Governments' exploit second-hand EU car imports to levy taxes

Publication date: 12 March 2009

Drivers are increasingly frustrated at the governments' who are targeting second-hand car imports to unfairly levy exorbitant registration taxes.  The European Parliament's petitions committee heard a number of complaints earlier this year brought by European citizens and their representatives including automobile clubs.

In January, a series of complaints finally arrived at the European Parliament's petitions committee. The most significant was one put forward by Carmen Fanaru from the Romanian Automobile Club (ACR). “A second hand car coming from any other member state can be only registered after paying a tax that is three times higher than that for a new car or for a car that has already been registered in Romania,” Fanaru told MEPs in the European Parliament's petition committee. ACR's petition “0265/2008” has gathered 120,000 signatures against the excessively high tax levied by the Romanian government on first registration of automobiles purchased from other EU Member States. “By maintaining this tax in its current form the Romanian government is in breach of its obligations under the EU treaty,” said Fanaru.

Speaking in front of the EP committee, Fanaru, Vicepresident of ACR's legal Commission, told MEPs that the tax infringes Europe's principal of free movement of goods. She disputed the argument normally put forward by the Romanian government that the tax is “environmental” in that it is based on vehicle pollution. Fanaru explained that the tax is listed under the budgetary heading of “other excise duties” thus making clear its true nature as a “money-spinner”. ACR is petitioning the Parliament to make the Romanian government finally bring its tax arrangements back into line with EU legislation.

Also present at the petition committee was a representative of the Commission, who gave an overview of the case. The European Commission, which scrutinized Romanian rules on car registration taxes in the light of EU legislation, has concluded that these rules did not respect the principle of equal treatment. Back in March 2007, the Commission sent a formal letter to Romania stating that its national rules on car registration tax were “incompatible” with Community law. In November 2007, the Commission moved to the next step in its infringement procedure by issuing a so-called “reasoned opinion” and by formally requesting that Romania modify the contested provisions. In theory, this gives Romania just a few months to notify the Commission that it has changed the law into line with EU legislation. Whilst the Commission does not see Romania's new rules, adopted in April 2008 under Emergency Ordinance No. 50/2008, as contrary to EU law, the infringement procedure remains open.

Hungarian car drivers have also faced excessive taxes on imported vehicles. Petition 156/2005 by Szilvia Deminger concerned the registration fee payable in Hungary for importing cars from other EU Member States. Back in October 2005, the Commission first told Hungary that its Law CX 2003 (amended in 2005) is illegal. The tax was due on new and old cars and was fixed according to engine capacity, type of fuel used and emission standards. Hungarian drivers have complained that the amount of tax does not change depending on whether or not the car to be registered is new or second hand. The Commission is still investigating noting that the Hungarian tax affects imported second-hand cars but not second-hand cars already registered in Hungary. This is despite Hungary losing its case at the European Court of Justice in October 2006.

Car drivers still have to wait the outcome of their petitions as the committee decided to wait until the Commission drafts its final position before closing the petition. But petitioners can take heart from the Hungarian case, where Hungary was forced by the European Court of Justice to refund to  buyers of second-hand cars the part of the registration tax which exceeded the tax charged for similar “home” vehicles already registered in Hungary.

The principle of refunding for the illegal tax may come in handy for Maltese car owners, where drivers on the island, also face steep registration charges. Whilst the Commission adamantly refuses to take action purely on the basis of excessive car registration taxes, Maltese drivers have been paying an illegal registration tax based on the cost, insurance and freight (CIF) value of the car and not the pure value of the car. On top of that, the government saw fit to charge VAT. “The EU said this situation had to change and the government amended the system as of 1 January 2009,” explains Daniel Vella, committee member of Touring Club Malta. “The problem is that car owners who bought a new car after March 2004, when Malta joined EU, will not get a refund on the illegal tax and VAT charged,” adds Vella. “According to the government what was done, was done and everybody stays put. We feel that government should refund these illegal taxes,” concludes Vella. The illegal monies taken from Maltese drivers amount to some EUR 40 million in total.

For more information contact: Caroline Ofoegbu, FIA European Bureau.