Bursting the Bubble

Who should pay to fix German potholes? Weighing the initiative for a toll on ‘foreign’ road users

12 May 2014 | by

This article is a continuation of a post on the same topic from January 2014.

When Germany’s two largest parties – the CDU and the SPD – approved the coalition treaty in December 2013, Angela Merkel’s sister party (CSU) managed to secure a key concession: the possibility of introducing a controversial motorway toll for foreign passenger cars.

When the proposal was first launched, not many people in Berlin or Brussels took it for more than campaign noise. The majority of the German political establishment rejected its populist undertone and accused the CSU of scapegoating foreigners for German infrastructural woes. There were also concerns regarding the feasibility of introducing the toll in accordance with the EU’s anti-discriminatory rules. While the legislative fate of this proposal is still uncertain, the idea has proven rather resilient.

Although the SPD had opposed this idea and Ms Merkel publically ruled it out during the campaign, the parties eventually agreed to go ahead with sounding out ways for a toll on foreign cars, based on two conditions: one, any toll would have to be in conformity with European law; two, its consequences should not pose any additional burden on German car owners. It is these two conditions that have kept German transport ministry officials busy over the past months, struggling to come up with a legislative proposal for a toll which would fulfil both.

Their latest idea is a €100/year vignette obligatory for all car owners. Mr Dobrindt’s ministry proposes to compensate German drivers for this fee by lowering the tax levied on vehicle ownership (Kfz-Steuer) and by introducing an ‘eco bonus’ rebate system applicable to low-emission cars, similar to the differentiation system already governing the Kfz-Steuer. This way, German drivers should be effectively exempted from the fee.

Five months into the new coalition’s term, Mr Dobrindt has now announced that his ministry will publish his draft of a legislative proposal before July this year. He also indicated a starting date for the toll: 1 January 2016. Stirring controversies at home and facing political and legal pressures from the EU, the road to meeting this deadline will, however, likely be bumpy.

Footing the bill for Germany’s infrastructural investments

Despite arguments over the appropriate policy response, there is little doubt over the yawning funding gap for German infrastructure. Often hailed as the key driver of the EU economy, German road infrastructure is ailing under high maintenance costs and urgently needed reparation and renewal. The annual gap in needed investments for German infrastructure is estimated to be as high as €7.2 billion (supplementing current investments of €10 billion/year). This figure excludes costs for extending current or construction of new installations.

As these funds are not foreseen in Germany’s €298 billion annual budget (2014), a heated debate has recently emerged on who should pay for the necessary investments.

Alexander Dobrindt and the Bavarian CSU party think it should be foreign road users in Germany. On paper, the toll promises to generate an annual €800 million and is intended to pay for urgently needed projects.

However, the German federal court of auditors disagrees with Mr Dobrindt’s idea due to its potential conflict with EU law and has suggested re-shuffling existing budgetary funds instead of imposing new levies.

In the meantime, the German social democrats have come up with proposals of their own: the party’s Minister-President of the state of Schleswig-Holstein, Thorsten Albig, suggested imposing an extra charge of €100 per-annum which would apply to all road users in Germany and go to a dedicated fund benefiting German infrastructural projects. Other politicians of his party prefer to raise taxes on the wealthiest Germans to pay for the gap.

Besides controversies within the German government, the CSU might need to convince the powerful German automobile club ADAC of the merits of this measure. The association has doubted its economic benefits and has vocally spoken out against any toll on passenger cars. With its 18 million members it is an influential stakeholder, even though its credibility was damaged recently by revelations over the fixing of a car award.

While the debate on who is to pay for German infrastructural needs is in full swing, the CSU and Mr Dobrindt hold both the institutional resources (i.e. the relevant ministry) as well as the right to make the first move on this issue given by a paragraph in the coalition treaty.

Provided that Mr Dobrindt can leverage these resources to win the political battle, a key technical problem remains to be solved: doubts exist regarding the proposed mechanism to exempt German car drivers from paying an additional charge. 13 million German car owners are currently paying less than €100 in motor-vehicle taxes, leaving them with an extra charge to purchase a €100 vignette.

A foreigners-only toll: A grotesque idea for Europe?

In addition to domestic pressures, Mr Dobrindt’s idea has raised eyebrows at the EU level.

This is in spite of the fact that in pushing for a national solution, Dobrindt’s proposal has made for strange bedfellows in Europe. The socialist French environment Minister Ségolène Royale announced similar plans for a roll imposed on “foreigners” for road usage.

And while most analysts identified the idea of a toll exclusively applying to foreign users of German roads as a clear violation of EU law (the ban of discrimination based on country of origin), the Commission had initially avoided criticising the proposal outright before it was officially published. In early 2014, the European Commission’s DG MOVE declared that the idea of a toll on the Autobahn could not prima facie be declared incompatible with EU law; only the actual content of the policy could determine its fate.

More recently, however, the German proposal encountered opposition which was formed along EU vs member states rather than party lines. This was evident when Mr Dobrindt’s proposal recently came under friendly fire, with the German conservative (CDU) energy commissioner Oettinger publically calling Dobrindt’s solution “grotesque” if applied across Europe. Instead, the Commissioner favours a single EU-wide system applicable in all member states and to all EU vehicle owners. According to Oettinger the income of the toll should go directly to the EU member states rather than to the EU budget. This idea recently found the support of other CDU politicians, such as Saarland’s Minister-President Annegret Kramp-Karrenbauer (CDU).

While EU-wide infrastructural proposals would abide by anti-discrimination rules, they face their own difficulties by potentially violating the principle of subsidiarity as infrastructural policies diverge strongly across member states.

In spite of these concerns, incumbent EU Transport Commissioner Siim Kallas has also expressed doubts over a Dobrindt style national solution of a road-usage fee. He warned an ‘eco bonus’ would only be admissible if it applied to all cars (regardless of the country of registration). According to Kallas, the German proposal would have to specify whether and how these rebates would be granted to foreign motorists.

In addition, a working paper circulated in the transport committee of the European Parliament earlier this year promoted the idea of an EU system which would allocate motorway usage permits based on the distance travelled, rather than on time periods. The system of a toll for lorries – already working successfully in Belgium, Denmark, Luxembourg, Sweden and the Netherlands – could become the model for such an approach to passenger car toll collection across Europe. The idea of an EU-wide distance-based fee was picked up by the Bundestag’s transport committee chairman Martin Burkert (SPD) who called it ‘an option’.

In order to transform his ‘flagship’ issue into reality, Minister Dobrindt thus faces an uphill battle involving domestic opponents, technical intricacies, legal restraints, and a possible competing policy from the EU level. Nineteen months before its suggested starting date, Germany’s toll system applicable only to foreign passenger cars therefore remains an open question.

Regardless of the toll’s eventual fate, the on-going debate has, however, not failed to achieve a political objective: delivering precious attention and populist momentum for Mr Dobrindt’s CSU ahead of the May European Parliament elections and beyond.

What do you think?