Finance Minister Tonio Fenech told Parliament yesterday the reform in motor vehicle registration tax system should be considered in tandem with the reform of the public transport sector, which would offer a real alternative to private transport with cheaper costs.
Mr Fenech was closing the debate in second reading of the Motor Vehicles Registration and Licensing Bill and Other Laws (Amendment) Bill, which seeks to revise the system and amend the Traffic Regulation Ordinance and the Authority for Transport in Malta Act.
Mr Fenech rejected the notion raised by Alfred Sant (PL) during the debate that the Bill had been born of the EU's charge that Malta had infringed rules through lack of sufficient scrutiny. Before access to the EU, Maltese laws had been well scrutinised and found to be compatible.
When in 2006 the Commission had taken Denmark to court and the latter had decided that VAT should not be paid on registration of vehicles in Denmark, the EC had taken a number of other countries to court on the pretext that they had systems similar to Denmark's. The opposition had pounced on this and said the government was obliged to refund VAT on vehicle registration in Malta following the court's ruling on another country.
In this sense, Dr Sant was wrong to feel the EC had forced Malta's hand. The PN electoral manifesto had mentioned the impending reform, which was now being implemented hand-in-hand with the EC.
The minister said on May 20 the European Court had burst the opposition's bubble when it ruled that Poland had been right to impose VAT on the motor vehicle registration. The system in Poland was very similar to that in Malta.
The court had ruled that the EC had been wrong to sue Poland because of the decision on Denmark, because the two systems were different. This had proved the Maltese government right in saying that the case of Denmark did not bear any resemblance to Malta's. A major difference was that Denmark did not impose VAT on importation but later, and depending on whether a vehicle was used on the roads or just kept as a collector's item. There had already been another case on Holland, where imposing VAT on registration tax had been found to be legitimate.
The minister said the opposition now had a clear court decision to throw light on its repeated allegations of the government having broken the law. Yet the Leader of the Opposition was effectively buying votes when he promised to refund VAT on legislation irrespective of what the courts decided.
The government had been proven right in not accepting the EC's interpretation of the law.
Mr Fenech said this showed how important it was to realise that any EC allegation of an infringement did not mean a country was in error. It was only a way of deciding on a lack of agreement. A government could accept the EC's position or contest for a decision. Even the EU's Attorney General had said no court sentence could be taken as a blanket ruling. The charge of infringement had never said the Maltese system was illegal, but simply highlighted the need to harmonise systems across the EU. What a difference!
Mr Fenech said the opposition's campaign was therefore both dangerous and immoral. It was continually seeking to buy votes while knowing that new car owners had no legitimate right to any refund, which would ultimately cost €50 million out of taxpayers' money.
Was buying votes not corruption? The situation certainly did not augur well for Joseph Muscat's hypocrisy, he said.
(In a statement issued later in the day, the Labour Party accused Mr Fenech "of trying to hide behind legal technicalities so as not to refund the money he had stolen". In a counter-statement, the Ministry denied the accusation and said that the government "collected the tax due and nothing else.)
Introducing the Bill on behalf the Minister of Transport, Mr Fenech said that this consisted of a number of amendments to the legislation in line with the reform started in the 2009 budget to reform the private and commercial vehicles sector. The government had changed the motor vehicle registration tax system from one based on the collection of taxes to one in which important environmental concepts have now been included.
The transport system in Malta contributes substantially towards pollution through emissions and road congestions. The government seeks to have other alternative efficient forms of public transport to reduce the individual's need to use private means.
The first reform in 2009 focused on the smaller range of vehicles, known as M1, and the same was completely changed to one based on the length, weight and CO2 emissions. The reform led to car buyers to seek those vehicles which did not pollute as these had the least amount of tax.
The reform which the Bill would introduce - which, effectively has been in place since January 1 as part of the budget - now focuses on commercial vehicles. These heavy vehicles contribute substantially towards pollution and it was the government's wish that emissions are curbed.
This reform was different from the private cars reform insofar that the commercial sector's would be based on the Euro-standard and not on emissions. The Euro-standard encompassed wider environmental considerations. It affects vehicles in three categories: N1 (3,500 kilos), N2 (between 3,500 and 12,000 kilos) and N3 (over 12,000 kilos). As far as passenger vehicles are consider these are those carrying over eight commuters.
Mr Fenech explained that the previous system impinged on the value of the vehicle and this led to the commercial sector keeping away from buying new vehicles because the tax was imposed on their value. Similar second hand vehicles were cheaper and even if tax was higher, the total net amount was less than the cost of a brand new vehicle.
The proposed change seeks to completely ignore the vehicle's value. Tax would not be tied to the weight, its capacity and the Euro-standard. Choice would therefore be based on the best interest of the environment.
People buying a concrete mixer or a pick-up do so to use it in their work and this would be considered as an investment. The government was careful and while collecting an amount in tax, it sought not to discourage investment in new vehicles or second hand ones which were of a good quality.
The amendments favour newer vehicles but not necessarily brand new ones. Thus, the government was helping the sector to upgrade its fleet as tax on N1 vehicles would decrease by half, especially those falling under Euro 4 or Euro 5 or those manufactured post-January 2006. The latter two categories are exempt of registration tax.
There was also a transitional provision for importers or dealers of vehicles who had unsold stock before the budget and who registered them at a rate different from the one being proposed under this Bill.
Particular attention was also given to vintage, classic and veteran cars. A stronger legal basis was also being given to the classification committee.
Turning to licensing, Mr Fenech said this was being based on the same environmental principles - the older the vehicle, the higher the licence. After the first five years, licence would increase so that at some point, the individual would change the vehicle.
Opposition transport spokesman Joe Mizzi said transport was the fulcrum of the country's economic activity, even if this was not fully realised because of Malta's geographical characteristics. A look at statistics regarding the number, ownership and density of commercial vehicles lead one to consider the importance transport has in the services sector.
The opposition welcomed any move which was economically sustainable to regulate this sector and offer high-quality services. It appreciated past efforts to resolve the difficult problems in this sector, including pollution.
However, the opposition's comments on the reform process had fallen on deaf ears as the government did not heed its appeal regarding safeguards to the economy and the workers.
The opposition was duty-bound to see that the people are protected, that there was social justice, absolute transparency in what the PN government was cooking.
The people are now used to hear opposition members draw the government's attention to certain policies which were negatively affecting both the operators and the users of certain services.
He rejected criticism that the opposition was inciting. When it presented corruption allegations, the government tried to belie the opposition without doing anything about such allegations. It tried to destroy the credibility of whoever made the allegations. He was speaking from personal experience, he said.
Mr Mizzi said that vehicle importers had received a circular from Transport Malta on May 20 which called their attention to the fact with effect from June 1, an adjustment factor of 10 per cent would be applied to CO2 values for vehicles imported from Japan. However, a few days later, they were given counter instructions.
The opposition is conscious that the European Commission is aiming at lower emission standards not only on vehicles but also on accessories which effect the vehicle's efficiency, like tyres and air conditioners.
Mr Mizzi claimed that indiscreetly the government was riding on this policy to increase its revenue, rather than to decrease pollution by introducing a pollution tax based on an outdated principle. As a consequence more direct and indirect taxes would be levied and the economic activity would stall. But the people had not realised what would hit them.
The PN government was promoting uncertainty among consumers and decreasing consumer confidence.
For more than 20 years, the government did not have a serious and comprehensive energy plan to target greenhouse gases. All of a sudden the government was asking the people to participate in the drafting of such a plan.
Which elements and important economic sectors are to be included, he asked, adding that transport should have been one of the main components. How would it tell the people that it must drastically cut down the use of vehicles to meet EU targets?
The government was taking advantage of its obligations towards the EU to increase its revenue by millions of euros to make up for the deficit and other shortcomings. The government was trying to hide behind authorities to burden the people.
Mr Mizzi said that three months ago he had shown that the tariffs were vitiated. The government would derive different revenue from different sectors at the expense of the consumer. He had asked for a social impact assessment of this Bill, but this was never forthcoming, although the minister had agreed and ordered that this study be undertaken. If such a study was made, why was it not presented with this Bill? On suspected foul play: the government was breaking the same legislation it promised to uphold - not to discriminate between different strata of society.
Weaker citizens were being made to pay more than stronger ones.
The rest of Mr Mizzi's speech and the contributions by Ċensu Galea (PN) and Dr Sant will be carried tomorrow.