Baseless claims on vehicle taxation

Passenger car taxation in Malta is meant to restrict the Maltese citizens' spending on passenger cars in order to limit the outflow of currency from the Maltese economy.

Until a few years ago, pollution, air quality and the environment were not part of politicians' vocabulary. To claim that registration tax (1994) on cars had environmental aspirations is as baseless as the denial that the black dust which had settled in the south of Malta had anything to do with switching off the Marsa power station precipitators.

During the parliamentary debate on commercial vehicle taxation, the Finance Minister was reported to have said that "the previous system impinged on the value of the vehicle and this led to the commercial sector keeping away from buying new vehicles" (June 10).

Both the old and the new passenger car (PC) taxation systems impinge on the car's value, specific systems meant to "keep away buyers from getting new vehicles". The increasing market share of used car imports confirms this. Such systems have burdened Malta with the EU's third oldest road vehicle fleet.

A reported understatement: "heavy (commercial) vehicles (CV) contribute substantially towards pollution and it was the government's wish that emissions are curbed". Commercial vehicles' pollutant emissions are more than "substantial". They are overwhelming! Their share of road traffic emissions are 90 per cent for particulates, 77 per cent for NOx and 56 per cent for SOx.

Fiscal incentives (lower costs) for the commercial sector were deemed necessary to reduce this overwhelming pollutant source. Paradoxically, arguments brought forward in 2008 to justify increases in PC taxation (annual circulating fees [ACF] and some registration tax [RT]) quoted a grossly-inflated pollution share from cars (see below).

Till some months ago, both the Malta Environment and Planning Authority and the authorities persistently claimed that "cars" were the major cause of poor urban air quality and overall road traffic emissions. In spite of this misconception, when the "new" PC taxation was being created in 2007-2008, the system continued to impinge on the value of passenger cars and maintaining the original function of "keeping away buyers from getting new vehicles"!

The "new" PC taxation regime was devised during 2007-2008 when the authorities were misled on, or manipulated, the pollutant share of road vehicles with data that was eventually included in the older and grossly erroneous pollutant emission inventory. At that time, the government/transport authority spin kept accentuating the particulate emissions contribution by PCs. Mepa's emissions inventories available in 2008 implicated PCs as contributing 59 per cent of road traffic particulates. The government justified the new car tax regime on this false pretence.

On February 15, this year, Mepa uploaded its revised and corrected pollutant emissions inventory, revealing that PCs contribute nine per cent of road traffic particulates while CVs spew out 90 per cent. The higher fiscal burden (ACF) imposed on the owners of PCs on January 1, 2009 is based on false, possibly manipulated, environmental data. Commercial vehicle emissions could have been suppressed in order to justify a castigating car taxation system with the pretext of "environmental" concerns.

Commercial vehicles are unequivocally implicated as the major polluters and this fact is now paradoxically being used to justify the freebees being given to operators of CVs. The lower ACF and zero or lower registration tax (Euro IV and V emission standards) of commercial vehicles is much lower than that of passenger cars. Two weights and two measures!

In 2009, estimated revenue from annual circulating fees (ACF) for PCs was €35 million. ACF from commercial vehicles approached €9.5 million (mostly tax deductible). Owners of PCs are paying 36 times the rate paid by commercial vehicles for particulate emissions, 13 times higher for NOx, five times higher for SOx and 2.5 times for CO2. Next time the authorities want to quote the Polluter Pays Principle they should skip it altogether. It makes a better impression with the non gullible.

ACF revenue from passenger cars in 2009 was at least €11 million more than that collected from PCs road licences in 2008. This excess revenue was likely pre-determined to compensate for the expected shortfall from registration tax revenue and the removal of VAT on registration tax in 2009. Expected revenue in 2009 was likely based on 2007/2008 vehicle registrations; 8,700 passenger cars and 900 motorcycles.

Of the estimated €55 million in registration tax and a further €10 million VAT on registration tax collected in 2008, no loss of revenue would have been acceptable for 2009 and the tax regime determined accordingly. In 2009, PC registrations however rose sharply to 15,250.

Surely there was a windfall in revenue from registration tax in 2009, conservatively estimated at an extra €30 million. This windfall, paid out of 15,000 car owners' pockets, is surely financing the freebees offered to commercial entities to change their old vehicles.

The minor polluter footing the bill of the major polluter! The polluter doesn't pay.

Albert Bezzina
08.07.2010
The Times of Malta