EU Commission tells Malta to change rules

The European Commission yesterday decided to send a formal request to Malta to amend its car registration tax rules which discriminate against second-hand cars imported from other member states.

The request takes the form of a "letter of formal notice", the first stage of the EU infringement procedure. If the Commission does not get a satisfactory response within two months, it may proceed with the second stage of the procedure and eventually bring the case before the European Court of Justice (ECJ).

The Commission said the car registration tax system was discriminatory.

"The tax rate, which depends on the vehicles' engine capacity, is the same for new and used cars. The rate is calculated on the vehicle's value, which is determined by the Maltese authorities. However, differently from new vehicles, there is a minimum amount of tax fixed for used cars.

"Even if the application of the corresponding tax rate to the taxable value determined by the authorities results in a smaller amount than the fixed minimum, the latter prevails.

"The application of the minimum tax cannot guarantee that the tax applied on imported second-hand vehicles will not exceed the residual tax incorporated in the value of similar vehicles already registered on the island, as required by the ECJ," the Commission said.

The Commission also said that an additional aspect is the lack of transparency of the procedure that is used to determine the tax on motor vehicles. "The ECJ has ruled in case C-393/98 (Gomes Valente) that the criteria on the basis of which the taxable value is determined have to be brought to the knowledge of the public."

The EU executive is also contesting the lack of the possibility for taxpayers to challenge the amount of tax due where they believe the amount of tax does not reflect correctly the vehicle's actual depreciation.

Malta is not the only EU member state being requested by the Commission to change its taxation system in this sector. Similar infringement procedures were launched against Romania, Cyprus, Poland and Hungary.

In a statement issued after the Commission's decision, Labour MEP Joseph Muscat said he had already warned the government over this issue.

"The authorities should take this opportunity not only to change that part of the system related to imported second-hand cars but to revise the car registration tax system altogether," he said.