Put an end to car tax issue, government told

The head of the European Commission Representation Office in Malta, Joanna Drake, has called for an end to the issue of VAT charges on the registration of cars.

Dr Drake said that the longer the government dragged its feet on the issue, the more money it would have to fork out if it was ordered to reimburse people who paid VAT twice when they bought their cars.

Writing in her blog on the Commission's website, Dr Drake did not spell out exactly what course of action the government ought to take. She was later unavailable for further comment.

She wrote in her blog that, according to the European Commission, the Maltese government should have never slapped VAT charges on the registration of cars, vans and motor cycles.

"The Commission believes this discriminates against cars being imported from other member states. It's as simple as that. The Commission has twice warned the government to mend its ways. The next step would be to go to court," she said.

The issue of VAT on car registration gained momentum a few days ago in a reply given by EU Taxation Commissioner Laszlo Kovaks to a parliamentary question by Labour MEP Louis Grech, who asked whether Maltese taxpayers were entitled to refunds on the VAT they paid on vehicle registration.

Mr Kovacs confirmed that Maltese taxpayers could seek redress over taxes collected in breach of EU law. However, he made it clear this was not automatic and had to be decided by the courts.

The Labour Party (PL) is insisting that the government reimburses car owners who had paid VAT "illegally". Finance Minister Tonio Fenech said the refunds would cost the country an estimated €50 million.

"Ultimately, of course, it is up to the European Court of Justice to decide who is right in the matter. Basically, this is a question of interpreting EU law correctly," Dr Drake wrote.

She explained that there was no EU legislation that regulated motor car registration taxes and that it was up to each member state to decide. Denmark, for example, charged as much as 180 per cent of a vehicle's value in tax. "But the point is this: Tax must not be discriminatory. To levy VAT on the registration tax of cars coming from the EU is viewed as discriminatory."

In the last budget the government took steps to modify legislation to bring it in line with EU requirements. On the other hand, the EU Commission was proposing the complete abolition of car registration fees over a transitional period of five to 10 years.

"Normally, it is better for a member state to decide whether it really has a leg to stand on or not. By dragging feet, things can only get worse. Obviously, the further this squabble is drawn out, the more money one will have to fork out", Dr Drake concluded.