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Ministry denies it is obliged to refund VAT on registration tax

The Finance Ministry insisted this evening that it was not true that the European Commission had confirmed that VAT paid on vehicle registration tax had to be refunded by the government.

The ministry was reacting to a Labour Party statement about a reply given in the European Parliament by European Taxation Commissioner Laxzlo Kovacs to a parliamentary question by Labour MEP Louis Grech.

The ministry said Commissioner Kovac’s reply had not changed the state of play in the process on vehicle registration tax, which had still not been concluded.

All the Commissioner had said was that any individual who felt that he had been charged tax in violation of European law could seek redress.

It was not true, the ministry said, that Maltese VAT law on vehicle registration violated European law, as the PL was claiming. There was no European Court decision against Malta in this regard.

“While the European Commission has a right to express an opinion, this cannot be taken to be a declaration that domestic law had breached community law,” the Ministry said.

While Malta was continuing to insist that it was not in breach of Community Law, the Commission never took action against Malta before the European Court.

At no time did the Commissioner reply ‘yes’ to the question of whether the Maltese government was obliged to refund VAT from May 2004.

Explaining the facts, the ministry said that Malta joined the EU after detailed pre-accession screening of domestic law, which never revealed any shortcoming with regard to VAT.

On May 23, 2007, the Commission requested clarification about Maltese law dealing with the subject.

It was only on February 1 last year that the Commission issued a reasoned opinion which, the ministry reiterated, could not be seen as a final decision against Malta. This was a commission opinion which could only become binding if a decision was taken by the European Court.

European Commissioner's reply

Earlier, the PL in a statement said the VAT charged by the Maltese government on the registration fee of cars bought since May 2004 has to be refunded, according to commenys made by Commissioner Laxzlo Kovacs in reply to a parliamentary question by Labour MEP Louis Grech.

Mr Kovacs said that people who paid VAT on registration tax could seek repayment of the tax paid in breach of European law.

They had, however, to exercise this right according to procedures in the national law for similar refunds since there were no Community rules on remedies for the enforcement of Community laws.

It was the duty of the national courts to apply domestic rules, and these should ensure that taxes imposed in breach of community legislation were reimbursed, Mr Kovacs said.

Mr Grech has been working on the issue since 2007 when together with former MEP Joseph Muscat, now leader of the Opposition, they had informed the Commission that this tax was not in conformity with a decision taking by the European Court of Justice and so it was illegal.

The Commission said it was also examining the newly amended legislation.

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