Prime Minister Lawrence Gonzi said this evening that the government would tweak the new vehicle circulation tax announced in the budget, particularly in the case of diesel family cars which, in terms of the original proposal, would have ended up being taxed as much as luxury cars.

Speaking in Parliament during the budget debate, Dr Gonzi said the purpose of the new registration tax and the circulation tax (which would replace the vehicle licence), was to encourage the purchase of new, smaller and cleaner cars.

The registration costs of new petrol 1300cc cars would be almost half of what they were before. Small family would cost some €2,300 less than before.

The money would be recovered from the new circulation tax, but 1300cc petrol family cars which were six years old would see licence costs increase by just €5, which was not sky high. Petrol cars of between 1300-1500cc which were also six years old would see an increase of just €6.

It was true that for some categories - the big diesel thirsty cars - there would be significant increases. But one either had the courage to tackle the environment or acted like jelly.

Dr Gonzi said that the government had, however, decided to review the new licence costs for certain diesel cars, bought some 10-15 years ago by ordinary families who had sought to save on their fuel at a time when diesel was substantially cheaper than petrol. In this way, such families would not end up paying as much as those who bought large luxury cars.

The government had also received valid complaints by importers of second hand cars currently in stock and would therefore introduce transitory provisions for the new tax, Dr Gonzi said.

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