PAY-PER-MILE TAX: Anxious wait for details in the taxi industry as further costs uncertainty looms
The prospect of a new pay-per-mile tax for motorists, as speculated under the incoming Labour government, has sparked significant debate across various sectors. With fuel duty revenues declining due to the rise of electric vehicles and more fuel-efficient cars, the Government is searching for ways to replace this lost income. However, the proposed pay-per-mile system has raised several concerns, particularly for high-mileage drivers such as those in the taxi industry.
One of the main arguments in favour of the pay-per-mile tax is that it reflects actual road usage. The current fuel duty system disproportionately affects drivers of large petrol and diesel vehicles, who pay more in taxes as they consume more fuel. In contrast, electric and hybrid vehicles, which still cause wear and tear on roads, will pay less in fuel duty. A pay-per-mile system would ensure all vehicles contribute to road maintenance based on how much they are driven, not how much fuel they use.
However, for those in the taxi industry, where daily mileage is often significantly higher than the average motorist, the pay-per-mile tax raises concerns about increased operational costs. While it’s hoped that the new system would be comparable to existing fuel duty charges, the impact on hybrid or electric taxi drivers could be significant. Currently, these drivers benefit from lower running costs due to reduced or zero fuel duty. Under the new scheme, they could be taxed on all mileage, potentially erasing these savings and making the transition to cleaner vehicles less attractive and more costly.
Another issue raised is how the tax could inadvertently favour less fuel-efficient vehicles. Under the current fuel duty system, drivers of inefficient petrol and diesel cars pay more due to higher fuel consumption. If a flat rate per mile is introduced, these drivers could end up paying less in overall taxation than they would under the fuel duty system. This could discourage the shift to more efficient vehicles, undermining the Government’s environmental goals.
There are also questions about exemptions... Will emergency vehicles be exempt from any such tax? What about public service vehicles like taxis, which play a crucial role in urban transport? Some argue that taxis should be exempt or at least given special consideration, as they provide a public service by helping to reduce the number of private vehicles on the road. If the pay-per-mile tax is applied uniformly, taxi drivers may face higher costs, potentially leading to fare increases for passengers.
Additionally, the impact on rural motorists, who often have no alternative to driving long distances, has been a key point of debate. In contrast to city dwellers, rural drivers would be disproportionately affected by a pay-per-mile tax, raising concerns about fairness and regional inequality.
Another consideration is how the new system will be enforced. Tracking mileage for taxation purposes would likely require significant investment in monitoring technology, possibly GPS-based systems, to ensure accuracy. This raises privacy concerns and questions about the administrative costs of running such a scheme. Taxi drivers, whose livelihoods depend on the number of miles they drive, may also face added complexity in managing their tax obligations under the new system.
With no concrete details on the scheme yet, the uncertainty it brings to industries like the taxi trade is palpable. Drivers, particularly those who have invested in cleaner vehicles, are left wondering how this new tax will affect their bottom line. Will there be relief for those providing essential transport services? Will high-mileage drivers be disproportionately burdened?
