JAMA supports a gradual phase-out of registration tax in the European Union

In July 2005 the European Commission published a proposal that would require Member States to re-structure their passenger car taxation systems. A key element of the proposal is a gradual phase out of registration taxes over a transitional period of five to ten years and a parallel switch to annual circulation tax.

This parallel switch to an annual circulation tax would allow Member States to maintain existing fiscal revenues and, as such, would also protect car owners from significant devaluations of their cars. The transitional period would also allow those Member States applying high registration taxes to make the necessary structural changes to their car tax systems. In effect, the Commission’s proposal aims to establish an EU structure for passenger car taxes, but does not aim to harmonise tax rates or oblige Member States to introduce new ones.

A second key element of the proposal is the proposed system whereby a Member State would be required to refund a portion of registration tax, pending its abolition, where a passenger car that is registered in that Member State is subsequently exported or permanently transferred to another Member State. It is also suggested that eventually a similar refund system would be introduced for annual circulation taxes.

JAMA welcomes the proposed gradual abolition of car registration taxes. It would facilitate the removal of existing tax obstacles to the transfer of passenger cars from some Member States to others. It would also assist in creating an effective system for avoiding double taxation and eventually would help the gradual reduction of the gap in vehicle prices that currently exists across the Member States. JAMA believes that, overall, a gradual abolition of registration taxes (with parallel transfer to circulation tax) will benefit consumers throughout the European Union and promote the free movement and transfer of passenger cars within the Internal Market. JAMA supports a system whereby vehicles taxes are related to the actual use of the vehicle in the Member State concerned.

JAMA generally favors a simplification of fiscal provisions for passenger cars in order to enjoy the potential benefits of operating within a single market, and consequently to improve competitiveness of the sector in the EU. Japanese automotive manufacturers strive to produce cars for the entire Internal Market and providing the same benefits across all 25 member States. Moreover, with the reduction or removal of registration tax differentials, Japanese automotive manufacturers would limit the need to adapt pre-tax prices of new cars in the high taxing Member States.