Problems with new vehicle registration tax

Used passenger cars imported into Malta from another EU state will be evaluated for registration purposes according to the UK's Glass's Car Guide Book.

'Transparency' issues in the valuation of imported motor vehicles seem resolved. VAT will not be applied to the registration tax due. It also seems that the minimum registration tax provision will not be imposed on used vehicles coming from EU member states.

Imports from non-EU countries will still be subjected to this provision if the vehicle is over four years old. In any case, minimum registration tax dues should only be of concern to the car collector.

These changes have not been made by the authorities in benevolence or because of environmental requirements. These changes have been initiated because the old car tax regime was not in conformity with EU regulations. I do not think that this is the end of the story.

The latest version of the Budget document related to the new car tax regime (available on the ADT website) has three new paragraphs, A12 to A14, which were not included in the original document. Paragraph A12 is claiming that this new tax regime conforms to all EU requirements. This claim is unfounded. The European Commission, and not the Maltese authorities, will decide if the new tax regime conforms to all EU requirements.

Regarding the method applied to taxing used vehicles, EU requirements specify that the tax imposed on a used vehicle imported from another member state shall not exceed the amount of residual tax incorporated in the residual value of a similar vehicle already registered in the national territory. The residual value of a used vehicle in the UK has no relationship to the residual value of a similar vehicle already registered in Malta. Using the valuation of used vehicles in the UK market, as given by UK's Glass's Car Guide Book, becomes irrelevant as a matter of fact.

Factoring in residual values into the formulae published in the Budget document to work out the registration tax due does not in any way deduce the 'residual tax' which would be incorporated in a similar vehicle already registered in Malta. The maximum tax which can be imposed can only be deduced from the sale price (in Malta) of a new similar vehicle when sold in the same year as the year of manufacture of the used imported vehicle, the importation tax or registration tax and VAT (if any), paid on that new similar vehicle in that year, and the current (local) market value of the similar vehicle already registered in Malta. Depreciation rates are also considered which are higher during the first few years but which continue throughout the life of any vehicle.

How can the new tax regime conform to EU requirements if, should official CO2 emission values for an imported used vehicle not be available, the default maximum category is applied (251g/km) in working out the registration tax due? Any used vehicle imported from an EU member state from January 1, 2009 will attract an Annual Circulating Tax (ACT) higher than the ACT due from a similar vehicle already registered in Malta before that date. These two situations are examples which would surely draw objections from the European Commission as Article 90 EC would be infringed once again.

Paragraph A13 of the revised Budget document gives the definition of a new motor vehicle which includes "a motor vehicle which has been temporarily registered in another country and had been supplied less than six months after the date of first entry into service, or has travelled less than 6,000 kilometres".

Can the authorities explain how they will guarantee that when a private person imports a new car into Malta, the same registration tax will be imposed the way it is imposed on a same new vehicle imported by official car importers since the registration value and registration tax of new car imports are not made public?

The last new addition to the document, A14, is the cherry on the cake. With all the environmental claims for the introduction of the new car tax regime, A14 has been tailor-made so that foreigners seeking to take up residence in Malta do not have to pay any tax (which is only fair). This provision is being done purely to encourage foreigners to buy from the glut of property in Malta. Does this not encourage more cars on our roads?

Towards the end of 2009 our Finance Minister and the ADT will have to go back to the drawing board. The EU champions free market choice and the free market where the consumer is king.