EC Asks Ireland To Modify Motor Tax

By Editorial 30 January, 2012

The European Commission (EC) has requested that the Irish government modify its taxation of motor vehicles less than three months old.

The formal request was made in an effort to ensure that Ireland's rules comply with European Union (EU) law. In a statement, the Commission acknowledges the EU Court of Justice's ruling that a vehicle starts to lose its value as soon as it is bought or brought into use. According to EU case law on car taxation, the amount of tax due can not exceed the amount of tax incorporated in the value of already-registered similar vehicles.

However, under Irish legislation, vehicles which are less than three months old or cars with less than 3,000 km on the clock bear the same tax burden as new vehicles. The EC believes this policy to be a discrimination against these vehicles, which it deems proportionally more taxed than new vehicles purchased in the country.

The EU has not harmonized the taxation of motor vehicles, and member states have the right to levy a registration tax, at a rate as high as they see fit, when a vehicle is registered for the first time in that state. This tax can be levied even if the transfer of the vehicle is linked to a change of residence and if a similar tax has already been levied in another member state.

However, EU rules prohibit member states from imposing higher taxes on products of other members than imposed on similar domestic products. This is to guarantee the complete neutrality of internal taxation as regards competition between products already on the domestic market and imported products.

The request takes the form of a reasoned opinion which is the second stage of an infringement procedure. If the rules are not brought into compliance within two months, the Commission may refer the matter to the EU's Court of Justice.

Tags: Individuals | Expatriates | Court | Tax | European Commission | Ireland | Law | Legislation | European Union (EU) | Europe |


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