Using the personal taxation regime to encourage modal shift : an international review

Correctly pricing transport behavior to take account of the ‘external’ costs such as congestion, emissions and congestion imposed on society by excessive car use has long been a tenet of effective Transportation Demand Management. But while policy makers have striven to increase public transport subsidies, raise petrol taxes, and introduce road user charging schemes to change the price of car travel, the wider influences of the personal tax regime has had relatively little attention. This paper is a review of reforms to the personal tax regime to favor more environmentally benign forms of travel and, in particular, to encourage employers to take part in TDM-type programs. The results reported are based on work undertaken for the UK Department of Transport, Local Government and the Regions, and the Inland Revenue. In addition to reporting the British situation, it also outlines how this same process has been approached in the United States, Ireland, Germany, Netherlands, Switzerland and Norway, and at how successful they have been thus far with respect to TDM objectives. It then draws conclusions as to which direction policy makers could aim for the future.