Fenech denies illegality in charging VAT on registration tax

Finance Minister Tonio Fenech this evening denied claims that by charging VAT on vehicle registration tax the government had somehow acted illegally and deceived the people.

Speaking in Parliament, Mr Fenech recalled that all Maltese legislation, including registration tax, was vetted and approved by the EU before Malta joined the bloc.

The European Union first served an infringement notice on March 23 last year. That followed a European Court judgment against Denmark. However what applied to one country did not automatically apply to another. The commission had to start procedures to which the government replied and if no agreement was reached, the parties went to court.

The European Commission published its ‘reasoned opinion’ on February 1, 2008 to which the government replied.

Mr Fenech pointed out that the EU was not against registration tax itself The government, therefore, could have simply removed VAT and compensated by raising registration tax and the issue would have been resolved. But since the whole process was being reformed, the government and the commission agreed to await the changes, which was what was being done now.

The government, therefore, had not deceived anyone.

Turning to the increased duties on hybrid cars, Mr Fenech said the new circulation tax was based on CO2 emissions and the actual size of vehicles. Hybrid cars had different levels of emissions. Some were 50 percent efficient, others 20 percent. In the past there had been a flat rate for such cars but to continue that would have seen a situation where small very efficient cars were taxed at the same rate as the bigger and far less efficient vehicles.

Henceforth the bigger cars would be taxed more, but their tax would still be lower than equivalent sized cars, Mr Fenech said.