Germany is taking final preparatory steps to roll-out its PKW-Maut– a controversial motorway toll that would de facto apply to foreign passenger cars only. The Maut law is set to take effect before the end of the current legislative term in 2021.

Yet there are legislative and policy hurdles to clear for the toll to become a long-term solution on German roads.

First, there is a lawsuit from the Dutch and Austrian government pending since end-2017 charging that that the law’s publicly stated political motivation (exempting nationals from the fee) and impact violate European anti- discrimination principles. The targeted proceedings before the European Court of Justice take on average about one and a half years, but even if successful the lawsuit would have no direct suspensive effect for the planned introduction of the toll. This would have to be specifically requested and granted in court.

Second, the European Commission has published a proposal for a European vignette scheme which would run on a distance-based rather than the time-based scheme introduced by Germany. If adopted, the proposal would likely replace the German PKW-Maut from 2023.

While the German government reaffirmed its commitment to the toll, its fate will likely hinge on the European judiciary as well as the policy developments in Brussels. The road toll is thus likely to remain tenuous in the coming months.

 

How will it look like?

After much political wrangling, former Transport Minister Alexander Dobrindt unveiled his proposal in 2014, which became law on 1 January 2016.

  • The toll would apply to all vehicles under 3.5 tons (including motorcycles) using German roads.
  • Domestic motorists are to be freed by a reduced vehicle tax from the actual tolls, foreign motorists should pay only for the use of highways.
  • all car drivers would be able to purchase windshield stickers of an average cost of €70 per year [no more than €130/year] depending on cubic capacity, fuel-use and year of construction (payable as €10/10 days, €20/2 months or €100/year).[1]
  • Following consultations with the Commission, Germany conceded as part of a late change to the bill, that the short-term fees for foreign drivers of passenger cars will be further differentiated. Depending on the vehicle’s fuel efficiency, prices for a ten-day vignette will be calculated on a six-step fee scale. Domestic drivers using more fuel-efficient will also be receive a passenger car tax credit of € 100 million.

Current German transport minister Andreas Scheuer (CSU) announced that the law will go ahead to take effect once the system to collect the toll is operational. Experts expect this to take until 2020.

 

How did we get here? Brussels consent, neighbours’ discontent

Technical wrangling over legal compatibility with EU antidiscrimination rules, doubts over generated revenue and fears over adding red tape were key reasons why the proposal did not have many friends on the German cabinet bench when it was first announced. The toll became the flagship project of the CDU’s smaller, Bavaria-based sister party, the CSU. When the CSU started pushing more energetically for a toll for foreigners in 2013, not many people in Berlin or Brussels took it for more than campaign noise. The majority of the German political establishment (at the time) rejected its populist undertone, and accused the CSU of scapegoating foreigners for Germany’s own infrastructural woes.

However, despite the initial opposition of the coalition partners, the CSU secured its inclusion in the December 2013 coalition treaty between Angela Merkel’s conservative “Union” of CDU/CSU and the SPD. The parties eventually agreed to go ahead with sounding out ways for a toll on foreign cars, based on two conditions:

  1. Any toll would have to be in conformity with European law,
  2. Its consequences should not pose any additional burden on German car owners.

Throughout the drafting process of the bill, the European Commission kept rather a low profile on the toll, initially avoiding direct opposition of the proposal before it was officially published. But in December 2014, the European Commission detailed its institutional stance in the form of a formal letter sent to the then German Transport Ministry deeming the toll plans incompatible with EU law and said that that foreign drivers of cars with smaller engines would have to pay an unreasonably high price for the short-term vignette. Dobrindt answered that the prices for short-term and annual vignettes for foreign drivers were “within what our neighboring states offer as well” calling the Commission’s criticism superficial, inappropriate and inaccurate.

Based on “considerable doubts” over the proposal meeting non-discrimination standards, European Commission President Juncker announced on 1 June 2016 an infringement procedure against Germany

The German government responded to the Commission’s letter of formal notice by stating once again that the tax was not discriminatory and therefore not in violation of EU law and asked the Commission to drop the infringement proceeding.

While a form of direct discrimination would have halted the legislation immediately, the EU treaties are also keenly aware of indirect forms of discriminations. These could be found in the bill’s design as unfavorable conditions de-facto apply to non-German nationals only. According to the German transport ministry, however, legal studies have shown that the bill is compatible with EU law in the sense that it mirrors neighbouring countries’ motorway tolls. To comply, his ministry argued, the new legislation is formally introducing a toll that is applicable to all drivers.

In response the Commission’s further criticism, Germany promised to make the same tax deductions promised to German car owners available to those foreigners taxable in Germany. Furthermore, the proposal was amended to become more sensitivity towards ecological goals: tax credits will be offered to those drivers with a good eco balance (however, only German car drivers will benefit). Following the submission of the revised drafts, the EU Commission announced that it would no longer pursue an infringement procedure.

The basic legal question over principles of non-discrimination remains unresolved: Discontent has been brewing from Germany’s neighbouring states primarily affected by the toll: in a move welcomed by mayors of border towns, Austria and the Netherlands filed a lawsuit against the toll with the European Court on the grounds of discrimination to foreign drivers. A legal study commissioned by the Green Party corroborates this claim arguing concluding that the law is in violation of EU laws of non-discrimination.

Recently, Chancellor Merkel said that she did not expect that the complaints of the Netherlands and Austria to succeed arguing that the solution on the table now complies with European law and reassures that the dreaded impact of the toll on the border regions will not be as high as anticipated.

 

The German Autobahn – a bumpy ride?

On the surface the law for an infrastructure levy addresses a legitimate concern: A yawning gap in infrastructure investment poses a long-term problem for the German economy. German road infrastructure, often hailed as the key driver of the whole EU economy, is ailing under high maintenance costs and urgently needed reparation and renewal. In 2016, the annual gap in investments needed for German infrastructure is estimated to be as high as €24.4 billion[2] (on top of the current investments of €10 billion/year).  The uptick foreseen in Germany’s 2018 budget to an annual € 15 billion until 2022, while considerable, is still falling short of the investment gap.

What will a road toll do to close this gap? According to estimates by the German ministry of transport, the toll will net €500 million in additional annual revenue (with most of the €3.7 billion in gross revenue offset by lowering the personal vehicle tax as well as additional costs of administration). Additional revenue, the government argues, will pay for the most urgently needed road infrastructural needs.

Yet outside estimates paint a different picture: German automobile club ADAC argues that the proportion of foreign vehicles of passenger car traffic on motorways is not high in proportion to overall German car traffic and the government does not currently spend a significant amount of the revenues gained from the personal vehicle tax on road infrastructure. ADAC estimates conclude that instead of a surplus the toll would lead to € 71 million loss of revenue. After compensating domestic drivers, the toll is estimated to generate revenues of €139 million with system maintenance costs running up to € 211 million. The estimates do not account for the cost of the toll’s introduction of around 380 million.

Even if the optimistic estimates by German transport authorities were to materialize: the modest increase in infrastructural funding of an annual € 500 million may not amount to more than a drop in the bucket for Germany’s real transport needs.

What’s more, the Greens and other stakeholders (such as the Federal Court of Auditors) have also questioned the toll’s regulatory impact and added-value in terms of sustainability goals, arguing that the proposed model is unlikely to encourage less driving or more sustainable options.

 

Bad economics – good politics? A CSU pet project

There is more to the toll’s rationale than a wonky debate over the right policy response to structural challenges (infrastructural funding, ecological considerations). The toll’s appearance on the German political agenda was motivated in no small part by local politics and can be traced to a single party: the CSU.

A hegemon of Bavarian politics for many decades, the CSU has positioned itself as the mouthpiece of ‘the ordinary Bavarian’. Part of that promise was to defend legitimate interests of Bavarians in Berlin and guard against unequal treatment particularly visible in the toll policy difference across the Austrian-German border. Austrians would get a free ride on the Autobahn, whereas Germans would be charged across the border. The toll was the answer to level the playing field and the CSU promised to fight for it in Berlin.

After CSU party chief Seehofer had promised the Bavarians a toll as early as 2013 – the CSU has invested a large amount of political capital into the project.

In the new grand coalition government in charge since March 2018, the ministry of transport remained in the hands of the CSU. New transport minister Scheuer appears just as eager as his predecessor Dobrindt to ensure the German Maut will see the light of day. The party’s weak showing in the latest regional elections was seen by some as evidence that the CSU was growing out of touch with the concerns of ordinary Bavarians. The results served to embolden Scheuer to make good on the CSU’s word and deliver on an election promise.

Introducing the Maut has become a test of the CSU’s credibility – a key reason why the proposal has survived significant criticism by both outside groups and the opposition.

 

The road ahead: Toward a European toll solution?

Beyond the legal disputes, technicalities and domestic politics, the controversy over a road toll in the EU’s largest Member State raises a broader question: What is the European response to a petty “Why should we pay if ‘foreigners’ don’t” logic. Future competitiveness of the EU single market hinges upon a world-class infrastructure. Common (or at the very least coordinated) efforts to address infrastructural needs for a single market are needed. The solution offered by national tolls is very small: Member States cannot tax their own way out of the challenges.

The stakes are high: Bavaria is a key transit region in the heart of Europe. Germany’s infrastructural investment gap poses a risk to the competitiveness of the German and the EU market. While the toll plans are moving a step closer to fulfilment, there are open questions regarding the feasibility of reconciling the toll with the European Commission’s initiative for an EU Eurovignette scheme published in May 2017, which would force Member States to replace a time-based tolling system by a distance-based approach by 2023. Through this proposal, the Commission hopes to serve environmental objectives by incentivizing less CO2 intensive transport while addressing the funding gap in transport budgets across the continent.

Against this backdrop, Germany may be forced to change its time-based road toll system only a few years after its introduction.

The saga of a German road toll will thus likely continue. Its introduction has not come without streaks of irony: Recently, Germany awarded the contract to develop the system needed to collect the toll to Kapsch ITS Solutions, a company based in Austria, whose government may yet halt the toll’s introduction in court.  Moreoever, over in Brussels, overseeing the roll-out of the German toll will likely fall under the aegis of the new Commission president. In one scenario, Bavarian Manfred Weber, a key contender for the job and CSU politician may thus have a chance to turn a local Bavarian initiative into a coherent European approach to road tolls.

 

[1] https://www.bmvi.de/SharedDocs/DE/Artikel/StV/Infrastrukturabgabe/infrastrukturabgabe.html

[2] https://www.zeit.de/2017/31/investitionen-staat-kommunen-schulen-strassen-verwaltung