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EC Gives Go Ahead To Romanian Car Registration Tax

by Tatiana Smolenska,

17 December 2008

The Romanian government has been given the go ahead by the European Commission to apply a tough new tax on motor vehicles designed to curb the import of cheap and environmentally-unfriendly automobiles.

Last month, the Romanian government announced that it would suspend car registration tax for a year on new vehicles in tandem with a three-fold increase on second-hand vehicles, in part to protect the country's own car manufacturing industry. However, the government had to wait for a response from the European Commission before it could set about implementing the tax hike.

In response to the Romanian government's enquiry into the legality of its proposed car registration tax regime, the European Commission stated in a letter dated December 5 that:

“First of all, it must be noted that there is no harmonization at European Union level in the field of motor vehicle registration taxes. This means that member states may impose these taxes and decide unilaterally upon their levels and methods of calculation, while respecting the principle of non-discrimination."

“Romania may, thus, also keep a motor vehicle registration tax and set its levels as high as it sees fit (in Denmark, for example, a similar tax amounts to 180% of a vehicle's value). In other words, there is no Community rule, which would require Romania to eliminate the registration tax levied on new or used motor vehicles. There is also no Community provision, which would regulate the level of this tax."

“I would also like to inform you that the Commission being aware and concerned of the difficulties that the European citizens face in connection with the car registration taxes levied in different EU member states on July 5 2005 presented a proposal for a Directive which, inter alia, includes the abolition of car registration taxes over a transitional period of five to ten years."

“Moreover, the proposal includes provisions establishing a refund system for registration taxes to be applied on those passenger cars which have been registered in a member state and are subsequently exported or permanently transferred to another member state. The objective of this measure is twofold: first to avoid double payment of registration taxes, and second to charge registration taxes according to the use of the car in the member states concerned. Although the adoption of Community legislation in the field of taxation requires unanimity in the Council the Commission remains hopeful that the member states would be cooperative in removing the remaining tax obstacles in the Internal Market.”

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