Article 90 EC and car imports

The European Court of Justice (ECJ) has stated: "It is incompatible with Article 90 EC to levy on second-hand cars from other member states a tax which, calculated without taking the vehicle's actual depreciation into account, exceeds the residual tax incorporated in the value of similar second-hand motor vehicles already registered in the national territory."

This statement is clear: 1. No second-hand car import from an EU member state should pay a registration tax which is higher than what has been paid by a similar newly registered vehicle in the national territory; 2. No matter the age of the vehicle, depreciation of that vehicle has to be taken into consideration when calculating the tax due.

To fulfil these criteria, an overhaul of the Motor Vehicle Registration Tax Act is required. Furthermore, to calculate the tax due on registration of a used car imported from an EU member state, the starting point is the registration tax that was paid for a similar car with similar specifications when registered new in Malta.

For this purpose, the Licensing and Testing Department and the Customs Department must dig up records of registration tax paid on all new road vehicles imported into Malta since 1994 and, before that date, the amount of customs duty paid.

The tax paid on each individual vehicle model must be further defined on whether it was a standard model or with extra specifications. They must prepare lists which must be made available to the public. Transparency is essential because EU regulations provide for the right of an individual to request a review of the authorities' evaluation and these individuals must have access to this information in order to make their claim.

The next step is the establishment of a realistic depreciation factor. The ECJ has already established that "the annual depreciation in the value of cars is considerably more than 5%, that depreciation is not linear, especially in the first years when it is much more marked, and, finally, vehicles continue to depreciate more than four years after being put into circulation. A 5% annual depreciation on passenger cars was deemed unrealistic (in Greece and Portugal) as was 0.6% per month (7.2% per year - Denmark). Realistic depreciation figures for Malta are 15% for the first year (which can apply to a vehicle which is over six months old), 10% for each of the next five years and lastly reduced to 5% a year after six and a half years. This is equivalent to a vehicle life of 14 years.

The ADT claims to take depreciation into account when evaluating an imported used vehicle. The depreciation guides used by the ADT are relevant only to establishing the market value of the used vehicle in the UK. The Licensing and Testing Department of the ADT will not divulge the nature of this depreciation guide except that I was told that they are received from the UK, monthly by subscription. There is no other plausible publication but Glasses Guide, which is used throughout the UK by the used car trade and is also published for other European countries.

The ADT uses such a guide to establish whether the CIF of the imported used vehicle falls above the price equitable to the minimum payable tax for each engine category. In practice, popular vehicle models older than three years would have to pay the minimum amount of tax laid down in the Registration Tax Act. Another quirk of this provision is that the minimum tax quoted may be equivalent to the registration tax paid for the same vehicle when registered new. This is in clear breach of Article 90 EC.

ADT's public relations manager Daniela Borg Mizzi, is a very prolific writer and efficiently answers complaints by letter-writers in the press. Yet I still have to see a response from her to explain to your readers in what way is the current Registration Tax Act compatible with EU regulations, Article 90 EC in particular.