EU countries to streamline taxes on cars

BRUSSELS – The European Commission proposes the gradual cutting or even abolition of the so-called classification duty on cars in the name of boosting competition, thus creating the prospect of much cheaper car prices in the future. The proposal, by the Internal Market Directorate-General, overseen by Taxation and Internal Market Commissioner Frits Bolkestein, was presented yesterday. The proposal contains the abolition, or drastic reduction of the classification tax within five or 10 years and introduces considerable changes into other taxes on automobiles, taking into account environmental objectives as stated in the Kyoto Protocol. «I am determined to tackle the tax obstacles individual citizens and tax manufacturers face within the internal market arising from 15 different systems of car taxation within the EU,» Bolkestein said yesterday. «All too often, people have to pay through the nose when they move a car from one country to another. We also have to try to ensure that car taxes are more clearly geared to meeting the EU’s environmental objectives.» Given the fact that classification taxes are an important source of revenue for many member states, the Commission leaves it to members to find replacement methods, recommending, however, that any new taxes should affect car use rather than car acquisition. Greece’s total tax revenues from cars are the highest, as a percentage of its gross domestic product, than those of any other country in the EU. They amounted in 1999 to 3.581 billion euros, or 3.29 percent of GDP. The governments are urged to increase their road tax and tax on fuel. It recommends a convergence of road tax rates, in order to encourage citizens to move across EU countries in search of a car. Regarding environmental concerns, the Commission recommends that taxation on new passenger cars be more directly related to their carbon dioxide emmissions. It also recommends a gradual increase in diesel fuel taxation to bring it in line with taxes on gasoline. In the end, the Commission’s primary aim is not to reduce the cost of car ownership and use but to boost competition by introducing greater transparency in car prices. It also wants to simplify things for car manufacturers, who are now obliged to produce many more models than they would like to deal with different taxation systems according to engine size.

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