MEPs say: tax cars on pollution, not on registration

Publication date: 05 September 2006

MEPs have backed plans to scrap passenger car registration taxes throughout the EU. They adopted a report by 385 votes in favour to 139 against with 109 abstentions saying annual circulation taxes should be used instead, and that these should be linked to the level of pollution produced by the car. MEPs stressed that the directive should not prevent governments from exempting vintage cars from road taxes.

Car registration taxes vary widely across the EU from 0 to 180 per cent of the pre-tax price of a car.  According to the Commission, this distorts the internal market, is administratively complex, encourages tax avoidance – and can often mean people buying a vehicle in one Member State then moving it to another have to pay twice. To solve these problems, the Commission has proposed a directive (COM(2005) 261) to phase out registration taxes over ten years and replace them with Annual Circulation Taxes linked to the carbon dioxide emissions of the car concerned – so the less environmentally damaging the car is, the less the owner has to pay.

com2005_261_taxation.pdf (218 KB)
 

By approving the report from Karin Riis-Jřrgensen MEP, Parliament backs the Commission’s general approach, though it says that the environmental aspect should be more broad, with the level of tax linked to fuel efficiency and pollutant emissions as well as carbon dioxide. MEPs also note that the changes should be revenue neutral.
 

Next step
As will most matters concerning taxation, Parliament's role is consultative - the final decision must be taken unanimously by the Council.

Related News Items:
- Car taxes: the less I pollute, the less I pay (21 June 2006)
- Commission proposes abolition of registration taxes (5 July 2005)

For more information:
- FIA position paper
- FIA press release

press_release_car_taxation.pdf (102 KB)