European Parliament Backs Taxing Cars on Emissions and Fuel Efficiency, Not Registration
6 September 2006
Members of the European Parliament (MEP) have backed a proposal to replace passenger car registration taxes throughout the EU with a tax linked to fuel efficiency, tailpipe emissions and CO2.
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% 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 last year proposed a directive 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—the lower the emissions, the lower the tax.
By a vote of 385 votes in favor to 139 against with 109 abstentions, Parliament is backing the Commission’s general approach. However, Parliament says that the environmental aspect should be broader, with the level of tax linked to pollutant emissions as well as carbon dioxide (and, by extension, fuel efficiency). MEPs also note that the changes should be revenue neutral.
As will most matters concerning taxation, Parliament’s role is merely consultative—a final decision must be taken unanimously by the Council of Ministers.
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