Commissioners target car taxes

The European Commission is about to launch a two-pronged offensive on obstacles to the free movement of goods in the car sector by tackling arcane registration tax regimes.

Registration taxes are the fees paid by car-owners to national administrations for official identification purposes. Günter Verheugen, commissioner for enterprise and industry, wishes to dismantle single market barriers in the form of higher fees levied on imports of used cars.

Countries using this method to restrict the import of second-hand cars are to be given a stern warning by Verheugen next week (13 February). In an ‘interpretive communication’, he will lay down the law on unacceptable tax regimes, clarifying existing EU rules.

Obstacles can also come in the form of complex and costly formalities. The Commission has already launched legal action against Austria, Cyprus, the Czech Republic, Hungary, Luxembourg and Poland for allegedly obstructing imports.

Registration taxes in Poland, which was flooded with cheap used cars from Germany after joining the EU in 2004, can be as high as 65% of the purchase price paid by the importer. Poland is currently the subject of a Commission investigation.

The European Court of Justice ruled last month that the Polish taxes were illegal. The case was brought by a Polish consumer who requested a reimbursement of duties.

"There is no added value on second-hand cars, so there should be no extra tax on second-hand cars," said Philippe Casse, spokesperson at D’Ieteren Auto, a Belgian distributor of new and old cars. In parallel with Verheugen’s drive, László Kovács, the commissioner for taxation and customs union is seeking to introduce a green tax on motorists in a bid to clear single market anomalies.

By introducing a green tax levied on carbon dioxide emissions, Kovács is seeking to abolish registration tax laws that vary widely from country to country.

Kovács’ principal aim is to eliminate double taxation, which occurs when car-owners moving across borders are charged tax a second time. He wants to simplify car tax rules, not only removing possibilities for double taxation, but also dismantling obstacles faced by independent importers of used cars.

Kovács’ measure will be put to finance ministers in the spring, but the tax is likely to meet with stiff opposition from member states, which are extremely protective of their fiscal laws.

Should Kovács fail to introduce the green tax, Verheugen would be left with no option but to take further legal action against offending countries.

"It’s a case of the Commission trying to apply single market rules in any way they can," said Marc Grevin, director of legal affairs at ACEA, which represents European carmakers. "Tax is a matter of national sovereignty, but they try, in this case, to do the small things they can do."

Recent EU entrant Romania, which also imposes discriminatory duties on used cars, is moving fast to ensure its system is in line with EU single market rules. Car dealers enjoying a brisk trade in imports of new cars are vexed at government plans to impose a blanket tax on all cars.

"They will not eliminate this tax, but normally they want to be in agreement with the EU also," said a Romanian diplomat. "That means that all [owners of all] cars registered for the first time will have to pay the tax."

The European Commission is about to launch a two-pronged offensive on obstacles to the free movement of goods in the car sector by tackling arcane registration tax regimes.