With Budget 2009, government unveiled its plans to revise the current vehicle taxation regime. In so doing, the Gonzi administration had a golden opportunity to simultaneously address a number of long-overdue issues related to traffic management and car ownership issues; and though this newspaper has serious reservations on the measures adopted, it must be said that the government’s overall direction was not entirely amiss.
In essence, government’s revision of the car taxation system revolves around two central motifs. The first is the substantial (or so government claims) reduction in registration tax – which, until January 2009, could have been as much as 75% of the total car value, making Malta one of the most expensive countries in the world in which to buy a car. Apart from lowering this tax, and therefore the price of new vehicles, the new system also envisages that vehicles registered after 1 January 2009 are taxed not according to the size of their engine capacity, but rather in direct proportion to the amount of their combined CO2 emissions, among other factors.
The second issue involves the introduction of circulation tax, which will replace the existing road licence system with an alternative method based on CO2 emissions, as well as the age of the vehicle concerned.
Briefly put, the older and more polluting the vehicle, the costlier it will be to run.
On paper alone, the exercise appears to have been fairly well thought out. Ideally we should reach a stage where car owners would be discouraged from keeping on the road their ageing and polluting vehicles, in favour of cheaper, smaller and lower-emitting vehicles; and hopefully, turning to make greater use of public transport instead – currently being used only by an estimated 11% of the population.
And with lower registration tax, we should also see a situation whereby people change their cars more frequently, thus getting rid of older, more polluting cars in favour of newer ones boasting lower emission levels.
This, at any rate, is how it works in theory. In practice, however, it is highly debatable whether the above aims will indeed be achieved, for a number of reasons.
Leaving aside the possibility that government may well have engineered a new environmental problem for future generations – what is to become of all the old, unwanted vehicles, in the absence of sufficient end-of-life vehicle scrap-yards on the island? – most of the problems are entirely logistical in nature.
One immediate issue is that the success of the above systems depends entirely on the existence of a functional, reliable and convenient public transport system – which, for instance, does not suddenly stop operating most of its routes at 11pm, only to resume early the following morning.
This is a vital consideration, because in today’s world, getting from A to B is no longer a luxury, as it may have once been in another age. Mobility is now indispensable to one’s ability to work, and consequently to the nation’s economy. From this perspective, encouraging more use of public transport does indeed make a lot of sense; but only if the service is capable of replacing car ownership as a means of getting around.
However, the sights and sounds we experienced early this summer – when bus, minivan and taxi drivers joined forces for a disgraceful three days of mayhem – serve as a reminder as to how far away we still are from enjoying the type of service we can all rely upon. The government’s handling of the public transport crisis last June was commendable at the time; but more than four months have passed since then, and there is still no agreement on the liberalisation of the various branches of this sector.
It might therefore have been opportune to tackle this festering problem from the outset, rather than introducing an experimental new car taxation regime before ensuring the provision of a reliable public transport service.
But by far the biggest fly in the ointment is that the government’s scheme only works if one has the means to regularly (every five or so years) change one’s vehicle altogether. For the reasons outlined above – i.e., that owning a car is no longer a luxury but a necessity – this system can only be successful if the price of new cars is brought within range of even the lowest-income brackets.
To this end, it has to be said that the proposed reduction in registration tax may be nowhere near enough to make it feasible for the majority of middle-to-low income earners to regularly replace their ageing vehicle with a new one. Add to this the prospect of a new circulation tax, which will in turn make it more expensive to maintain one’s vehicle with each passing year, and one can only question who stands to benefit from the announced tax revision.
The car owner, who will be forced to either buy a new car every few years, or rely on a notoriously substandard public transport system? Or the car importers’ lobby, which will be guaranteed a permanent market for their own products?

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