Labour MEP Louis Grech has asked the European Commission to ensure the Maltese authorities refund the VAT paid on registration tax by those who have bought a car since EU accession in May, 2004.

Writing to Lazlo Kovaks, the EU commissioner responsible for taxation, Mr Grech asked the Commission to confirm whether the Maltese government had to issue refunds to all individuals or entities that have purchased a car since then.

He asked the Commission to state whether it would start legal procedures against Malta if such refunds are not made. Mr Grech said he had been holding meetings with the Commission over the past months and was assured by EU officials that since slapping VAT on vehicle registration is illegal, the government has to refund the extra money paid.

"Following a number of meetings with the EU commissioner, I was given to understand that the Maltese government has no option but to affect the relevant tax refunds according to national laws," he said.

It is not known how much money the government would have to refund if Mr Grech's claim is implemented but industry sources said the sum would run into hundreds of thousands of euros.

Following pressure from Brussels, the government has this year introduced a new car registration taxation system and stopped charging VAT on the tax.

Despite these changes, the EU's legal procedures against Malta on the issue remain open as the new system has not yet been cleared by Brussels.

A Commission official yesterday declined to comment on Mr Grech's requests, saying "the Commission not yet in a position to give any formal position on this issue".