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  • WORKING PAPER 11-16

    Commuting subsidies in Belgium Implementation in the PLANET model

    October 2016

    Benoît Laine, bl@plan.be - Alex Van Steenbergen, avs@plan.be

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  • WORKING PAPER 11-16

    Federal Planning Bureau Avenue des Arts - Kunstlaan 47-49, 1000 Brussels phone: +32-2-5077311 fax: +32-2-5077373 e-mail: contact@plan.be http://www.plan.be

    Commuting subsidies in Belgium Implementation in the PLANET model

    October 2016

    Benoît Laine, bl@plan.be - Alex Van Steenbergen, avs@plan.be

    Abstract – This paper seeks to quantify the size and traffic effects of commuting subsidies in Belgium. To this end we implement the most recently available data on both the personal income tax treatment of commuting reimbursement and subsidies to rail commuters in the PLANET model. We find that subsidy rates by tend to differ strongly by mode and by type of reimbursement. Commuting by own car is generally subsidized at low levels, if it enjoys any subsidy at all. Commuting by company car, bike and public transport enjoy relatively high levels of subsidization. Policy simulations show the im- portance of commuting subsidies in steering the modal split. Both the exemptions for commuting reim- bursements as well as subsidies for rail commuters moderately steer traffic away from private transport, while also lengthening the average commute.

    Jel Classification – D62, H24, R41

    Keywords – Externalities, Personal Income Tax and Subsidies, Transportation: Demand, Supply and Congestion

    Acknowledgements – The BELDAM survey has been realised by GRT (Université de Namur) in coop- eration with IMOB (UHasselt) and CES (FUSL). Financial support by BELSPO and FPS Mobility & Transport is gratefully acknowledged.

  • WORKING PAPER 11-16

    Table of contents

    Executive summary ................................................................................................ 1

    Synthèse .............................................................................................................. 2

    Synthese .............................................................................................................. 3

    1. Introduction.................................................................................................... 4

    2. The Belgian tax system in an international perspective ............................................. 7

    3. Employer reimbursements: standard practices ....................................................... 10

    4. Data ............................................................................................................. 11

    4.1. Who gets reimbursed? 11

    4.2. The taxation or employee-paid commuting costs 13

    4.3. The taxation of employer reimbursements 14

    5. Implementation in PLANET ................................................................................ 16

    6. Policy results ................................................................................................. 22

    7. Conclusions ................................................................................................... 24

    8. Bibliography .................................................................................................. 25

  • WORKING PAPER 11-16

    List of tables

    Table 1 Tax rules for employee – paid commuting expenses ··················································· 7

    Table 2 Tax rules for employer – paid commuting expenses ···················································· 8

    Table 3 Proportion of population with a fixed working address by reimbursement type and daily km driven ········································································································· 11

    Table 4 Main commuting mode by reimbursement type ························································ 11

    Table 5 Reimbursement type by commuting distance ·························································· 12

    Table 6 Reimbursement by family income ········································································ 13

    Table 7 Reimbursement type by sector ··········································································· 13

    Table 8 Main commuting mode by sector (subpopulation of those that are reimbursed) ················· 13

    Table 9 Private transport: per kilometre reimbursement and tax exemption level (current and former rules) ·········································································································· 15

    Table 10 Share of commuters with reimbursements in total pkm driven by mode, and total kilometres without reimbursement ···················································································· 19

    Table 11 Monetary costs, average reimbursements and tax exemption (2012) ······························ 20

    Table 12 Monetary costs and derived tax subsidy (2012) ························································ 21

    Table 13 Impact of different policies on the number of commuting PKM, modal split, average speed levels at peak and change in the tax expenditure ····················································· 23

  • WORKING PAPER 11-16

    1

    Executive summary

    This paper seeks to quantify the size and traffic effects of commuting subsidies in Belgium. To this end we implement the most recently available data on both the personal income tax treatment of commuting reimbursements and direct subsidies for rail commuters in the PLANET model.

    The personal income tax treatment of commuting reimbursements in Belgium is quite complex, with extensive differentiation in the rules per commuting mode. Moreover, different reimbursement schemes, such as the company car regime and the third payer system for rail, seem to co-exist with standard conventional arrangements. In general, various policies seem to attempt to encourage public transport use at the expense of the car, while the generous fiscal treatment for company cars runs coun- ter to this objective.

    Using survey data on the prevalence of commuting reimbursements and publicly available data on the level of reimbursements, the PLANET model is adapted to take the most common subsidy schemes into account. We show that expressed as per kilometre values, subsidy rates tend to differ strongly by mode and by type of reimbursement. Commuting by own car is in general subsidized at relatively low levels, if it enjoys any subsidy at all. Commuting by company car, bike and by public transport modes enjoy relatively high subsidy levels.

    Illustrative policy simulations show the importance of commuting subsidies in steering the modal split. A recent tax reform, increasing the maximum tax exemption for car commuting, has increased the mar- ket share of car in commuting by 0.4 percentage point. Likewise, the direct subsidy for rail commuters through the third payer system incr