ECONOMY

Drivers offered car tax carrot

The government is likely to table in Parliament tomorrow a bill of amendment reducing the registration tax payable on purchases of new cars and motorcycles in a bid to boost sales in the sector. The cut, a 50 percent reduction of the registration tax on vehicles of all engine sizes, will apply for the next four months and cost the government an estimated 200 to 300 million euros. The measure might also be made applicable to used cars in order to avoid any opposition from the European Commission on the grounds that the measure might distort competition in the market, according to a government source. The tax cut will translate into savings of up to some 4,400 euros for motorists with an eye on the higher end of the market. For example, a new Mazda, with a 2.3-liter engine, will have its price tag cut from 36,490 euros to 32,090 euros. Savings on a medium-sized vehicle will reach some 1,250 euros while the benefit for a smaller car will be 750 euros. Industry sources do not expect trading activity to pick up significantly as a result of the measure, saying that it will only benefit those buying a new car for the first time. The value of secondhand cars will drop significantly, perhaps even by more than the gain to be made through the acquisition of a new vehicle, said a source. The conservative government had reportedly been looking into offering greater financial incentives for motorists that trade in their car for a new one but dropped the plans due to the enormous strain it would place on the state budget. Used-car dealers have expressed concern about the impact the tax cut might have on their business activities. Economy and Finance Ministry sources said the government is also considering temporarily dropping a transfer tax applicable on the sale of used cars for a four-month period to bolster the sector which is calling for more substantial means of support.