Longing for a Return to the Danish 180% Tax on New Cars

Car ownership is on the rise in bicycle nations like Denmark and the Netherlands. In Denmark, car sales rise each year. This is largely due to prosperity and a strong economy. Money to spend on luxury items.

Politicians in cities across the land — not least in Copenhagen — are fumbling about as they try to tackle this regrettable trend and looking quite ridiculous as they do so. They have simply no response to it.

I do.

Just today I read about the “Certificate of Entitlement” that Singapore established in 1990. Basically you have to bid for a permit to buy a new car. The current cost for the permit is $106,000. Why is this not a thing in every city in the world?!

But since the 1980s, Denmark has had a similar approach. For many years, there was a 180% tax on new cars, which was an attempt to not only make it more inaccessible to buy but also to try and get some money back from what is, essentially, the worst business model in the history of transportation.

The 180% tax on top of the ticket price of a new car was an effective tool for many years but it didn’t follow the growth of the Danish economy and it became less of a hinderance to purchasing a new car. Even gas is cheaper — or around the same price — as during the oil crises in the 1970s.

A right-wing government in Denmark a few years back reduced that 180% tax to between 80%-150%, depending on various factors like size (and weight) of car and environmental taxes.

The result? A massive increase in the number of new cars across the nation. We had an effective tool and we should reestablish it as soon as possible. Instead, politicians are raising the prices of public transport and basically nudging people over to automobiles.

If we talk about business models, we know that for every kilometre ridden by bike in Denmark, the state coffers recieve 23 cents.

For every kilometre driven by car, the Danish state pays out 86 cents.

Those numbers are from the “Socio-economic analyses of bicycle initiatives — methods and cases”, produced by Danish engineering firm COWI in 2009.

For a more local urban context, if you travel in Copenhagen from Øster Allé to Nørreport during rush hour here’s the societal benefit and loss:

Bicycle: 63 cents net profit for society. (3.65 DKK)

Car: $1.15 net loss to society. (6.59 DKK)

We have done the math. The math has worked. This previous focus on improving the quality of life in our cities was important. Less so now. We are back to throwing into a big, bottomless hole by subsidising car culture. It’s basic economics.

Interestingly, even with these taxes, be it 180% or the current 80–150%, we still cannot get our money back from the destructive nature of automobiles. It is worth noting that all these cost-benefit or loss numbers reflect the aforementioned taxes on cars in Denmark. I think I’d throw up a little bit in my mouth if someone could calculate the net loss in countries without such taxes. Singapore has it figured out. They are rational.

So. What ARE these taxes of which we speak? First let’s look at what cars cost, based on the Danish cost of living. This is from an article I wrote in 2012 so have a grain of salt for the preciseness of the numbers, but they still serve to present the big picture.

In 2012 in Denmark a basic compact car would cost you about 100,000 DKK — which was $17,400. A new Honda, depending on model, would cost between 200,000 DKK ($34,700 USD) and 500,000 DKK ($86,900). A new BMW, again depending on model, would set you back between 400,000 DKK ($69,500 USD) and 2.5 million DKK ($434,360 USD).

That probably looks nasty pricey to many of you readers out there, but the cost of living here in Denmark is high because we have a strong economy. Wages are high. Things are expensive to visitors. For example, minimum wage — if you work as a bartender at the age of 20 or something like that — is around $25.00 USD per hour.

On top of the list price of the car, here are the taxes that made up the 180%. But please consider the disclaimers that follow.

The 180% on top of a basic car price
Sales and registration: 106,960 DKK ($18,583 USD)
Ownership tax: 44,562 DKK ($7742 USD)
Insurance tax: 8412 DKK ($1461 USD)
Fuel tax at 15,000 km/year of 15 km/liter: 50,989 DKK ($8,857 USD)

Total taxes over 12 years: 210,922 DKK ($36,643 USD)

So all that looks like a dreamy scenario for those who are working towards the Paradigm Shift of replacing the deadly cars in our cities with intelligent transport forms. Denmark once taxed motorists effectively for the destruction they cause in our cities and in the country in general.

We still hear misconceptions out there about these taxes. Things like , “they only ride bikes in Denmark because they can’t afford a car”. Nah. Nice try. In Copenhagen, car ownership is around 30%. It’s even lower in certain traditional neighbourhoods, around 20%. But people don’t own cars because they don’t need to. There are a host of other transport options, including the bicycle.

Out in the distant provinces, when a young person — usually a young man — turns 18 the first thing he does is pay the $2000–3000 fee for a driving licence course and then, upon successful completion, buys a car. So cars are not inaccessbile to Danes when 18 year olds can afford them.

And this brings us to the current reality. At their inception, the 180% taxes on new cars were effective but that diminished as the economy grew strong and wages increased dramatically. They ended up being much less prohibitive as originally planned. In other words, they were rather irrelevant. Now that the taxes are much lower — 80–150% — you can see how car sales are skyrocketing.

Car ownership has been rising consistently over the past 15 years at least and have been accelerating exponentially over the past five or six years. What’s more, I heard that the fuel tax, which as I understand it carries a certain environmental aspect, is also increasingly redundant. Simply because cars are more fuel efficient and “environmentally-friendly” than when the taxes were implemented.

In 2012, the money earned by the Danish state on these taxes had fallen from 24 billion DKK ($4.1 billion USD) to just 14 billion DKK ($2.4 billion USD).

The automobile burden on our society is greater than at any point in the last 50 years. Reducing the 180% was a completely moronic legislative move. It should have increased at least by double.

Sadly, there is no political will to raise them. Singapore now stands alone as the great hope for the future of our cities and the end of the automobile scourge.

Originally published at http://lifesizedcity.blogspot.com on October 30, 2012.