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Pay by Use: BnG

The summary of the report – which runs no less than 68 pages – already gives a good idea of what a BnG system will look like in the Netherlands. The main conclusion: 7 cents per kilometer. You may take that rate into account if a BnG system is introduced in the Netherlands. So suppose you drive 10,000 kilometers a year, you will pay 700 euros in taxes on an annual basis. If you make 50,000 kilometers a year, that’s 3,500 euros, or 291.66 euros a month. Then again, that’s on the expensive side.

Parliamentary inquiry – Paying by Use: the final report

We take you step-by-step through the document “Parliamentary Exploration – Paying by Use: the Final Report. First the basics: “In order to keep car taxes at the 2025 level and to reduce CO2 emissions by 2.5 Mton by 2030, the Coalition Agreement of the Rutte IV cabinet provides for preparations for the introduction of a system of pay by use (per kilometer) for automobility. This system will replace the current motor vehicle tax (mrb),” according to the report. The following passages are also from the final report.

Note

Another small note up front: This report was (largely) prepared prior to the fall of the Rutte IV government in July 2023 and the subsequent controversial declaration of the topic of Pay by Use by the House of Representatives in September 2023. The formulation of research questions and answers was based on the plans set forth in the 2021 coalition agreement and subsequent letters from the cabinet.

Technical capabilities, the rates and potential impacts of BnG

The parliamentary reconnaissance looked at the technical possibilities, tariffs and the potential impacts of BnG. Three methods were used to answer the research questions: synthesis of existing research from the cabinet, staff’s own literature review, and analysis by outside experts.

Technology, rates and implementation

The final report states the following: “Within the basic choices made by the Cabinet (mileage registration only, no differentiation by time and place) there are a number of choices in terms of implementation technology. Registration based on current odometer readings in vehicles is simple and has relatively low costs, but is not guaranteed to be tamper-proof. An in-car box unit (OBU) system greatly reduces the potential for counter manipulation, but it is not easy and quick to implement and relatively expensive.

The trade-off between different mileage registration systems is about the social and political acceptance of the risk of counter manipulation versus the cost and complexity of the system. If the current measures to combat counter manipulation are tightened only slightly, 0 to 2.5% of motorists will engage in counter manipulation, with an expected tax loss of 0.1 to 5% (up to 400 million per year in 2030). Depending on which box is installed, application of differentiation by time/place is still possible later. Choosing a simple system without an OBU now limits the disinvestment if differentiation is chosen later, which requires a more sophisticated OBU.

Levy Height

The levy rate is not yet fixed; the variants that have been calculated by the cabinet have rates ranging from 6.68 to 8.16 cents per kilometer. Declining automobility after the introduction of BnG would require the price per kilometer to increase somewhat to maintain revenues. Assuming an initial rate of 7 cents per kilometer, stabilization occurs at or 7.7 cents per kilometer (+10.2%).  With the continued increase in electric vehicles (EVs) after 2030, mileage rates would have to increase further to ensure the intended budget neutrality. Land erosion due to increase share of EV between 2025 and 2030 is calculated to total 584 million euros. Cabinet calculations arrive at an additional EUR 2.4 billion in losses in 2040 compared to 2030 and an increase in tariffs of between 43% and 53%, depending on the assumptions.

Effects

With the overall decrease in automobile traffic due to introduction of Pay by Use, a decrease in congestion is expected. This effect is smaller because people say they have no choice and there is latent demand, especially in the Randstad (people still take the car when there are fewer traffic jams). Recreational traffic in particular is sensitive to a price incentive that will reduce congestion especially in the evening.  In the variants where the electric car tariff, relative to fuel types, is relatively low, the CO2 reduction goal is achieved along with the budget neutrality goal.

In the variants where fuel types, relatively low, the CO2 reduction goal is achieved along with the budget neutrality goal. For low-income classes, BnG generally has a positive income effect because people in these classes drive few miles on average. In counties with the highest annual mileage, costs increase the most after implementation of BnG. The average increase in costs is greatest in Flevoland, North Holland and Zeeland.

Existing toll sections in the Netherlands will expire at the start of BnG. With the elimination of tolls on a specific route, traffic volumes there are expected to increase substantially. This is muted, however, by the generic decrease in traffic due to BnG. Some of that will be additional car traffic, and some will be traffic that previously took a different route. Because that earlier other route was probably longer, it would reduce the total number of miles driven. More car miles generally gives a higher risk of accidents, depending on the new distribution of traffic among road types (highways are safer than county roads).

When to pay?

The concrete elaboration of the aspect of timely cost awareness has not yet been made and the cabinet documents have so far given limited attention to this. However, it seems quite possible to maintain a monthly or quarterly payment rhythm to prevent people from overpaying or overpaying at the end of the year. An in-car display, such as on an OBU, could help with this. The Cabinet took the privacy aspect into account when devising the technical solution for BnG. Privacy should be regulated by law and privacy safeguards should be built into device development. For citizens’ perception of privacy, meeting privacy requirements without proper education is not necessarily sufficient.

How can odometer readings be read reliably (fraud proofing)? 

The trade-off between different mileage registration systems is about acceptance of the risk of counter manipulation versus the cost and complexity of the system. What level of fraud-proofing is sufficient? What risks are socially and politically acceptable? According to the researchers from Dialogic, TwynstraGudde and Decisio, an answer to these questions is necessary to express preference for a system.

In terms of technology, the simplest and most economical option is to use the odometer in the car and to connect as much as possible to the existing central registration of meter readings at the RDW, according to the researchers from Dialogic, TwynstraGudde and Decisio. The desired standard of conduct was thereby defined as “the situation where the taxpayer himself ensures an honest representation of the (unmanipulated, correctly working) counter reading and has it registered annually at a garage approved by the RDW.”

Counter manipulation

Commissioned by the Ministries of IenW and Finance, Arup and KPMG conducted research into the expected compliance and violation behavior associated with this desired standard of behavior. With the introduction of BnG, the risk of counter manipulation increases the higher the tax rate, the lower the probability of being caught, the lower the punishment, and the higher the degree to which citizens find counter manipulation justifiable. Acceptance of counter manipulation is influenced in part by support for BnG. A sufficiently reliable system is an important prerequisite for that support.

If the measures to combat counter manipulation are only tightened to a limited extent, the researchers from Dialogic, TwynstraGudde and Decisio expect that 0-2.5% of motorists will switch to counter manipulation. This is associated with a projected loss on motor vehicle taxes of 0.1-5% which amounts to up to 400 million euros per year in 2030.

What about border areas?

A good question! What are the expected effects of Pay by Use at the borders of the Netherlands? Why is this relevant: mileage abroad must also be paid for.

About 15 percent of all kilometers driven by Dutch passenger cars are driven abroad. Based on literature review, the scholars consulted expect few border effects of Pay by Use in that:

• Rental cars – even after BnG – are more expensive to use because fixed costs (depreciation and taxes) must also be reimbursed
• Business travelers already often choose air travel because of time advantage
• For households that do choose to purchase an (additional) car after the introduction of BnG, the car could become a more attractive option for international travel, partly at the expense of air travel
• For vacationers, besides cost, many other factors come into play, such as the amount of luggage you can carry and whether or not a car is available at the destination
• As more other countries in (Northwest) Europe adopt a form of BnG, possible border effects may change.

Finally, some points of interest

• There will be an additional written explanation of boundary and regional effects, more on that later.
• Because the system also counts miles traveled abroad, it could make it more attractive for vacationers to take the plane more often. Furthermore, the question may be raised whether this amounts to double payment, since people sometimes pay tolls abroad as well. On the other hand, even now mrb is paid for cars that are partially driven abroad.
• How can frequent billing be ensured so that people get quick feedback on their costs and do not face unexpectedly high charges? This point will need to be looked at.
• The levy applies to vehicles that are also currently paying mrb according to the license plate register, so not foreign license plates.  

Read the comprehensive document for yourself? You can do that here!

Source: central government