Ditching paper tax discs sees £93m plunge in tax payments

When the DVLA did away with paper tax discs in 2014, they expected a dip in the amount of vehicle excise duty paid, as motorists got to grips with paying without having the disc as a daily reminder. However, they vastly underestimated how tax receipts would plummet.

New figures in the DVLA's latest annual report, have revealed a shocking £93 million drop.

This was far more than the government had expected. A year ago, the Department for Transport conducted a roadside survey, which projected that about 1.5% of all vehicles on the road were unlicensed – compared with 0.6% in 2013. As a result the Department's statisticians estimated a loss to the exchequer of around £80 million. The loss is in fact closer to £93 million.

RAC spokesman Simon Williams said: "It is worrying that the reduction in revenue from vehicle tax has exceeded the Government's own estimate. Some may argue that a £93m loss is only £13m higher than expected, but this represents an increase of £58 million on the corresponding period before the tax disc was abandoned and far exceeds the £10 million savings arising from no longer issuing tax discs. This loss is a significant sum and one that merits further investigation."

Why?

The DVLA said in its report that a great deal could be attributed to people getting to grips with the scheme. It said: "As the last tax discs issued expired on 30 September 2015 it is likely that during the transitional period with customers becoming accustomed to the new tax changes that VED collection was affected. The agency has taken considerable steps to ensure that motorists are aware of the vehicle tax changes and have responded quickly where there have been issues."

It added that there may also be those who didn't know the new rules when buying a second-hand car. Since 2014, the car tax ends when the car changes ownership, and the previous owner is refunded any tax remaining. The new owner must tax it immediately, and this may not be happening.

Williams added that there may be other factors affecting the lower tax take - such as the lowering of car emissions across the board, which means more people will pay lower car tax, and the fact that the DVLA introduced direct debit payment - which means people paying monthly instead of up-front.

However, he warns that some of it will also be people evading the tax, because it's easier to get away with when a passing officer cannot just check the disc on the windscreen, and he is concerned that the figure may continue to rise in the coming years as a result of increased evasion.

He says: "We need to fully understand how great a part evasion plays. We therefore urge the Department for Transport to carry out another roadside survey of unlicensed vehicles this year to fully assess the untaxed vehicle situation. 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."

The question would then be what kind of action should be taken. If abolishing the paper discs costs more than it saves, there's an argument that the DVLA should bring them back. Alternatively, they might give wardens the power to check whether a car has a valid disc, or beef up the number of number plate recognition cameras tasked with spotting drivers who have not paid.

But what do you think? Would you like to see the return of the tax disc? Let us know in the comments.