Three ministries to study EU Commission request

The European Commission's decision to formally ask Malta to amend the car registration tax rules for second-hand vehicles will not trigger off any "back breaking changes".

Meetings between three ministries will be held to try and tailor the EU's requests to Malta's tax legislation on second hand cars imported from EU states, the Parliamentary Secretary in the Finance Ministry, Tonio Fenech, told The Times. The Commission has deemed the car registration tax system discriminatory on a number of counts. It argued that the same taxes are levied on new and used cars and that the value of a vehicle is determined in a non-transparent manner by the Maltese authorities at import stage.

It also held that Malta applies a minimum tax rate only in the case of used cars and that consumers have no recourse to challenge the value established.

The EU's formal notice is the first stage of infringement procedures. If the Commission does not receive a satisfactory response within two months, it may proceed with the second stage of the procedure and eventually take the case before the European Court of Justice (ECJ).

Mr Fenech was not taken by surprise by the EU's formal letter, especially since the ECJ recently ruled against Poland in a similar case. In fact, similar infringement procedures were launched against Romania, Cyprus, Poland and Hungary. "We are analysing the letter in detail and seeing how we can eradicate the element of discrimination. The changes we are seeing at the moment are minimal. The government cannot, however, launch incentives for the second-hand car industry at the cost of the environment," Mr Fenech said, when contacted.

The government is seeking legal advice to try and iron out the so-called discriminatory elements. One possible solution would be to impose a minimum threshold on new cars as well, or ban the importation of cars older than 10 years.

Mr Fenech believes the changes requested by the Commission will have negligible impact on the Lm24 million raised by the car registration tax. Ultimately, the issues are not fundamental to the tax system because the EU is not contesting the legality of the car registration tax system, or whether this should be replaced by an emissions tax.

The Roads Ministry, the Finance Ministry and the Environment Ministry will now hold meetings to try and hammer out an arrangement.

"Wherever we agree, we can make amendments and wherever we don't then we may give our arguments against and it's up to the Commission to give a ruling. We will then decide if we should contest it at court level," Mr Fenech said.