A worst case scenario in the current issue over VAT charged on vehicle registration tax would cost Malta €50m, Finance Minister Tonio Fenech said this afternoon.

He stressed however, that it was only the European Court which could declare the imposition of VAT on vehicle registration as illegal - and the Maltese government was sticking to its position that it was not.

Replying to questions, Mr Fenech said that after the European Commission published its reasoned opinion a year ago, the Maltese government had amended the registration tax system - while insisting that it never violated community law. Once the issue complained of had been changed, the commission did not normally proceed with a court case.

However should any individual pursue that direction, the government would argue, as it has done over the years, that no law was broken and this was not a tax on tax - registration was paid by the importer and VAT by the consumer.

He pointed out that the European Court had decided two cases, one against Denmark and one in favour of The Netherlands. Malta insisted that the Dutch case was closest to Malta's situation. And even if the ECJ was to declare the collection of VAT to have been illegal, there was no guarantee it would order a refund.

Earlier, Opposition Economic Affairs spokesman Gavin Gulia has accused the government of playing for time and trying to find a loophole so that it would not need to reimburse Maltese motorists for VAT paid on registration tax since Malta joined the EU in 2004.

Dr Gulia said in a statement that Commissioner Laszlo Kovacs has confirmed that Maltese consumers had a right to sue the governemnt for reimbursement of VAT charged in what Dr Gulia said was 'an abusive manner'.

The Labour spokesman said the government's excuses not to reimburse Maltese motorists showed that the government considered Malta as being only a part-time member of the EU, despite the rights which the people were promised.

The government, he insisted should immediately announce a scheme to refund the people, without recourse to the courts.

The government in a reply said that contrary to what the PL was claiming, the Commission never said that the government had to pay back VAT on vehicle registration charged since 2004. Neither was there any European Court declaration that what the government had done violated community law.

See also:

http://www.timesofmalta.com/articles/view/20090224/local/vat-paid-on-car-registration-tax-has-to-be-reimbursed-european-commission