Government Postpones Decision On Car Tax Changes

05.26.2011 By Gavrila Oana

Romania’s Government has postponed a decision to change the car tax and will first draw up an impact analysis and discuss the matter within the ruling coalition, people close the matter told MEDIAFAX Wednesday.

The Government wants the impact analysis to show how many cars were registered in Romania after the car tax was introduced, how much money the state collected from the tax and how many used cars have been scrapped.

"This is a political matter after all and the decision should be made by the coalition, but only after an impact analysis," the sources said.

Environment Minister Laszlo Borbely said after the Cabinet meeting the "law or ordinance" amending the car tax would be adopted next week.

He added his proposition is to apply a tax upon the first sale of the cars brought to Romania before January 1, 2007, in an amount reduced by 20-30%.

Borbely said the tax cut would be applied to all cars, to avoid discrimination.

A government document obtained by MEDIAFAX last week showed the Executive was considering charging the pollution tax upon the first sale of cars imported before July 1, 2008, but in an amount reduced by 30%, and refunding part of the tax already paid by owners, in installments over several years, to avoid returning EUR750 million all at once.

Another option considered by the Government was turning the pollution tax into a tax payable yearly by all car owners.

The current car tax system will be changed, following a judgment by the Court of Justice of the European Union, which found the tax in violation of community legislation, as it discourages the sale of used cars from other states to Romania.

The judgment was issued in response to a question by a Romanian court hearing the case of a Romanian national who bought a used car from Germany in July 2008. He paid the pollution tax when registering the car in Romania and complained that it is charged only on imported used cars and not other used cars already registered in the country and then resold.

To clarify such situations, the Government has drafted several versions of the tax.

One version says the car pollution tax will be charged upon the first sale of cars already registered in Romania when the tax was introduced (July 2008), but reduced by 30%.

Another version considered by the Government says the tax would be payable for cars already

Another version considered by the Government says the tax would be payable for cars already registered before July 2008 (with no mention of the first sale), but the tax would be lower and the difference paid as of July 1, 2008, would be refunded.

The difference would have to be returned over several years, since "the repercussions on the Environment Fund's budget would be 'overwhelming'," says the document, pointing out that as much as EUR750 million would need to be refunded.

The last version analyzed by the Government entails turning the pollution tax charged upon the car's first registration into a pollution tax payable yearly by all car owners, separately from the property tax. The Government acknowledges that individuals who have already paid the tax would need to be exempted.

This option comes presents certain administrative challenges: some taxpayers have received refunds through court decisions, but a database of cars for which the tax has been calculated/paid/refunded does not exist.

At the moment, there are more than 40,000 pending court cases concerning the pollution tax.