Registration tax and free movement

With the ADT press release Foreign Registered Vehicles For Foreigners With Work Permits (Non-Residents), Malta as a new member of the European Union lost a unique opportunity to show its support for the free flow of persons, goods and services, including the freedom of movement and residence, to facilitate the mobility of citizens within the European Union.

It is intrinsically repugnant, as well as inefficient, that some people can travel freely almost anywhere while others cannot.

Under the EU Treaty, individuals are entitled to move freely for work or other reasons from one EU member state to another without suffering discrimination as regards employment, remuneration or other conditions of work and employment.

Cars are an important means of getting around and are, therefore, instrumental to the right of freedom of movement by their users which is guaranteed under the EU Treaty. Many citizens take their car when they leave their member state temporarily or settle permanently in another.

The European Commission presented a proposal for a directive that would require member states to restructure their passenger car taxation systems. The proposal aims to improve the functioning of the internal market by removing existing tax obstacles to the transfer of passenger cars from one member state to another. It would also promote sustainability by restructuring the tax base of both registration taxes and annual circulation taxes so as to include elements directly related to carbon dioxide emissions of passenger cars.

The European Commission (on July 5, 2005) made this proposal because it is convinced that there is a need for action to eliminate obstacles to the free movement and transfer of passenger cars within the internal market, to tackle market fragmentation and to promote environmental sustainability. The Commission believes it really necessary to abolish registration taxes.

The problems most frequently faced by private individuals moving cars within the internal market are double payment of registration tax, troublesome administrative procedures and extra costs associated with administrative delays.

In its judgment of June 16, 2005, in case C-138/2004, the European Court of Justice stated that registration taxes can amount to an obstacle to free movement of persons and workers, in particular because of their rates and technicalities.

Annual circulation taxes have more coherence than registration taxes because they relate to the use and permanence of the vehicle on the territory.