DVLA revenue drops by £93 million after axing of tax disc

DVLA revenue drops by £93 million after axing of tax disc
The Government’s income from vehicle tax dropped by £93 million following the scrapping of the paper tax disc, official figures have revealed.

According to information from the Driver and Vehicle Licensing Agency (DVLA), revenue from vehicle excise duty (VED) fell from £6.023 billion in 2014/15 to £5.930bn the year after.

The drop has sparked calls from the RAC for a further investigation amid fears that the abolition of the tax disc has caused an increase in vehicle tax evasion.

In 2014, when the tax disc was axed in favour of an online system, it was hoped that the move would save the DVLA millions of pounds every year.

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Despite this, a roadside survey carried out by the Department for Transport (DfT) led experts to predict the new taxation method would lose the Government’s purse around £80m.

At the time, it was found that about 1.5% of all vehicles were unlicensed – a total of around 560,000 vehicles.

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This was an increase on the 0.6% of unlicensed vehicles recorded in 2013, which represented a loss in revenue of £35m.

But the latest figures, published in the DVLA’s annual report and accounts, show that the loss of revenue is even greater than many had feared.

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The RAC said several factors could explain the fall in VED income, such as the increase in low carbon emission vehicles, which are cheaper to tax, and unfamiliarity with the new system.

But spokesman Simon Williams said the drop still represented “a significant sum”, and urged the DfT to conduct a further survey to build up a better picture of the problem.

“If this were to find that the number of untaxed vehicles is still at the same rate as when the last survey was conducted or, worse still, has increased, then action needs to be taken urgently to counter this,” he said.

“We just hope that this doesn’t prove to be the tip of the iceberg and that the figure does not keep on rising, especially as the DVLA had predicted the new system would lead to savings of £10m.”

A DVLA spokesman added that a switch to payment by direct debit had caused a lag in when money was received.

Copyright Press Association 2016. Motoring News articles do not reflect the RAC's views unless clearly stated.