The Minister for Finance Tonio Fenech will be undertaking a review of Malta’s car registration system with the view of replacing the current system with an emissions-based tax, the prime minister told MaltaToday in Brussels.
On Friday Lawrence Gonzi said he had entrusted Fenech with reviewing the system, in response to a question by MaltaToday on what the government was doing to reduce car fleets. The European summit addressed both climate change and energy security, with the heads of EU member states calling on each other to set an example to citizens by reducing energy use in their buildings and car fleets.
But despite EU moves towards an emission-based car tax – which would replace Malta’s hefty registration tax, and instead charge road tax on the carbon dioxide (CO2) emissions emitted by cars every year – Malta had already resisted such changes in its pre-budget document two years ago.
The government has now said it will be placing priority on changing the system.
Under the Slovenian presidency, Friday’s European summit reaffirmed that 2008 would be the year where EU member states would have to obtain firm results. “Last year the EU made firm and ambitious commitments on climate and energy policy; now in 2008, the challenge is to deliver,” the EU’s 27 leaders said.
Brussels wants car registration tax to be completely abolished by 2016, claiming car prices will fall by 10 to 25% if registration tax is cut just by half across the EU. By replacing it with an emissions-based system, the new tax would instead penalise heavy polluters and older cars.
Only two years ago, the government’s 2006 pre-budget document had made it clear it had no intention to implement a CO2-emissions tax, although it had started internal consultation on this issue. Additionally, there was no enthusiasm on the proposal from the British presidency at the time on the new tax.
High registration taxes on car imports keep prices high in Malta: cars to Malta from the EU are taxed at a minimum 50.5% over cost, insurance and freight value. The pre-budget document had stated the proposal to shift tax onto emissions was “not implementable”, claiming a lack of sufficient information on a substantial part of the fleet circulating on the island.
Proponents of the CO2-emissions tax say it makes cars cheaper but also ensures that a younger fleet is kept on the road, therefore ensuring CO2 emissions cause less harm than cars which are over five years old.