Do employers encourage too much driving?

Guess who is at fault in bicycle-car smashes in The Netherlands?

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.


7 Comments on “Do employers encourage too much driving?”

  1. LD / Melb says:

    In the context of ‘who really pays for parking?’, it’s also interesting to see the numbers of planning applications for in/near the Melb CBD that include a request to waive offstreet parking requirements (via planningalerts.org.au).

    Assume it’s to maximise ROI on space etc., but how many waivers are approved? And are there mechanisms for developers/building owners to offset the impact?

    After all, these translate into real costs they’re passing on, either to city users (higher prices as the demand for fewer overall spaces increases) or more critically through hidden costs e.g. more pressure on public transport systems.

    Interested in your thoughts on this.

    • Alan Davies says:

      My guess would be these developers have calculated their market wants less parking than the code requires either because their buyers don’t have or want a car or because they calculate their buyers will be prepared to use a substitute like on-street parking.

      It makes sense to me that many new city centre dwellers, especially young singles, would take the view that a car is simply not necessary (I lived on the edge of the CBD in Sydney for many years and happily got rid of my car). That would free-up a lot of money to help pay for their (no doubt enormous) mortgage.

      As for parking on-street, that would depend on how practical it would be given all the restrictions on parking like clearways etc. I’d hope that Council would not provide resident parking permits for occupants of buildings that obtained a waiver. Would a car-owner buy a CBD unit without parking on the expectation that on-street parking would be a satisfactory and practical substitute?

      Really comes down to who the developments are aimed at. Empty nesters in (say) Docklands probably tend to have a car but young singles probably don’t. It would also help to know if any proportion of the developments seeking a waiver have a social housing component with (say) elderly people who are unlikely to drive.

    • Russ says:

      Personally I’d remove all car parking requirements. If a market demand for off-street parking exists, then it is reasonable to assume someone will build a long-term storage off-street car-park in the vicinity.

      There are still costs being passed on if a car-park is forcibly built: mostly in higher development costs and less affordable housing. Which is more important to house, your car or your person?

      • Alan Davies says:

        Exactly. Let the market work it out – deregulate both on-street and off-street parking.

        That alone should help reduce driving in locations like the CBD where there’s good public transport. This doesn’t preclude the imposition of a tax on parking as a form of road pricing.

  2. Michael says:

    I don’t know how common salary sacrificing for cars and car parking is, but are any employers offering salary sacrificing for public transport or bikes?
    The other thing that puzzles me is the existence of cheap car parking spaces. I have noticed car parking spaces in the city in short distance of each other that have $2 an hour near spaces you can park all day for less than 66cents. Is this a deliberate subsidisation of people who want to come to work at 6am?

  3. jack horner says:

    Issues to do with environmentally detrimental cross-subsidies (using half the mall’s land for car parking adds to the prices that all customers pay including bus riders yadayada) should be distinguished from issues to do with tax breaks. A situation may involve one or other or both.

    Graham Currie’s comment seemed to relate mostly to the first.

    Obviously there should be no tax break involved in decisions about providing employee parking.

    The property developer’s decision to provide an on site parking space creates an external cost which is the external cost of the traffic congestion created by the motorist driving to and from it. It is quite justified to levy a parking space charge in congested areas to account for that.

    VECCI’s beef seems to be a fear that employers might be prevented from offering parking, or free parking. But if there is an appropriate parking space charge, and no tax break, should we regulate further?**

    If there is a parking space charge, and no tax break, there would hopefully be enough incentive for employers to cash out free parking voluntarily to avoid the charge (NB this implies that the charge is a charge on a parking space *which is being used*, which might have practical difficulties).

    Using the same logic in the mall: should government regulate to force Coles to give a discount to bus riders (ie cash out their parking space)? Surely not. Government should set a suitable parking space charge and let the mall operator decide whether to respond by charging customers for parking or offering a discount to bus riders.

    If the mall operator decides to keep the status quo, I think we have to live with it.

    ** Arguably maximum parking requirements are also justified in congested areas, as being a more permanent constraint on traffic than a parking space charge.


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