Confusion reigns over new car tax system

People who were waiting for the new registration tax to rush out and buy a car may have to wait a little longer as dealers still cannot work out the cost of their vehicles under the new regime.

Car importers and dealers are racking their brains as they wade through equations and tables to compute new vehicle prices according to the registration taxes announced during Monday' budget.

Clients are asking them for pre and post budget prices to work out what pays them most, but none of the major car importers was able to provide revised prices of the cars they have on offer, yesterday.

When contacted, dealers said their clients are as overwhelmed as they are by the numbers that were thrown at them during the budget. Importers are also concerned because, amidst this confusion, clients who have already ordered their cars may postpone registering them with the Transport Authority until January 1 - when the new registration tax and licence system come into force.

The problem is that a car's registration tax now takes into account the vehicle's length and emissions, which requires complex calculations for each model and its variables, especially diesel models.

A spokesman for the Finance Minister said when contacted that meetings were held with the industry to field any questions the dealers might have both before and after the budget. But the situation is clearly far from clear.

From January 1, Vat will no longer be levied on registration tax. According to the budget, through the new registration tax, cars with smaller engines between 1,000cc and 2,500cc will go down in price by between five and 44 per cent. Those with engines bigger than 2,501cc will see prices rise by up to 45 per cent.

Registration tax on imported second-hand cars will be computed in the same way as new cars with their prices calculated according to the local market value. If they are imported from non-EU countries, and manufactured before January 2005, a minimum registration tax will apply.

The road licence system on new cars will be replaced with an annual circulation tax, which is based on emissions and the car's age from the year of manufacture, meaning that the tax will increase as the vehicle ages.

Cars already on the road (registered before January 1) will also pay the annual circulation tax that will be based on cubic capacity, fuel type and age of vehicle.

Owners of new cars bought in 2008 can choose to take up a credit system whereby the difference (between the registration tax they paid and the new one) will be credited at the Transport Authority and deducted from their circulation tax due. This credit is tied to a specific vehicle and, while it may be transferred to a new owner if the car is sold, it cannot be transferred to another vehicle.