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EC to investigate registration tax

Car registration taxes have come under renewed attack from the European Commission, which believes they should be reduced or scrapped in order to improve the movement of cars within the European Union.

The EC claims registration taxes are an obstacle to consumers purchasing cars in other countries in its latest strategy document. It recommends they should be phased out over a transitional period of five to 10 years and replaced by higher annual road and fuel taxes.

Ministers also want to put greater emphasis on environmental objectives by relating taxes to CO2 emissions - currently the UK is the only member state to do this.

“I am determined to tackle the tax obstacles individual citizens and car manufacturers face within the Internal Market arising from 15 different systems of car taxation within the EU,” says taxation commissioner Frits Bolkestein.

“All too often people have to pay through the nose when they move a car from one country to another.”

Bolkestein estimates that about 20 per cent of European car price differentials are due to the different tax levels. He is confident prices would begin to harmonise under his proposed new structure.

The SMMT cautiously welcomes the discussion. “Tax harmonisation will remove the difference in cars prices and UK motorists shouldn't be paying more for their cars than consumers in other countries,” says head of communications Al Clarke.

“But it's a complex debate and we don't want a system that would penalise business. Governments would still need to get that revenue from somewhere.”

The suggestions have now been submitted to the council of ministers and the European Parliament for consultation. The next stage is for the EC to draw up proposals, but a spokesman admits it will be a lengthy process before any rule changes are agreed.

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