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European tax harmony achievable in 10 years

Plans by the European Union to harmonise car taxation levels in member states could bring new car prices into line across the continent within a decade.

A public consultation by the European Commission on proposals to gradually reduce levels of car sales and registration taxes over a period of 10 years, replacing them with fuel taxes and annual road taxes linked to carbon dioxide emissions, is due to end next month.

Currently there are 25 separate registration tax systems for passenger cars in the EU, the operation of which leads to issues such as distortion of car prices from country to country and double taxation for consumers who have registered a vehicle in one member state then permanently register it in another.

Research by Pricewaterhouse-Coopers and eurocarprice.com shows that pre-tax prices of cars in the UK are 8% higher than the average for Western Europe and 10% higher than the average for the Euro currency zone. Once registration tax is added, car prices in the UK are still 5% higher than the EU average.

The European Commission believes creating a level playing field would bring increased competitiveness and higher employment in the motor industry, and would benefit manufacturers by enabling them to produce cars with similar specifications for the entire EU and benefit from economies of scale.

“The car industry will no longer need to adapt pre-tax prices of new cars in the high taxing member states if registration tax differentials disappear,” the report says.

The SMMT agrees. “This move would not harm consumers in terms of offering greater clarity if it happened. We are broadly supportive of it,” says a spokesman.

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