Car importers ‘perplexed’ over hike in annual licence tax

Government is hoping to reap some €55.4 million in annual circulation tax on cars in 2014, even though the last available data for 2012 shows that it has been off-mark on actual revenues from car licences.

In 2011, then finance minister Tonio Fenech estimated that €54.5 million would be paid in car licence tax to the government: the financial estimates presented by Edward Scicluna on Monday shows the actual revenue collected was of €48.5 million - 11% less than expected.

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Labour has now hiked up annual circulation tax for cars with larger engines and higher carbon emissions, and is expecting that it will earn €55.4 million, or €1.4 million than what it is expected to receive this year.

Maurice Mizzi , the president of the Association of Car Importers Malta (ACIM) told MaltaToday he was still unsure at how the higher taxes would impact the industry. "ACIM is still evaluating these measures. I am perplexed. We still have to see how all these measures are going to work out. We hope issues related to second-hand cars will be addressed in the near future."

The ACIM, which imports cars from their manufacturers, has long been at loggerheads with the used car import lobby, which has taken more than half of the car retail market share in the last years.

One such used car vendor, Ron Micallef from Autobahn, a member of the Used Vehicles Importers Association (UVIA) said the increase in car licence was going to affect both new and used cars, but that it was not a "drastic measure".

Car licence tax will be increased for cars with larger engines, but the licences for smaller cars registered from 2009 onwards and with carbon emissions of between 0g/km and 100g/km will not be affected.

Moreover, €3.5 million is being allocated for the refund of VAT on that was charged on both the value and the registration tax component on the price of cars, prior to 2004. 18,000 owners started a class action instigated by the Labour Party, seeking the VAT refund on cars bought prior to registration tax rules being amended in 2009. It is believed the cost will amount to some €50 million.

The refund process is expected to take seven years.

Registration tax of second hand vehicles imported from outside the EU will be reduced if the vehicles' emissions do not exceed 150g/kg and have not been in use for more than eight years.

The tax on the registration of motorcycles with an engine capacity of 250cc or more will be decreased by 25%. Previously, motorbikes of less than 250 cc where exempted from tax.

Another measure in Monday's Budget was an allocation of €600,000 on two years for a car scrapping system. The benefits given will range from €500 to €900, according to the emissions level of the new purchased car. The government will also encourage a shift to auto gas in a separate scheme.