July 2005
OPPORTUNITIES FOR DIALOGUE
Passenger car taxation
In early July, the Commission adopted a proposal on passenger car taxation which is designed to eliminate obstacles to the free movement and transfer of cars within the Internal Market but which is also intended to promote environmental sustainability. The proposal does not require Member States to introduce any new passenger car related taxes and it would not harmonise tax rates - it only aims to restructure car-related taxes, i.e. car registration taxes (RT) and annual circulation taxes (ACT) – with the objective to abolish RT before 2016. [see note at end].
One of the main reasons given for the proposal is that individuals moving cars within the Internal Market end up making double payment of RT, face administrative procedures and extra costs associated with administrative delays. Some Member States exempt cars from RT when the car is moved as part of a change in residence but this is also subject to a lot of administrative requirements. When cars are moved, but not as part of a change of residence, double payment of RT often occurs. Additionally, the wide differences in RT systems has had an impact the car industry's ability to achieve the benefits of operating within the Internal Market – to the extent that the industry is often obliged to produce specific car models, with different specifications (as regards horsepower, diesel etc.) to reduce pre-tax prices, in particular when vehicles are destined for high taxing Member States. Conversely, because of the differences in tax levels, the car industry often adapts its pre-tax prices according to the level of taxation in Member States. Pre-tax prices are in general lower in those Member States with a high RT.
So the Commission wants to gradually reduce and replace RT with parallel increases of revenue from ACT and (where necessary) other taxes. The Commission wants this because of the problems RT cause and because ACT relate to the use and permanence of the vehicle in one country. Additionally, ACT are much more stable than registration taxes.
However, the proposal also requires Member States to derive at least 25% of their total tax revenue from registration and annual circulation taxes from the CO2 based element of the taxes by 31 December 2008 and to increase this figure to 50% by the end of 2010. While tax revenue is meant to be remain neutral as a result of this proposal, historic vehicles emitting higher levels of CO2 could be disproportionately affected. FIVA made a representation to the European Commission in September 2004 on the issue (see update of September 2004) when FIVA made clear that:
? car taxation is of interest to owners of historic vehicles because of the variety of approaches to the taxation of historic vehicles across the EU and because historic vehicle enthusiasts often purchase vehicles in a country other than their country of residence – not for financial reasons but because of the availability of vehicles.
? taxation based on environmental specifications (CO2) would prove disproportionate to historic vehicles because their circulation mileage is generally far lower than that of modern vehicles thereby compensating for any marginally higher emission levels.
This proposal does not reflect FIVA’s concerns. However, a view in the relevant department of the Commission is that historic vehicles are not "passenger cars" in the sense of this proposal, that there is little opportunity for this to be reflected in law based on the current text and that decisions on how historic vehicles will be taxed under this new proposed system will be passed down to the member state – a fact supported by the great variety of historic vehicle taxation in the EU at present. FIVA is taking discussions forward with the UK Presidency of the Council – which will be managing Council deliberations on this proposal in the next six months.
Daytime Running Lights and Blind Spot mirrors fro commercial vehicles
Both of these anticipated proposal are still with DG TREN awaiting approval and their adoption will be preceded by the publication of the Commission’s mid-term road safety review in September.
INFORMATION
Further to last month’s report, it seems that Environment commissioner Stavros Dimas has successfully defended his proposed environmental policy and as a result, the Commission will release thematic strategies on seven environmental themes between September and December.
The debate was initially stalled because there were concerns that new environmental rules would cost too much and conflict with Commission President Barroso's overriding aim of boosting jobs and growth. An estimate that the proposed new air quality strategy (Café) will cost €12bn per year to implement is thought to have triggered the process. During the meeting, enterprise commissioner Günter Verheugen said that existing EU air pollution rules already cost the bloc €18bn per year.
Apparently some of the other commissioners who were critical of the strategies included Peter Mandelson (trade), Charlie McCreevy (internal market), Andris Piebalgs (energy) and Jo Borg (fisheries). Café is now likely to be the first strategy adopted – probably in September. The others address pesticide use, the urban environment, resource use, waste recycling and soil management.
As previously reported, the programme is expected to merge the four existing laws and air quality limit values contained in the laws will not change but also it might introduce controls on fine particulate matter (PM2.5). However, the proposal will probably advocate a two-phase strategy - first by requiring better monitoring of PM2.5 and then by setting air quality limits. The most controversial part of the Cafe package will be the level that the Commission chooses to propose for reducing levels of five key air pollutants - sulphur dioxide, nitrogen oxides, volatile organic compounds, ammonia and PM2.5 - by 2020. However, there are indications that DG Environment now thinks that Café should not contain fixed EU-wide air pollution targets and that targets set by Café for air pollutants sulphur dioxide, nitrogen oxides, volatile organic compounds, ammonia and particulates should take account of differing national and regional climatic conditions. This new view is based on the recognition that high pressure, together with a lack of wind and rain, made it much harder for parts of Italy to meet air pollution targets than, for example, Scandinavian countries.
New vehicle emission limits
The European Commission has launched a consultation on the next round of EU car emission standards – in preparation for proposing "Euro V" standards for new vehicles by the end of the year. They should enter force by mid-2008, replacing Euro IV limits that took effect in January. The Commission is recommending that all new diesel cars be fitted with a filter to limit particulate matter (PM) emissions to 5mg per kilometre (mg/km), down from 25mg/km under Euro IV. The figure tallies with its proposal in January of 5mg as the threshold for incentives to fit filters before 2008. It also suggests a 200mg/km limit for diesel nitrogen oxides (NOx), down from 250mg currently. New petrol cars would have to respect a NOx emission limit of 60mg/km, down from 80mg currently while hydrocarbon (HC) emissions would be capped at 75mg/km rather than 100mg. Additionally the intention is for Sports Utility vehicles – (4x4s) to have to adhere to Euro V, as a loophole which up to now has made it possible for them to be classed as heavy vehicles and therefore meet laxer emission standards, will be removed.
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The FIVA Legislation Commission members are: Geoff Smith, (Chairman); Winfried Kallinger; Svend Aage Tholstrup; Adalberto Gueli; David Davis, Tiddo Bresters, Horst Bruning, Patrick Rollet, and CarlaFiocchi (Secretariat)
NOTE from Jim Whyman: Andrew Turner attached a 26 page PDF file to this e-mail detailing the tax proposal. I have too much respect for trees to sending one automatically, but if you’d like to receive a copy, please ask