An EU-wide car taxation scheme for cars that would avoid double registration costs for consumers and favour vehicles emitting less CO2 could be on its way if it gathers support from all 25 member states.
Under a draft directive tabled by EU Taxation and Customs Commissioner László Kovács on 5 July, car registration taxes would be scrapped over a transitional period of five to ten years. The Commission says that the period should allow member states applying high registration taxes - such as Denmark - to adjust their system to preserve their revenues. Nine out of 25 member states - including France, Germany and the UK - currently do not apply car registration taxes.
The Commission insists that the directive will not introduce new passenger car related taxes and does not seek to harmonise tax rates.
The proposal would also put a refund system in place to prevent consumers paying their registration tax twice when moving from one EU state to another or when selling their car abroad. A similar refund system would be introduced for annual road tax as well.
But perhaps the boldest part of the proposal is the introduction of a pollution element in the tax base of both registration and road taxes based on the amount of CO2 emitted per kilometre.
Under the draft, member states are required to derive at least 25% of their total car tax revenues from CO2 based elements by 31 December 2008. The figure will then rise to 50% by 2010.
