Vehicle Excise Duty (VED, colloquially known as road tax) is the tax motorists must pay to use a vehicle in the UK. Previously, it required a paper disc, known as a tax disc, to be displayed, but that all changed in 2014, when the system went paperless. Now, drivers must renew their road tax online, over the phone, or at a post office using a reference number provided by the Driver and Vehicle Licensing Agency (DVLA).
Since the rule change, the rate of tax evasion has risen noticeably, climbing from around 0.6 percent in 2013 to 1.8 percent in 2017. However, for the first time since the VED rules were changed, the rate of evasion has fallen, with new Department for Transport (DfT) figures showing a drop to 1.6 percent in 2019.
Although the numbers sound small, that means an estimated 634,000 cars could be driving around the UK without valid road tax. And as a result, the DfT estimates that the total cost to the Treasury could be as much as £94 million.
The DfT admits this figure is an “upper estimate” and “unlikely” to be the total loss to the Treasury, as some VED income will be reclaimed or paid later. Nevertheless, it’s clear that the government is losing huge amounts of money as a result of VED evasion. If that sum were to prove accurate, it would be enough to pay for three councils’ annual highways maintenance budgets, which average £31.5 million, according to the Asphalt Industry Alliance.
RAC spokesman Simon Williams said the abolition of the paper tax disc had not helped the government keep tax revenue up.
“While it is good news that vehicle tax evasion has gone down, it is still significantly higher than it was before the tax disc was abolished in October 2014,” he said. “To put this into perspective, evasion in 2013 was around 0.6 percent and in 2015, the next point at which this survey was carried out, it had risen to around 1.4 percent.
“It’s therefore hard to see that doing away with the tax disc has been good for ensuring as many vehicles as possible are taxed for use on our roads. This all means the government is consistently missing out on very large amounts of tax revenue, which from next year will be ring-fenced for maintaining major roads in England. This time around the lost revenue figure is potentially as much as £94 million.”
Motor1.com has contacted the DVLA for its take on the situation, but a spokesman said the organisation was not able to comment due to the forthcoming general election.