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400 Million Pound Loss Following Abolition of Tax Disc

August, 22 2016 | Peter Jepson

A freedom of information request made by the Financial Times shows that vehicle excise duty takings, following the abolition of the paper based tax disc in October 2014, fell by a huge amount.


400 Million Pound Loss Following Abolition of Tax Disc

The aim of moving to a digital system and scraping the tax disc was to reduce administration costs for the DVLA, but in the 12 months following the move (October 2014 to September 2015) they took £5.71 billion - some £412 million lower than the previous twelve months.

The DVLA replied with a statement saying that the drop in revenues was due to a new phased payment plan that was not previously available, meaning that drivers had to pay their tax in one lump sum, but from November 2014 had the option to spread this over a 12 month period with direct debit. This accounting for the difference in monthly cash receipts year-on-year.

When the disc was withdrawn, the motoring service RAC warned of a risk of increased evasion - the absence of a visible disc encouraging more users to try to get away without paying. After these figures came to light David Bizley, chief engineer at the RAC, said the abolition of the paper tax disc made sense from an efficiency perspective and that there was no reason to believe that the forecast savings were not being achieved. But he added: "The recent figure of a £400m year-on-year reduction in VED revenues is worrying. Undoubtedly, part of this is due to the rephrasing of revenues arising from allowing those paying VED to do so with monthly direct debits, and the increased take-up of low-carbon vehicles, which attract lower rates of VED."

The Department for Transport previously estimated that £80m of vehicle tax revenue would be lost in 2015 to evasion - they generate this figure by performing a roadside survey every two years to identify untaxed vehicles. We'll have to wait until June 2017 for the next one to be carried out to see if tax evasion has really soared.

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