Motorcycles and second hand cars

Joe Dimech writes:
Buying vehicles in Malta is an extremely expensive prospect.
Apart from my car, I drive a motorcycle, which is very economical, hence a very low pollutant and contributes to less congestion on our clogged roads. Now, the price of the new motorcycle that I am planning to purchase is approximately 50 per cent dearer in Malta than in other EU countries where wages are twice or even three times higher.
Is this a case of discrimination? Is this acceptable within the EU?

I have already had the opportunity to explain in this column that our car registration tax system is, in the main, compatible with EU law.

However, there have been many attempts, especially by EU citizens in high-registration tax countries, to attack the system on the grounds that it is a tax measure that ultimately creates an obstacle to free movement within the EU market. Indeed, the European Court of Justice has already pronounced itself in the case of people moving their car along with their residence from one EU country to another.

Last week, the court delivered another important judgement which goes further down this road.

In two cases brought by Hungarian nationals, the court found that EU countries cannot charge a higher registration tax on used cars than that imposed on similar used cars already registered in that country.

In this case, the Hungarian nationals had purchased their second-hand car from Germany and registered them in Hungary. They contested the amount of registration tax they were asked to pay and sought a reimbursement.

The court said that the registration tax must not burden products originating from another EU country more heavily than similar national products. It said that a new car in respect of which registration tax has been paid in Hungary loses, over time, part of its market value. And with depreciation in value, the amount of registration tax included in the value of the car also diminishes. Since it is a used car, it can only be sold at a percentage of its original price, which contains the residual amount of the original registration tax.

The court found that in Hungary a car of the same model, age, mileage and other characteristics that is bought second hand in another EU country and registered in Hungary still attracted the full rate of registration tax for that category of cars. This was therefore a heavier burden on imported second-hand cars than on similar used cars already registered in Hungary (which had already borne that duty at an earlier stage).

The court therefore decided that registration tax imposed on used cars cannot be higher than the tax component in the value of a similar used car already registered in that country.

In Malta, used cars imported from another EU country are subject to registration tax (as well as VAT on the tax element). However, it appears that the value is established by the Malta Transport Authority (ADT) and it is not necessarily linked to the price of a similar second-hand car already registered in Malta. Moreover, the law imposes a minimum tax charge which has to be paid regardless of the value of the car being registered, still less of a similar used car.

For instance, a car with an engine capacity of between 18,000 and 20,000cc must pay registration tax of 65 per cent calculated on the value of the car (established by the ADT). But the tax payable must, in no case, be less than Lm4,200.

Now, clearly, if the value of a similar used car in Malta is already lower than Lm4,200, it goes without saying that this rate places a higher burden on the imported second-hand car than on similar used cars already registered in Malta.

Note, however, that this new legal development applies to second-hand cars and not to new cars. In other words, it does not affect the rate of registration tax applicable to new cars. So far, the court has never ruled against a registration tax system imposed on new cars. Or motorcycles for that matter.

Yet, as the reader states, motorcycles of certain engine capacity are indeed energy efficient and contribute to less pollution. And, of course, they also contribute to less traffic congestion. In a country where traffic congestion is increasingly becoming a political issue, it may therefore be worth considering whether the registration tax burden imposed on new environment-friendly motorcycles and vehicles should also be reconsidered.

Readers wanting to ask questions to be answered in this column can send an e-mail, identifying themselves, to contact@simonbusuttil.eu or through www.simonbusuttil.eu