A proposal to abolish car registration tax and replace it with an EU-wide taxation scheme based on CO2 pollution won backing from the European Parliament on 5 September.
The proposal, put forward by the European Commission in July last year, is meant to avoid double taxation when citizens move around Europe and create level tax conditions for automakers on the European car market.
"We believe there is strong support for the abolition of registration taxes which give rise to double taxation for European citizens and create fragmentation within the European car industry," said EU Taxation and Customs Commissioner László Kovács when he presented the proposal on 5 July 2005.
Because of disparity in tax levels, automakers are often obliged to produce specific car models, with different specifications (as regards horsepower, diesel etc.) to reduce pre-tax prices, the Commission points out, generating additional costs for the car industry.
"On the whole, taxation is responsible for about 20% of the car price differentials in the EU," the Commission says.
Under the proposal, registration taxes would be phased out "over a transitional period of five to ten years". Member States' revenues would be unharmed if the gradual abolition is accompanied by a parallel increase of other taxes such as annual circulation taxes, the Commission said. In the meantime, a refund system would be set up to avoid double taxation.
