Kovács seeks support for green car-taxation regime

By Anna McLauchlin

Date: 16/06/05

Aides to Taxation and Customs Union Commissioner László Kovács will today (16 June) seek support from other commissioners' teams for new rules on overhauling EU taxes for passenger cars.

The rules - to be laid out in a communication that could be adopted by the College of Commissioners next week - would scrap registration taxes in favour of a circulation tax based on carbon dioxide emissions, but it needs unanimous support to fly.

Kovács hopes to put an end to the current situation whereby a consumer who buys a car in one member state and then takes it to another could be subject to double registration taxes. As a result, the proposal suggests phasing out registration taxes across the EU within ten years.

But the commissioner also wants member states to go further and base the circulation tax, which would replace registration taxes, on the amount of carbon dioxide produced by the vehicle.

"At least 50% of tax revenue should be based on CO2 emissions by 2010," said a Commission official.

As it stands, the UK is the only member state to apply a circulation tax based on carbon emissions. The other member states have different systems, for example basing their tax on the engine power or weight of the car.

Jos Dings, from transport non-governmental organisation T&E, said that he would welcome an emissions-based tax.

"If we are going to have car taxes anyway, why not use them to reduce carbon emissions?" he asked.

But Dings warned against a tax based on the proportional amount of emissions alone, as the difference could be so marginal that people might begin to buy bigger, dirtier cars.

"The move should be strong enough to have a meaningful effect on consumer choice," he said.

In an open consultation over 90% of respondents, most of whom were private individuals, said that there was a need to address both double registration and the environmental aspect of car taxes.

But the proposal is subject to approval by the commissioners before it can be adopted and so far there has been no consensus.

Cabinet chefs will review their positions today before deciding whether to adopt the communication on 22 June.

A British official said that the UK, though usually hostile to any tax harmonisation, was "cautiously sympathetic" to the idea as it already imposes a similar tax nationally.

But other countries with high registration taxes, such as Denmark, are likely to oppose it.

Danes are already embroiled in legal proceedings with the Commission over its passenger car tax and the European Court of Justice is expected to announce its decision today (16 June).

At the moment anyone moving to Denmark has to pay the same level of registration tax on their car, despite the fact that under EU law cars are supposed to be exempt from tax when someone takes their personal belongings to another member state.

Article reports on plans of European Commissioner for Taxation and Customs Union, László Kovács, for new rules on overhauling EU taxes for passenger cars. The rules would scrap registration taxes in favour of a circulation tax based on carbon dioxide emissions.