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Digital car tax system blamed for revenue loss


Parliamentary Correspondent

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Replacing paper car tax discs with a digital system has led to a surge in tax dodging which has cost the Government at least £94 million, figures from the Department for Transport (DfT) have shown.

The amount lost dwarfs the £14 million that the Driver and Vehicle Licensing Agency (DVLA) said would be saved each year by moving to online renewals.

The figures for the scale of evasion were compiled by analysing data from 256 automatic number plate recognition camera sites in June this year. The owners of 1.6% of vehicles tracked failed to pay vehicle excise duty, equivalent to 634,000 cars, vans and lorries.

Before the system was digitised the figure was only 0.6 per cent – meaning the proportion of evaders had almost trebled.

The DfT said the lost revenue since 2014 was around £94 million – with an “upper estimate” of £281 million – although some will be recovered through penalties imposed on offenders.

Under the new system, vehicles can no longer be sold with up to 12 months’ tax, meaning that a new owner must immediately re-tax it. The figures suggest many owners may be falling foul of this requirement, with 36% of untaxed vehicles changing hands in the previous nine months – compared with the 22% of cars that are sold in any one year.

RAC criticism

Motorists’ organisation the RAC Foundation criticised the DfT, saying the money lost has been “more than the pothole repair fund announced by ministers in March”.

“Getting a piece of paper to stick in the windscreen might seem a quaint idea in the digital age, but what we've lost is the daily reminder it provided for all to see when the next payment was due,” said its director Steve Gooding.

But Sir Patrick McLoughlin, the transport secretary when the change was made, defended it, saying: “The idea that paper discs is the way you stop evasion is nonsense.

“I wouldn't want to go back to that system. We don't make people put discs in their car to show they've paid insurance, and people still renew their insurance,” he told The Daily Mail.

Online change

The paper tax disc was first issued in 1921 but scrapped five years ago in favour of the online system that allows drivers to spread their payments by direct debit.

Any motorist caught driving without road tax can be fined up to £1,000. Cars can be clamped or impounded with drivers charged a £100 release fee.

Perhaps significantly, the number of cars being clamped has soared to more than 2,500 a week since paper discs were abolished, according to figures released earlier this year.

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