Constitutional Court annuls "cash for car" allowance

The Constitutional Court annulled the mobility allowance, also known as the 'cash for car' scheme. The Government of Michel I had introduced the mobility allowance with an Act of 30 March 2018 to encourage employees to exchange their company cars for a cash for car allowance with a view to reducing the number of company cars on Belgian roads in order to combat congestion, air pollution and climate change. The mobility allowance consists of an amount of money corresponding to the catalogue value on an annual basis of the user benefit of the company car returned.  The mobility allowance was excluded from the notion of pay, which meant that only a solidarity contribution and no social security contributions had to be paid on it.

A number of trade unions and climate organisations had submitted an annulment request on the grounds of violation of the general and fiscal equality principles, to be found in Articles 10 and 11 of the GW and Article 172 of the GW respectively.

The Constitutional  Court refers extensively to the negative opinion  (in the preparatory works of the Act of 30 March 2018) of the Council of State, Legislation Section, which states that the mobility allowance is not pertinent to achieve the intended objective (the reduction of the number of cars on the roads) for various reasons. In particular, the Council of State pointed out that:

- "The existing advantageous status of company cars is maintained unchanged;

- the draft measure is based on the voluntariness of employer and employee;

- the choice to convert the benefit of a company car into a mobility allowance is not irreversible;

- where more than one company car is at the employee's disposal, obtaining a mobility allowance for one company car does not preclude the use of the other company cars;

- there is no relation between the mobility needs of the employee concerned and the amount of the mobility allowance, which is based on the catalogue price of the last company car;

- the fact that the mobility allowance is freely available does not in any way guarantee that 'alternative sustainable modes of transport' will actually be used;

- the explanatory memorandum to the draft does not contain any substantiated elements making it plausible that there is a demonstrable link between the measure and its intended purpose, namely to reduce the number of cars put into circulation and thus reduce traffic congestion and the associated health, economic and other problems;

- the proposed scheme is not conceived as a temporary and extinctive measure intended solely to bring about a change in behaviour with regard to mobility, but, on the contrary, it is of a permanent nature, with the result that a scheme is created for an indefinite period of time which creates a difference in treatment between persons who are in a comparable situation.”

The Constitutional Court includes some elements of this criticism in its assessment. First, it points out that the Government does not provide sufficient justification for the fact that the mobility allowance creates unequal treatment between workers who do not benefit from the mobility allowance and whose wages are subject in their entirety to tax and social security contributions. Indeed, where the company car is a benefit in kind and its preferential treatment can be justified, the mobility allowance is a cash benefit, as is normal pay. Second, the Court points out that there is no guarantee that the mobility allowance would not be used by the employee to purchase a (smaller) private car for his journeys, which would defeat the objective (fewer cars on the road) of the measure. Third, the Court has a problem with the fact that employees with two or more company cars (even if this situation is exceptional) only have to surrender one company car in order to benefit from the mobility allowance. As a result, the employee would still be able to drive his other company car while at the same time receiving a tax advantage in cash.

On the basis of these elements, the Court considers that it has sufficient arguments to annul the mobility allowance. In order to give the (relatively low number of) employers and employees who have made use of the mobility allowance time to find another solution, the Court maintains the effects of the annulled law until, where appropriate, new legal provisions enter into force and until 31 December 2020 at the latest. However, employers and employees can still make use of the mobility budget introduced in 2019, which the social partners support.

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