and upper-medium sector vehicles.

Macgowan said: 'There is an incredible amount of competition in this segment and consumers are benefiting from this.

'Practically all the volume manufacturers have a supermini model in the range and the level of equipment fitted as standard is now quite phenomenal. The barriers to smaller motoring have been removed and buyers have recognised this.'