Adopted by the Federal Parliament last week, new fiscal legislation takes first steps towards a more sustainable taxation of mobility and commuting expenses in Germany. Until now, the private use of all types of cars and bicycles that were provided by companies to their employees was taxed at the same rate. With the new law, rates stay the same for conventional combustion engine cars and are halved for electric cars, while company bicycles will be completely exempt from income tax.

With this step, Germany follows neighbouring countries like Austria or Belgium, where employers already can provide bicycles free of tax. In Belgium, companies even benefit from a corporate tax reduction for all expenses linked to bicycles and cycling infrastructure. Another positive change is that the new German law also provides for the tax-free provision of public transport subscriptions for employees. However, while reducing taxation of sustainable modes of transport, it does not touch upon the enormous tax subsidies for the private use of company cars in Germany, with a fiscal loss estimated at 23 bn EUR per year in a report written for the European Commission.

There are some other caveats as well. Stephanie Krone, spokesperson of ECF’s German member federation ADFC states:

“As a political signal, it is of course important that public transport and cycling become more attractive as alternatives to cars in tax policy. Unfortunately, due to other changes in income taxation, it is not yet clear whether the new law will actually result in a financial advantage for company bicycles. However, providing bicycles always pays off for employers; bike commuters take on average two less sick days per year, and they are fitter and more motivated.”

All in all, the new law is a good first step towards a more sustainable taxation of mobility, but more ambitious reforms will have to follow. To motivate people to cycle, investments in better and safer cycling infrastructure are an even more important factor. Unfortunately, the federal budget for transport for 2019 that was also adopted last week again stays well below the ambition to invest 200 million EUR yearly that was formulated in 2017 in the wake of the Diesel scandal.

You can find more detailed information on fiscal incentives for cycling and other modes of transport in different European countries in our online comparison tool and in our report.