Do employers encourage too much driving?Posted: October 7, 2010
Monash University’s Professor Graham Currie is quoted in The Australian (6 October) as arguing that employer subsidies for staff car parking should be removed:
When buildings go up in cities, the parking component is about 37 per cent of the total cost. Is that cost passed on to the people who use it or borne by society as a whole? I can tell you it’s the latter because most car commuters don’t pay their own parking; their employers do. The costs of this ‘free parking’ flows through into the price of goods and services, so we are all in effect subsidising the car owners who drive into the city. Traffic congestion in Australian cities is unlikely to diminish because so many car commuters don’t pay their own parking bills
The Victorian Employer’s Chamber of Commerce and Industry (VECCI) has hit out at Professor Currie, arguing that many employers offer subsidised parking as a way to woo workers to city jobs where it is otherwise inconvenient or untimely to use another transport method, like the train or bus:
The way to lessen inner city congestion is not to restrict choice but to increase it – making it more attractive to travel on trains, trams, buses or to walk/ride. Ultimately employers should retain the freedom to offer whatever incentive it deems it requires to lure the best calibre of workers to its business.
I don’t buy VECCI’s line about not restricting choice, but I agree entirely that employers and their staff should generally be free to negotiate whatever lawful remuneration packages they want. However I think it’s an entirely different matter if those packages are underwritten by tax payer subsidised car use.
Let me make the disclaimer from the outset that I’m not a tax accountant, but my understanding is that while the scope for tax breaks on employee parking is actually now quite limited, there’s nevertheless still scope for employers and staff to generate tax savings on car use.
I’m aware, for example, of some businesses who provide staff with free parking and claim that cost as part of their rent in their corporate tax return while their staff do not declare the benefit. I’m aware of senior public servants who theoretically make their Fairlanes available for general departmental use in the car pool and consequently pay a relatively modest amount for the private use component of the vehicle – even if parking isn’t subsidised, they’re still well ahead on the car.
If there is no tax benefit, employers and staff should be indifferent between a car park or post-tax cash of equivalent value. That so many staff have an employer-related vehicle and/or parking space is prima facie evidence that there’s some benefit, whether it’s via the tax system, savings through group leases or simply a means of minimising the administrative burden associated with leasing. Even if employers use cars and/or car parks as a means to enhance differentiation between different levels of staff, that’s still a (management) benefit to both parties.
The actual value of any such benefits should be part of the employee’s pre tax remuneration package.
There’s also another dimension to this issue. Firms located in areas that generate high levels of traffic congestion – essentially the CBD and environs – obtain significant benefits from agglomeration. They ostensibly pay for those benefits through rents, but it is not clear that all the costs incurred by government in supporting an agglomeration like the CBD are collected from landlords.
If they aren’t then government has a legitimate interest in the social impact of corporate remuneration practices if they encourage particular behaviours, like high car use. There’s now ample evidence that public transport is a more efficient way to move people in and out of very dense concentrations of activity like the CBDs of Australia’s capitals, than cars. On that basis Professor Currie’s call is entirely legitimate.
Let me emphasise again that I have no expertise in tax accounting, but I note that cars and parking are just one aspect of a tax system that influences all sorts of behaviours, good and bad. For example, I’m told that some workers salary package meals and entertainment. Some package their friends meals when they go out (and collect the cash), package their children’s weddings and even package holiday accommodation. It’s reasonable to ask if these tax breaks are encouraging socially productive behaviours, or not.