Vehicle excise duty
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In the United Kingdom, Vehicle Excise Duty (VED) (often known as road tax, although it is not hypothecated for spending on roads, and before 1936 as road fund licence) is an annual tax on the use of motor vehicles on the public roads. It is collected and enforced by the Driver and Vehicle Licensing Agency (DVLA).
In the United States, such fees are called car taxes or vehicle license fees, and are imposed on a state-wide basis, although some counties have surcharges per vehicle.
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[edit] United Kingdom
Any vehicle used or kept on the public road is liable. Vehicle owners paying the tax are issued with a non-transferable vehicle licence ("tax disc") to be displayed on the vehicle. Since 1998, owners of registered vehicles not using the public roads have been required to submit an annual Statutory Off-Road Notification (SORN). Failure to submit a SORN is punishable in the same manner as failure to pay duty and display a tax disc when using the vehicle on public roads.
In March 1998, graduated vehicle excise duty (GRAD VED) was introduced as an incentive to purchase vehicles with low emission levels:
- Cars registered before March 1, 2001 are charged according to engine capacity. In the 2004 – 2005 tax year this was £110 for those with a capacity under 1550cc, and £165 for those above.
- Cars registered on or after March 1, 2001 are charged according to their level of carbon dioxide (CO2) emission. For the tax year 2004 – 2005 this varied between £55 and £165.
Rates for other vehicles vary from £15 for motorcycles with an engine capacity under 150cc, up to a maximum of £1,850 for the largest heavy goods vehicles (HGVs). (Special rates apply to HGVs not used commercially.) A few special-purpose vehicles such as ambulances are exempt.
In tax year 2002 – 2003, it is estimated that evasion of the tax equated to a loss to the exchequer of £206 million. In an attempt to reduce this, from 2004 an automatic £80 penalty (halved if paid within 28 days) is issued by the DVLA computer for failure to pay the tax within one month of the expiry of the previous tax disc. A maximum fine of £1,000 applies for failure to pay the tax, though in practice fines are normally much lower.
Also note that vehicles registered before 1 January 1973 are eligible for a free vehicle licence under the "Historic Vehicles" legislation. This is due to the age of the vehicle and a presumption of limited mileage. Initially this exemption applied to vehicles over 25 years old, and the change to "pre-1973" was unpopular in the classic motoring press.
[edit] Future changes
It has been announced that VED for HGVs will be replaced, probably in 2005 or 2006, by a new tax based on distance travelled, the Lorry Road-User Charge (LRUC). At the same time, the rate of fuel duty will be cut for such vehicles.
The primary aim of the change is that HGVs from the UK and the continent pay exactly the same to use British roads (removing the ability of foreign vehicles to pay no UK tax). However, it is also expected that the tax will be used to influence routes taken (charging lower rates to use motorways), reduce congestion (by varying the charge with time of day), and encourage low emission vehicles.
In June 2005 the government announced plans to adopt a similar road user charging scheme for other road vehicles, which would work by tracing the movement of all vehicles using a telematics system. The idea raised immediate objections on civil and human rights grounds that it would amount to mass surveillance.
