Taxation of the new generation passenger cars: the example of Turkey

As a mutual consequence of the efforts that put to protect the environment at the global level within the technological development in the automotive industry, internal combustion engines powered by conventional fossil fuel are being replaced by electric and hybrid electric vehicles, which are defined as new generation vehicles. In this substitution process, many countries and cities conduct works to limit or completely prohibit the use of fossil fueled cars. In this context, to generalize new generation vehicles which start to find its way in the automotive market and with intent to replace conventional vehicles, various incentives are needed for this kind of vehicles. The change in consumer preferences in the use of new generation cars in favor of new generation vehicles depends on the consideration of various incentives in the taxation process and the construction of the tax technique on this purpose. In this study, proposals are presented for the new generation of vehicles' excise duty and motor vehicles tax which are applied on vehicles in Turkey to be revised in a contributed way in the conversion process of the new generation vehicles' becoming common. The proposals generally include reducing tax burdens on such vehicles and other incentives. In this context, the taxation process and incentives of automotive in the countries where the use of new generation vehicles are widespread are examined and the automotive sales and sectoral effects of the policy changes are emphasized.