MEPs vote to abolish tax on importation of cars

The European Parliament yesterday overwhelmingly backed a Commission proposal tabled a year ago asking member states to abolish taxes on the importation of cars and replace them with a tax on emissions based on the usage and circulation of the vehicle.

The final decision has still to be made by member states that are divided over the issue. Sources close to the Commission told The Times that Malta is one of the countries opposing this proposal.

Malta imposes one of the highest registration tax regimes in Europe on imported cars, which are taxed between 50 and 75 per cent of their importation value depending on their engine cylinder capacity. They are also subject to 18 per cent VAT on the registration tax payable.

According to the proposed directive, car registration taxes should be abolished over a transitional period of five to 10 years. The Commission argues that member states' revenues would not be affected if the gradual abolition is accompanied by a parallel increase of annual circulation taxes and, if necessary, other taxes.

The proposal also contemplates the introduction of a system whereby a member state would be required to refund a portion of registration tax, pending its abolition, when a passenger car registered in that member state is subsequently exported or permanently transferred to another member state. This measure would aim both to prevent double taxation and to make these kind of taxes fairer by relating them to the actual use of the car in the member state concerned.

Speaking during the debate yesterday, Labour MEP Joseph Muscat said a positive vote would send a strong signal to governments, including the Maltese one, that are still resisting the change.

Because there still exists no internal market in vehicles, Mr Muscat said, it was extremely difficult for a European citizen to buy a car from another member state.

He said the Commission's proposal was a step forward since it would remove undue barriers to trade, lower the capital required to acquire a vehicle and encourage the acquisition of eco-friendly vehicles.

During technical discussions on the proposal, Mr Muscat had moved an amendment stating that until an agreement is reached on this issue, governments should at least agree not to impose double taxation on vehicles brought home by their citizens returning from a two-year work assignment in another member state. This amendment was also approved by the European Parliament yesterday.