EU tax commissioner wants to phase out VRT

Costly car registration tax is to be phased out over the next decade in a bid to ensure a true EU single market for vehicles, it was revealed today.

Speaking in Dublin today, European Commissioner for Taxation Laszlo Kovacs said the Irish Government was strongly against the elimination of th

e revenue-generating Vehicle Registration Tax (VRT), as well as any attempts to harmonise corporate taxes across the EU.

But Mr Kovacs said the goal was to eliminate the registration tax - but that it would take place over a period of between five to ten years.

Mr Kovacs said 16 EU member states operated VRT taxes varying from a couple of hundred euro to thousands of euro.

"For the car manufacturers it results in a very, very fragmented market. They simply cannot benefit from the single market, with 450 million consumers, in the case of the car industry, in the case of the car market it simply doesn't function," he said.

Mr Kovacs, who is meeting Minister for Finance Brian Cowen to discuss the issues, said rather than completely removing the registration tax it would be integrated with an annual circulation tax so individual governments would not suffer a major loss in revenue.

"Owners of the car would not pay it in a lump sum with the purchase of the car but year after year as a part of the annual circulation tax," he said.

Mr Kovacs people often faced double taxation on the vehicle if they moved country. The commissioner said that from 2008 onwards a quarter of the combined car tax would be based on the carbon dioxide emissions of the engine.

Mr Kovacs said the commission had no ambition to propose the harmonisation of corporate tax rates across the EU.

But he said the commission intends to begin working towards a common consolidated corporate tax base to present a legislative framework by 2008. The commissioner said this would involve harmonising the method of calculating the tax base in EU countries.