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Cost of Travel to and from Work

7.58. The present law, in general, denies a deduction of expenses of travel between home and work. In some circumstances, however, costs of travelling between home and work are regarded as expenses in deriving income and thus deductible. The principle applied in these circumstances requires that the home be in some sense a base of income-earning operations so that the travel can be regarded as travel between bases of operation. The application of the principle is not always clear and consistent, more especially where the bases of operation are aspects of different income-earning activities: the taxpayer may conduct his own business at home and also travel to a base of operations where he is an employee. The application of the principle is obscure where the taxpayer is, for example, a building worker: it is inappropriate to speak of him as having a base of income-earning operations, since his place of work may vary from day to day. The application of the principle may at times appear generous to the self-employed taxpayer where, for instance, he uses his own car in his business or profession. If the denial of a general deduction is to continue, a stricter definition and application of the law as to those costs of travelling between home and work which are to be regarded as expenses in deriving income would seem to be indicated.

7.59. In denying a deduction of expenses of travelling between home and work, the present law treats them as a form of consumption. Arguably they ought not to be so treated, since they are a prerequisite to the earning of income. But the same could be said of many other expenses whose deduction is currently denied, such as outlay on basic food, clothing and shelter. In the Committee's view a general deduction for expenses of travelling between home and work can only be justified as a concession.

7.60. A general deduction is denied in the United Kingdom and other English-speaking countries. There is however a deduction of general application but limited in several respects in a number of European countries. In Sweden, for example, the expenses are deductible where the taxpayer lives more than 2 kilometres from his place of work. The deduction for the most part covers only the cost of the cheapest means of transportation. A person who drives a car may deduct the cost of a bus or train fare; but should the saving in time resulting from the use of his car be more than 1½ hours a day, a deduction for the actual costs of operating the car is allowed.

7.61. The case for giving a concessional deduction in this area of consumption rests on the circumstances that the incidence of such expenditure, unlike expenditure on basic necessities, varies noticeably between individuals in a way that cannot be wholly explained by personal preference. For some taxpayers, admittedly, there may be a fairly clear choice between more expensive housing plus modest travel expenses and less expensive housing plus considerable travel expenses. But this would be far from generally true.

7.62. Variation in the incidence of travel expenses may arise:

  • (a) because one taxpayer has to meet his own expenses of travel while another has the means of travel provided for him by his employer; or
  • (b) because one taxpayer faces high costs of travel while another does not: the former may live a considerable distance from his place of work, or may be forced to use expensive means of transport because public transport is not available at all or not available when he has to travel (e.g. a shift worker), or may require special means of transport because he is disabled.

7.63. The Committee acknowledges the horizontal inequities that may thus arise. In the case of (a) there is clearly also a vertical inequity in that those receiving the benefit

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of free travel are likely to be concentrated in the higher income groups. But in this instance the inequities will disappear if the Committee's recommendations on the taxing of fringe benefits are implemented. It might be claimed that there is a vertical inequity in relation to (b) because lower income earners tend to live further from their places of work than those with higher incomes. It is doubtful, however, if such a claim can be substantiated. The case for a general deduction must therefore rest on the horizontal inequity involved in some taxpayers having heavier travel costs than others.

7.64. If a general deduction were allowed, some control would obviously need to be imposed on the amount deductible so as to deny a deduction of extravagant expenditure, for example on a chauffeur-driven limousine. One possibility would be to limit the deduction to expenses in fact incurred in using public transport. This might have a collateral advantage for State and local government finances but would lead to a new set of inequities—between taxpayers who are in a position to use public transport and taxpayers who are not. A way of overcoming this problem would be to allow expenses of other modes of travel where public transport is not available but to limit the deduction to some notional amount that might be thought reasonable in the circumstances. There would of course be administrative problems in fixing such notional amounts, and an inevitable element of arbitrariness. Other administrative problems would be involved in assessing the expenses of the private transport adopted—most often a motor vehicle in respect of which running costs and depreciation would be claimed. In some instances there would be a claim of a composite deduction, involving both private and public transportation, for example where a car is used to reach the nearest railway station. If it were thought that the concession should be extended to those using private transport when public transport is available, the administrative problems associated with assessing the expenses of private transport would be multiplied.

7.65. In the Committee's view the administrative costs of allowing the deduction outweigh any possible equity advantages, and accordingly it does not recommend that a deduction be allowed for costs of travel to and from work. There are special situations, however, for which some other provision might have to be made. Thus under the present sales tax law, tax concessions are available to a disabled person who incurs special expenses by having to use his own car to travel to work. If the continuance of such a concession is not thought appropriate under the value-added tax recommended by the Committee, an alternative form of subsidy—if necessary a direct grant—could be employed. Other special situations, such as the shift worker or the person called on to work in an area remote from any form of public transport, will already have been mitigated to the extent that wages include a loading for time or location of work.