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Position on Road Pricing in Europe

Publication date: 05 November 2008


Taxes and charges are among the most intensively discussed issues in transport policy. Over the last few years the European Union has – sometimes in parallel, sometimes in contradiction to national policies – developed an independent approach on infrastructure charging. The EU’s infrastructure charging policy is most clearly set out in the recently published and controversial Eurovignette draft directive which is expected to being hotly debated in both the Parliament and Council. The European Commission is attempting to set down a methodological basis for road charges in general and specific regulations for charging heavy goods vehicles. The FIA needs to respond to these initiatives and develop its own policy on infrastructure charging.

In order to address the issues, some basic terms should be defined since they are sometimes used ambiguously.

Infrastructure funding: To provide financial resources for infrastructure investment.

Infrastructure charging: To levy a fee for the physical use of infrastructure. In contrast to taxes not an instrument to finance the general public budget but in character a payment in return for a public supply. Can be levied for a certain period (toll sticker, vignette) or a certain distance travelled.

Road pricing: Levying infrastructure charges with an electronic system and with respect to distance travelled.

Costs of infrastructure: Economic cost for providing a certain infrastructure, including depreciation for invested values and running costs of maintenance.

External costs: Costs which are not covered by the person responsible because no market is present (e.g. there is no market for “clean air”).

Demand management: Trying to influence driver behaviour in the choice of transport mode, travel time, travel routes or travel distance by charging or taxing.

Marginal social costs: Marginal costs of infrastructure use for the economy as a whole, including not only direct costs of infrastructure but also external costs (e.g. for environmental damage or congestion).

Status quo

Europe shows a wide diversity of historically grown, national systems of
infrastructure funding. Roughly, two forms of taxation are in operation. Firstly, fixed taxes are levied on the car (e.g. the annual circulation tax and registration tax). Secondly, there is variable taxation (e.g. fuel tax and distance related tax or toll). In most countries, the tax income is used to fund the general public budget, with no special relation between the tax base and the spending of the money (i.e. there is no hypothecation). The only common fact is that in all countries the vast majority of the roads, the secondary network is financed out of the public budget. Secondary roads provide access to the whole expand of countries, including rural roads.

For funding the primary road network (e.g. motorways, Autobahnen) all kinds
of systems can be found in Europe, including:

-    Primarily or exclusively tax funding (e.g. Germany, UK)

-    Charges (toll sticker) for private cars and road pricing for heavy goods vehicles (e.g. Austria, Switzerland)

-    Distance related charges for all vehicles, motorway companies (e.g. Italy, France)

As a very recent development, city congestion charging has been discussed very intensively, following the implementation of the London and Stockholm congestion charging schemes. Still no conclusion on city charging in general can be drawn as the London example has succeeded in reducing traffic, but congestion is back to pre-charging levels, this at very high operational costs and within a rather unique framework.


No European-wide infrastructure funding policy
National systems of infrastructure funding have developed over time and are well-founded. There is no obvious advantage in a harmonised, European-wide infrastructure funding policy covering private and commercial transport. Any policy-making would need a solid evaluation of national systems and their current scale of covering infrastructure costs first.

Any discussion on motoring taxes and charges needs to respect the whole range of existing fiscal burdens. These either refer to fixed costs like annual circulation tax or registration tax, or variable costs like fuel-taxes and distance related charges. According to objectives and national situation, the balance between these two kinds of fiscal instruments can be shifted, e.g. to stronger emphasise the variable costs instead of fixed costs.

User-pays principle
European motorists accept the user-pays principle. In fact they pay much more than the infrastructure costs they cause. It is fair and justified to raise revenues from users in order to cover the costs of a publicly supplied transport infrastructure. Today, motorist in the EU15 pay taxes and charges in high volume: over 100 million car users pay 360 billion euro a year in taxes alone, i.e. some 15% of member state governments` total revenues.

When discussing new approaches in infrastructure funding, existing taxes which have developed historically as a means of funding roads must not be forgotten. Other transport infrastructures do not cover their costs (rail, waterway). The user-pays principle - when contrasted with the actual taxation situation - provides no justification for higher motoring costs at all.

Internalisation of so-called external costs
Motorists must not be burdened with costs exceeding those for building and maintaining roads. External costs are not an acceptable basis for taxes or charges. Up to now, no unified and broadly accepted methodology to define and value external effects has been presented. Additionally, when discussing external effects not only costs but also benefits have to be considered. Road transport's undisputed broad social acceptance for literally more than a century indicates that its tremendous benefits for society surely exceed its social costs. Road traffic has become an indispensable tool for mobility.

The FIA agrees however, that mobility has downside effects on the environment and safety and that these downsides result in costs for society. FIA states that these costs should be reduced by adequate measures instead of trying to internalise them or trying to cut mobility. Stricter norms and higher safety standards for new cars are a way that really helps reducing the external effects caused by motorists.

The decision to drop the approach of marginal social costs is an important step forward for the European Commission to a more reasonable infrastructure funding policy.

Revenue-neutrality of charging
Given the facts cited above, any shifts in taxes or charges must be revenue-neutral. Social hardship must be avoided. Low income groups are not to be loaded more strongly by the road charge than high income groups. Any social exclusion of individual social groups must not take place. With a system change from taxing to charging, motorists must not be burdened with additional costs.

In the light of long time experience, motorists have lost their belief in governments to deal fairly with motoring taxes and charges. Too often, fuel taxes have been increased without resulting in improved services for motorists. Keeping this in mind, merely promising revenue-neutrality within shifting from taxes to charges is not enough, governments need to prove their will to do so in advance, for example by cutting existing taxes or designing a new institutional framework (like independent road operators).

Demand management
Charging can be used as a tool of demand management. Cutting car usage should not be a primary objective of charging, however, because of the social benefits of the private car. Levying road charges can influence the citizen's behaviour in theory, though in reality the effectiveness of such measures is strongly limited. Experience shows that shifts in modal split (e.g. from road to rail) by influencing user costs hardly happen at all since the quality of modes for specific transport demands differ greatly. Any effect on the choice of travel time or routes is dependent on alternatives from a user perspective – which are not available most of the time. In case of non existing alternatives for the motorists (public transport, alternative routes) it comes to significant shift effects into the road network that is less or not charged. Road safety will decrease and the environmental damage rise.

Road revenues have to be earmarked
The revenues of charging have to be earmarked for the road transport network. The resources must be re-invested in roads. A cross-subsidisation between the traffic infrastructures should not take place. The goal is a funding system, in which the annual investments in road construction do not depend on political eventualities of the general budget. User tolls must be earmarked and can be fed into an independent motorway funding company directly as an option. The Austrian toll road operator ASFINAG can be consulted as a positive example.

Public responsibility for infrastructure

Government and state institutions must be held responsible for a good quality road network in total. Roads, primary and secondary, are an important public service and prerequisites for mobility as a way to participate in social and economic life. At all times, citizens must be provided with an acceptable road network to satisfy their basic needs free of charges, even when there are higher-quality roads which are charged.

Data protection issues need to be addressed

Electronic systems for implementing road charges bear the potential of collecting huge amounts of data about motorists and their habits of travel. The misuse of personal data by intent, negligence or lack of enforcement lie in wait. In any case, protection of personal data needs to be guaranteed: the use of personal data must comply with national and EU regulations on this issue. Furthermore, personal data can exclusively be used for the clearly specified, explicit, legitimate and transparent purpose of road charging and those data must be kept no longer than necessary for that purpose. Otherwise the data should remain totally anonymous.
The use of the personal data is of great value for commercial reasons. However, the use of data for these reasons is rejected, unless by explicit consent, given freely by the user on the basis of full information. For public purposes as traffic offences, the information is of great value as well. But, unless it is of great public service and authorised by court, this is rejected by FIA also.

For the car driver himself, the data must always be verifiable, in order to check the tax amount he has to pay. In the case of errors, there must be access to justice if needed. 

Road charges for heavy goods vehicles

Europe needs a truck toll, because heavy goods vehicles (HGV) do not cover their road using costs. In Germany before the truck toll was introduced domestic HGVs did cover only 76 % and the foreign vehicles only approximately 53 % of their road using costs.  In Austria HGVs and buses did cover 39 % of their costs before a truck toll was implemented.

Harmonisation of the conditions of competition for the European HGV industry, especially the harmonisation of the widely differing fuel tax rates within the Member States, which distort competition, is necessary. The collection of a HGV toll is technically simpler than the collection of a passenger car toll. The technical problems are solved partly or will already be implemented shortly. HGV tolls do not raise social issues in significant volume compared with charges for private traffic (e.g. access to the job, commuters). All revenues have to be earmarked completely for investment in transport infrastructure and must not be used for any other purposes. The amount of the charge has to correspond with the road using costs.

Road charges for passenger cars

Levying charges from passenger cars is not necessary. In fact, even today private motorists cover much more than the costs they impose on society. In Germany the ratio of revenues and costs of domestic passenger cars is about 220 %.The foreign passenger cars cover 135 % of their road using costs. Passenger cars in Austria finance 175 % of the user costs. The introduction of road charges for passenger cars must not imply additional costs for the motorists. Any passenger car toll will cause high system costs compared with existing taxes, since the passenger car fleet is so high.

Besides, the social effects of levying tolls for passenger cars must be considered. Commuters must not be loaded above average by a passenger car toll. Personal mobility must remain affordable and a social exclusion of individual social groups cannot be accepted.

In the case that a specific new infrastructure project (like a bridge or a tunnel) cannot be financed out of the public budget, the use of tolls can be envisaged as long as an alternative infrastructure is free of charge. The car drivers can decide for themselves if the new project is worth paying for. To avoid a hotchpotch of toll systems, the amount of these projects should be restricted to a minimum. 

Free movement

The rise in mobility has been and will continue to be a key growth factor for both cities and countries in Europe. In a Single European Market, motorists must be able to drive across borders and in each member state without problems. Thus any national charging schemes must not pose a barrier to the free movement of people or introduce distortions to competition. In accordance with the four freedoms of the European Union and European legislation protecting citizen’s rights to legal certainty and justice, such national schemes must not represent a barrier to the free movement of motoring consumers or introduce distortions for competition.

For more information please contact the FIA European Bureau


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