Labour ready to go to European Court to defend consumers

Opposition leader Joseph Muscat said yesterday that the government should have the courage to admit it was wrong to charge VAT on the vehicle registration tax. This would be the first step towards finding a political solution to the problem, following which the opposition would be ready to sit with the government to devise a reimbursement scheme. Failing this, Labour would sue the government in local courts on behalf of the consumers.

Speaking during the debate on the second reading of the Motor Vehicles Registration Tax (Amendment) Bill, Mr Muscat said that if the opposition lost the case in Malta, it would refer to the European Court.

On March 15, he said, the party would open its doors in Malta and Gozo to all those who want to join in the legal challenge against the government. Those interested in joining the case should give details of their ID cards and logbooks and give permission for their names to be used in the proceedings.

Dr Muscat said the government was trying to discourage the injured parties because of the expenses involved in filing a court case. Labour could not stand idle in the face of such an injustice, and was taking it upon itself to file the legal challenge on behalf of the people, without charging anybody anything.

The opposition agreed with the reform as proposed in the Budget, but it would make proposals to make the reformed system better.

Vehicles are the second largest expenditure for the average family, often paid through a bank loan. He said that when Malta changed from customs duties to VAT there had been widespread rumours that vehicles would be cheaper. The same campaign was repeated during the EU membership campaign, with the Maltese being told that membership meant they would buy cheaper vehicles.

Dr Muscat said that as an MEP he had led a campaign for the removal of the VAT on vehicle registration tax to one based on emissions. At the time the government was against, claiming that the tax did not infringe European regulations. This was correct but went against the spirit of the directive. Many Maltese claimed that if one believed in the European sentiment, the government should have removed it before.

Conscious of this, the PN strategy group put forward this proposal in the 2008 electoral programme to attract votes. Once the election was over, the opposition was being accused of exploiting the situation, an accusation the opposition would never accept.

In the budget, the government had considered diesel-powered vehicles as luxury vehicles and only changed the proposed licensing rates after letters appeared in the Press. The budget had also originally proposed higher taxation on hybrid cars than that to be imposed on other vehicles. One had to question the validity of certain budget measures when adjustments had been made.

Dr Muscat said that the government had to give more consideration to the social aspects in the Bill. VRT was not integrated in the reform, when VRT was used to calculate emissions.

He said the screening of national law to European directives made before 2004 could not consider VAT on car registration because the case before the European Court had come after that date.

If the government really believed in the European spirit, the government should have admitted its mistake and looked at ways how to make amends. Labour would tackle the issue in the local courts and if necessary also in the European Court. However, Dr Muscat declared that he was ready for a political settlement as his obligation was towards consumers. Malta was a full-time, not a part-time, member of the EU.

Minister Fenech had not said that the government should not give a refund. He had only clarified that the Commission's opinion was that the government could not charge VAT on registration tax.

Dr Muscat said the Commission officially called on the governments of Malta, Austria and Finland to enact new legislation, adding that taxes paid by the importer were paid on behalf of the end consumer. This had been before the elections. The change in the Bill did not include VAT on car registration. This was the first indication that the government was admitting the infringement. He again called for a political settlement to the issue.

In an aside to what the Prime Minister said on Tuesday as regards EU funds to Malta and the country's contribution to the bloc, Dr Muscat said that the opposition had checked the data quoted by The Times with the Commission and would announce its findings in the coming days.

Turning to the car registration issue with the EU, Dr Muscat said that the opposition's first preference was for a political settlement and called on the government to introduce re-imbursement scheme. The opposition was ready to join hands with the government in this. If not, the opposition would take the legal route in line with what the Commission had said, that the consumer had the right to seek legal action.

The government was morally obliged to give refunds.

The opposition had been warning the government on the issue for the last four years. The government should have made a contingency provision in each budget for the eventuality that it would have to reimburse those affected.

When the government was found guilty of infringing the European directive on satellite licences, the government had reimbursed the owners. The same principle applied in the car registration case.

Dr Muscat branded the government as "a euro-sceptic in this case" because it was dragging its feet to prolong the process so as to declare the issue time-barred.

Earlier, Finance Minister Tonio Fenech said the reform envisaged under the Bill radically changed the registration tax, introducing the polluter-pays principle.

He referred to EU Commissioner Laszlo Kovacs' remarks on the vehicle registration tax and said that the Commission was still evaluating.

The government was not morally obliged to set up an automatic reimbursement system. The European Court would not necessarily uphold decisions taken by the Commission.

The government had embarked on the reform because it was overhauling the car registration system to reach EU environmental standards, and not because it felt guilty about infringement of the European directive.

If Malta had known from the outset that there was any form of infringement, the easiest way would have been to increase the rate of registration and remove VAT so that the government would collect the same amount of taxation. The government collected taxes to implement the budget programme.

Mr Fenech said the present reform aimed at spreading taxation on the annual licensing payment in relation to the lifetime of the vehicle. The consultation process on the reform had taken a long time and included all stakeholders.

Opposition Whip Joe Mizzi said transport was an important economic sector, operating hand in hand with the services sector. The opposition appreciated the work being done in the House to enhance the transport sector while reducing the levels of pollution.

It was important to have social justice and complete transparency in what the government was doing. Labour was very much aware of Europe's policies regarding transport, setting up standards not only on vehicles as such but also on ancillaries, such as tyres and air-conditioners.