Road tax should be based on car emissions, says EU

“I am determined to tackle the tax obstacles individual citizens and car manufacturers face within the Internal Market arising from fifteen different systems of car taxation within the EU,” says Taxation Commissioner Frits Bolkestein. “We also have to try to ensure that car taxes are more clearly geared to meeting the Community’s environmental objectives.”

The European Commission is consulting on ways to achieve environment targets while restructuring road taxes across Europe. At present, EU countries vary in the types and levels of taxes imposed on car owners. Ten countries have registration tax, ranging (in 1999) from an average of €270 in Italy to €15,600 in Denmark. All countries have annual road tax, starting at around €30 per vehicle per year in Italy to €460 in Denmark. Although the Commission isn’t calling for a harmonisation of prices, it is suggesting that both registration tax and annual road tax should be based entirely or partly on CO2 emissions. Currently only the UK applies a CO2 based road tax.

The European Council and the European Parliament have targets to reduce CO2 emissions from new cars to 120 grams per kilometre by 2010. The car industry is aiming for 140 grams per kilometre, leaving a gap of 20 grams that may have to be plugged with financial incentives, says the Commission.

The Commission recently proposed a standardisation of diesel tax across Europe (see related story).