Economy & Politics

What taxation to promote sustainable mobility?

The new tax reform should strike the right balance between reducing CO2 emissions and better controlled traffic, the Idea foundation said on Friday. For the latter, these two objectives must be pursued together at the risk of causing perverse effects.

Eddy RENAULD

Eddy RENAULD

The new tax reform should strike the right balance between reducing CO2 emissions and better controlled traffic, the Idea foundation said on Friday. For the latter, these two objectives must be pursued together at the risk of causing perverse effects.

“Give up the company car to change your mobility habits.” This is one of the tracks mentioned by the Idea foundation in Décryptage n ° 12 published during this month of June. It must be said that in terms of mobility, Luxembourg is close to saturation. This observation prompted the authorities to set up a strategy for sustainable mobility in 2018 (Modu 2.0). In addition to this project, which aims to make traffic smoother during rush hour in the Grand Duchy by 2025, the government has also worked on a tax reform.

The main idea was to show how this new tax system could help make Luxembourg more attractive, sustainable and fair. A discussion in which the foundation took part via its annual opinion 2020. But that was before the coronavirus crisis came to upset the political agenda and everyone’s preferences in terms of displacement.


Make traffic more fluid during rush hour in Luxembourg by 2025, by transporting 20% ​​more people than today. To achieve this, the new strategy for Sustainable Mobility (MoDu 2.0), unveiled on Tuesday by Minister François Bausch, targets four major quantified objectives, proposes around fifty measures and lists the major projects in progress and to come.


If the question remains unanswered concerning the calendar, certain aspects remain topical. For example, the electrification of the company car fleet. “But we have to put this in the broader context of two imperatives: that of climate protection and that of better controlled mobility,” warns Vincent Hein.

For the economist of the foundation, “the problem of decarbonising the car fleet is a laudable objective” but it must not mask “that of changing the mobility habits of employees”. In other words, incentive policies in the area of ​​mobility can cause contradictory effects.


In the future, for companies and employees, the State will only tax exempt for electrically powered models. Claude Turmes, Minister of Energy, has lifted the veil on this measure which will enter into the next tax reform.


At the beginning of June, Claude Turmes (Déi Gréng) announced in particular that in the future, “the tax advantage would only be granted to all-electric vehicles”. Remarks on which he returned since, but choice which, however, will not automatically give rise to a decrease in traffic. “It is essential to conduct a transparent assessment of the effects of the tax treatment of company cars in order to shed light on any political choice in the matter,” said Vincent Hein.

For the latter, the tax reform should “introduce a tax-free sustainable mobility bonus exempt from contributions for employees”. History of allowing companies to be able to keep their staff or even to attract new recruits. The use of soft mobility (on foot, bicycle, electric scooter …) but also by public transport would therefore make it possible to respond to the country’s decongestion strategy.


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