Registration tax doubles on older vehicle imports

Cars with engines below the Euro 3 efficiency benchmark have seen the registration tax more than double this year as part of a little publicised Budget measure.

The change was announced in November by the Finance Minister and covers all vehicles which do not reach the Euro 4 or Euro 5 engine standard, which are the latest efficiency benchmarks in the industry.

The registration tax on a 2001 1.6-litre Renault Mégane worth about €1,900, for instance, went up from about €650 in December to €1,300. Overall, the new regime means registration tax increased by an average of between €100 and €4,000.

The move will deal a blow to second-hand imports, which mushroomed after an overhaul of the registration tax system in 2008.

However, this will all be good news for dealers of new cars, which suffered a serious loss of sales after importation tax was reduced.

A spokesman for the Transport Ministry said the real aim of the increase was to discourage the importation of older, dirtier second hand cars.

In essence, on top of the previous benchmarks to calculate registration tax (carbon dioxide emissions, registration value and particular matter emissions – in the case of diesel engine vehicles) the system will now consider the Euro standard of a vehicle’s engine. The rates applying to Euro 4 and 5 engines remain the same while those for the lower standard engines have gone up.

According to official statistics, last year an estimated 19 per cent of newly registered cars had an engine that was inferior to Euro 4 or 5, seemingly defeating the purpose of the subsidy scheme the government had launched to encourage people to scrap old vehicles.

With an average of age of about 12 years, Malta’s fleet of cars is of the oldest in Europe. The scrappage scheme, which is now in its second year running, gives people who intend buying a new car a maximum of €2,000 or 15.25 per cent off the value of their new car if they scrap their old one.

The car needs to be new and with a Euro 5 engine or better, with a low level of emissions and smaller than a stipulated length.

The original target of the initiative to have 2,000 second-hand cars scrapped was reached in a matter of months and was extended by another 1,000.

In October, this target was also met and the scheme was suspended. It was re-introduced under the last Budget and is targeting another 3,000 cars.