NEWS | Wednesday, 09 March 2008

Car sales slump bad news for public coffers

Motor Fair postponed indefinitely

David Darmanin
The pending car registration tax reform has resulted in what is probably the worst slump in car sales witnessed over the last decades.
“Showrooms are empty,” a person involved in the industry said, while a spokesperson for the The Malta Fairs and Conventions Centre (MFCC) confirmed that the date set for the Motor Fair has been postponed indefinitely.
On its part, the Ministry of Finance does not yet have a position on whether targets set for revenue generated from motor vehicle registration tax will be affected by the end of the 2008 budgetary period.
Further to a complaint filed by MEP Joseph Muscat, the European Commission has called on Malta to review its considerations on levying VAT on imported cars, while it has pronounced its disagreement to minimum thresholds set on second hand cars imported from the EU.
Meanwhile, the government is drawing plans on how to modify the vehicle tax regime into a ‘polluter pays’ model, whereby the car tax due would increase in accordance to how much pollutant a vehicle emits.

Finance Minister Tonio Fenech stated in the Sunday Times that details on the reform are due to feature in the pre-budget document – traditionally issued in June. A consultation process would follow and any changes would possibly be implemented later on in the year when government presents its budget for 2009.
Sources involved in the vehicle importation industry told this newspaper that what the government seems to be planning is a system whereby ultimately, the cost for a new car remains the same. “The difference is that the equivalent to the tax amount is paid in a form of emissions tax over a period of years,” a source said on condition of anonymity. “This is of course discouraging potential car buyers as it doesn’t take a genius to realise that staggering payments over a span of time is more convenient.”
Asked to explain how bad the situation is, he said :“The situation is still quite fluid. The showrooms are empty, that’s how bad it is.”
The current situation is probably one of the reasons why the Motor Fair, normally held in March, has been postponed.
Contacted by Business Today, the MFCC curtly said that the date set for the Motor Fair has been postponed. Asked whether a new date has been set, the spokesperson said “no, there is no particular date.” Asked what the reason for such a postponement is, the spokesperson said: “even if they knew here, they would surely not tell me.”
Other attempts were made to contact MFCC offices for a reply, but to no avail. Attempts to contact MFCC chairman Adrian Bajada proved futile.
In 2006, the exchequer’s revenue from car registration tax amounted to €50.7 million, while an approved estimate for 2007 set the target at €54.7 million. This year’s estimate is that of €49.3 million. It is unlikely that the target will be reached by the end of the 2008 budgetary period given the circumstances.