The future of salary cars

The mobility sector -and legislation - is continuously changing. New transport options are appearing and unsustainable means of transport are increasingly discouraged. What future do salary cars have is a question that is raised very often. Let’s dive into this topic looking at it from different viewpoints.

Objectives 📑

Concerning climate, economy and road safety, targets are set that must go hand in hand with a (salary) car. How achievable are they?

Climate

To reach the European goal of 'climate neutrality by 2050', Belgium must also take measures to reduce its emissions. About 14 per cent of the total number of cars in Belgium are salary cars. Making that number more sustainable and reduce it therefore seems to be an important part of this objective. Switching to electric cars will partly solve this. An electric car emits about 18,000 kilograms of CO2, which is more than 60 per cent less than a fossil fuel car. The question is whether this CO2 reduction is enough, as currently the number of salary cars in Belgium increases by about 0.3 per cent every year. Committing to alternative modes of transport for commuting therefore remains important, as electric (salary) cars also have significant emissions.

Economy

Belgian traffic jams cost €4,868 million, or 1.06 per cent of GDP, in 2022. This while the European Commission forecasts a budget deficit of 5.8 per cent of GDP for 2023. Reducing the amount of traffic jams can steer the budget deficit in the right direction. If we maintain the increasing trend of salary cars, we will be in even deeper trouble.

Traffic safety

In 2021, about 70 per cent of the number of victims were car drivers -or occupants. Relatively speaking, driving a (salary) car is among one of the most dangerous modes of transport. In addition, car drivers also cause most road accidents. Achieving the Vision Zero target by 2050 requires, on the one hand, working on a safer road environment and, on the other, promoting other modes. Only then can the number of road deaths fall to zero.

The mobility world 🚲🚙🚄

A changing mobility world also affects the use and view of salary vehicles. This section looks at some trends in mobility.

The mobility budget

The mobility budget is gradually becoming more familiar and well-known among companies. Indeed, the mobility budget is a fiscally attractive extra-legal benefit for both employee and employer and was created with the aim to reduce the number of salary cars. Namely, you exchange your company car for an equivalent budget. That budget can be spent on various means of transport and equivalent solutions such as housing costs.  

Autonomous vehicles

The future is autonomous driving, and that future is closer than you think. The autonomous mobility lobby in Europe wants to ban private cars in cities in 10 years time. As a result, salary cars will also be banned from cities. To make cities more livable and safer, they want to work with autonomous shared vehicles. In terms of technology, this could already be rolled out at the moment. It’s only a matter of legislation and regulation before this becomes a reality in European cities.

Soft mobility

The government is increasingly promoting soft transport modes for public health and economic reasons. The mandatory bicycle allowance from 1 May 2023 is a good example where the aim is to get more workers on bicycles instead of in their salary car. The higher speed of the electric bike and speed pedelec also means that people can often drive to work faster by bike than by salary car. Flemish Minister Peeters released a new cycling policy plan in which she states more than 30 per cent of the total number of journeys should be made by bicycle by 2040. Thus, cycling will become increasingly important in the commuting share.

In addition, shared bicycles and shared steps make it easier to bridge the first and last mile. In this way, public transport is an attractive alternative to the company car.

Fiscal policy 💰

Fossil-fuelled salary cars will be strongly discouraged from 1 July 2023. Non-emission-free salary cars ordered past this date will be phased-out from 2025. Salary car deductibility will then drop by 25 per cent annually.

Likewise, electric salary cars purchased or leased will no longer be 100 per cent deductible from 2027, thus employers will have to pay corporate income tax on these salary cars. For electric salary cars ordered in 2027, the deduction rate is 95 per cent and this drops to 67.5 per cent for electric company cars ordered in 2031. After 2031, the deductibility will decrease even further, eventually resulting in fewer salary cars in Belgium.

Besides deductibility, the CO2 solidarity contribution increases for all salary cars in the coming years, making them strongly fiscally discouraged.

The mental shift? 🤔

Finally, the mentality of employees and employers also plays a big role in the number of salary cars in Belgium. If employers continue to offer company cars and employees continue to use them, salary cars will be part of our fleet for a long time to come. The mental and modal shift to more sustainable means of transport takes place faster in the city than in the countryside. Convincing people to use more sustainable ways of transport will be a challenge.

Conclusion

For the foreseeable future, the salary car remains an important part of the salary package. Next to that, it is a status symbol, making the mental shift go slower then it should. Although the increasing popularity of the mobility budget and the higher tax burden on salary cars will cause a turnaround in the longer term. Especially as our mobility shifts more and more towards an autonomous part-mobility system.