Car registration tax to be phased out
Costly car registration tax is to be phased out over the next decade in a bid to ensure a true EU single market for vehicles, it was revealed today.
European Commissioner for Taxation, Laszlo Kovacs, admitted the Irish Government was strongly against the elimination of the revenue-generating Vehicle Registration Tax (VRT), as well as any attempts to harmonise corporate taxes across the EU.
On car taxes, Mr Kovacs said: “The idea is to eliminate in a period, not in one step, of five to 10 years, to eliminate the registration tax.”
Mr Kovacs said 16 EU member states operated VRT taxes varying from a couple of hundred euro to thousands.
“For the car manufacturers it results in a very, very fragmented market. They simply cannot benefit from the single market, with 450 million consumers, in the case of the car industry, in the case of the car market it simply doesn’t function,” he said, as he prepared to meet Finance Minister Brian Cowen to discuss the issues.
But Mr Kovacs said rather than completely removing the registration tax it would be integrated with an annual circulation tax so individual governments would not suffer a major loss in revenue.
“Owners of the car would not pay it in a lump sum with the purchase of the car but year after year as a part of the annual circulation tax,” he said.
Mr Kovacs, who said the commission’s proposals on altering vehicle tax were citizen, industry and environmentally friendly, said currently people often faced double taxation on the vehicle if they moved country.
The commissioner said that from 2008 onwards a quarter of the combined car tax would be based on the carbon dioxide emissions of the engine.
Mr Kovacs said the commission had no ambition to propose the harmonisation of corporate tax rates across the EU.
But he said the commission intends to begin working towards a common consolidated corporate tax base to present a legislative framework by 2008.
The commissioner said this would involve harmonising the method of calculating the tax base in EU countries.
“There are too many tax measures which encourage firms to invest and operate domestically rather than in another Member State,” he said.
The commissioner said he did not believe the economic success of Ireland was solely attributable to the favourable corporate tax concessions the country has offered since the 1960s.
“The majority of Member States are supportive or at least open to this idea, while some Member States, including Ireland, have expressed serious reservations,” he said.
“If necessary we will propose the adoption of the common tax base by those Member States who are interested under the enhanced cooperation mechanism because we cannot allow some States to hold others back.”
