The Dutch government has approved a bill to impose tax on drivers for every kilometer they are on the road, a move it says will reduce traffic jams, fatal accidents and carbon emissions.

The new tax charges drivers of an average-size passenger car a base rate of $0.07 cents per kilometer, beginning in 2012.

While taxis, vehicles for the disabled, buses, motorcycles and classic cars will be exempt, drivers of heavier and, therefore, more polluting vehicles will pay more. The cost will go up for driving in peak hours.

GPS will track the time, hour and distance each car moves and send the data to a billing agency.

In return, the government says annual road taxes and purchase tax for new cars will be abolished - reducing the cost of a new car by 25 per cent, the Dutch transport ministry said.

The ministry also says around six out of 10 drivers will benefit under the system, which shifts the tax burden to people who drive the most and at peak hours.

Congestion is expected to be halved and carbon emissions cut by 10 per cent, though the tax rate may increase every year until 2018.