Strasbourg, 05/09/2006 (Agence Europe) - On 5 September the European Parliament adopted the consultative report of Karin Riis-Jorgensen (ALDE, Denmark) on the draft directive on private car tax (EUROPE 8984). In compliance with the economic and monetary affairs committee, he supported the general approach of the European Commission's initial proposal to gradually get rid of the private car registration tax in the EU. This suppression would be accompanied by a parallel increase in annual road tax whose tax base will be linked to Carbon dioxide (Co2) emissions.
In a press release Karin Riis-Jorgensen stated, “the car market is not working well and a lot of customers are discouraged by administrative barriers. The stressful and tiring procedure to register one's car in another Member State is hindering the effective functioning of the internal market. Tax policy has to remain a national competency but it would be useful to establish a European tax band for passenger car taxation. She added that, “a common European tax will improve not only how the internal market works but fiscal measures could also help reduce CO2 emissions. If we want to reach the Kyoto Protocol objectives, our CO2 emissions have to be considerably reduced”.
Despite the sometimes contradictory votes, MEPs gave their agreement on the expansion of the field of application of the draft directive. They believe that the annual road tax should not only be linked to CO2 emissions but also to other pollutants such as nitrogen oxides or soot particles. On the other hand they threw out a Greens/EFA amendment calling for the inclusion of new categories of vehicle, such as vans. The amendment aiming to allow Member States to continue exemptions of vintage cars of over twenty years old was approved.
The Commission is proposing to get rid of registration taxes over a 5-10 year period. MEPs agreed to this proposal but rejected the amendment requiring an incompressible 10 year period. Neither did they agree to the 2008 date advised by the Greens/EFA group at which tax receipts generated by the annual road tax linked to CO2 emissions should represent at least 50% of total tax receipts.
The evening before the plenary debate, Lazlo Kovacs, the Commissioner for taxation presented the Commission's proposal by insisting on the neutrality of this proposal on national budgets an the exclusive competency of Member States in setting tax rates. He had indicated the first reaction of Member States to the Council, saying that it was “mixed” and hoped for “strong support from the EP”. Kovacs said that the amendments submitted linking the annual road tax to pollutants other than CO2 could lead to “increased fragmentation of the internal market” in the field of passenger cars and would make finding an overall compromise at the Council more difficult. In a spirit of consensus, he said that he was prepared to accept a transition period of ten years to implement the provisions of the future directive. On the other hand he said that it would be very difficult to include light utility vehicles in the directive's field of application.
At the Council, the chances of adoption of the draft directive at unanimity appear to be holding. Ireland, which generates a significant part of its tax returns via vehicle registration will oppose the legislative proposal, commented an expert close to the dossier. The British, even though the legislative proposal goes in the direction of the system used in their country, are, however, refusing any attempt at European fiscal harmonisation, he added.
In the EU, sixteen Member States are applying the passenger car registration tax. The average cost of a transfer of a car to another Member State is €350. 28% of total Co2 emissions in Europe come from the transport sector. 84% of this percentage comes from road transport alone, half of which are private cars.
Luxembourg Green Claude Turmes voiced his satisfaction in a press statement, “Thankfully, proposals by the German EPP to seriously restrict the tax differentiation between fuel-efficient and in-efficient car…were defeated in spite of heavy lobbying from the German car industry”. British Conservative Jonathan Evans was concerned about what this would mean for vintage cars which “are part of our heritage…I believe Britain's thousands of classic car drivers should continue to benefit from their exemption from road taxes”. The vote went in the opposite direction