Cars bought under the new tax regime will be subject to a lower registration tax upfront in most cases, but will face a higher annual road fee under the government's plans to revise the system.
A new annual 'congestion circulation' tax will replace the road licence fee, though a portion of the tax which is paid up front will remain, sources close to the government told The Sunday Times.
The revision of the system is clearly intended to incentivise the purchase of smaller, low-emission cars, while owners of bigger fuel guzzlers are likely to fork out more in tax.
Sources said that under the proposed system new cars will be subject to a higher road licence fee - (currently around €70) - which will be Co2 based and linked to the age of the car. All other cars on the road will remain under the old regime.
The government is also expected to introduce a system of credits whereby the 'extra' registration tax paid under the old regime for the cars purchased this year will be given as credit on the annual emissions charge levied under the new regime.
The Sunday Times has learnt that over the past days the government has met with representatives of car importers and second-hand car dealers to receive feedback on the new proposed system.
Overall, the discussions appear to be positive though the government is still finalising some technical aspects of its proposal before implementing the new system.
However, there are indications that the government would like to introduce the new regime before the summer recess.
Under the proposed system, a tax will still be payable upfront, based on the Co2 emission levels of the car (applying the polluter pays principle - the higher the emission the higher the percentage of tax on the value of the car) and the size of the car (bigger cars will be paying more tax than smaller cars, which reduce congestion and take up less parking space).
However, it is expected that some cars will cost more than they do today.
Car importers recently appealed to the government to announce its vehicle registration tax revision measures without delay in order to stem what they described as a dramatic fall in sales.
The European Commission has sent a formal request to Malta to amend the tax regime on the grounds that the minimum thresholds imposed on second-hand vehicles imported from the EU are discriminatory. It also objects to VAT being levied on the tax.
Vehicles are currently taxed between 50 and 75 per cent of their value, depending on engine capacity, and are subjected to 18 per cent VAT on the amount of registration tax payable, making cars sold in Malta among the most expensive in Europe.
The Nationalist Party electoral programme had promised a review of the tax system to make it more environmentally friendly.
Finance Minister Tonio Fenech had made it clear that the government wanted to continue addressing the element of congestion, underlining that it was not in the national interest to double the number of cars purchased.
However, contrary to some reports it is understood that the government has no intention of introducing a parking charge.