Select Committee on European Scrutiny Forty-First Report





Commission Communication on the taxation of passenger cars in the European Union — options for action at national and Community levels.

Legal base:
Document originated:6 September 2002
Deposited in Parliament:25 September 2002
Department:HM Treasury
Basis of consideration:EM of 7 October 2002
Previous Committee Report:None
To be discussed in Council:Not known
Committee's assessment:Politically important
Committee's decision:Cleared

The document

  17.1  The Commission's intention in this Communication is to stimulate debate on the policy options for taxation of passenger cars at national and Community level. It has particularly raised issues concerning how the taxation of passenger cars affects the functioning of the single market and the environment.

  17.2  On the single market, the Commission suggests that in the short term general rules are needed on the method of calculating and refunding passenger car registration taxes in those Member States that levy them, to avoid 'double taxation' when passenger cars are transferred between Member States. It says that it might be advantageous in the longer term for those Member States that levy passenger car registration taxes to reduce or abolish them to remove any barriers to the single market.

  17.3  As for environmental issues, the Commission suggests that Member States should make all taxes on passenger cars dependent on the carbon dioxide emissions of the vehicle.

The Government's view

  17.4  The Chief Secretary to the Treasury (Mr Paul Boateng) tells us:

"The UK does not levy a registration tax on passenger cars and its other taxes on passenger cars are already based on carbon dioxide emissions. The Government will examine any proposals for legislation to support the single market carefully to assess if the proposals are necessary and proportionate. Whilst the Government welcomes the sharing of best environmental practice in the field of passenger car taxation and notes that the Commission has effectively identified the UK's policies as best practice in the Community, the Government does not believe that it is necessary to introduce Community wide legislation mandating Member States to adopt any specific environmental approach. Decisions on how to tax passenger cars should continue to rest with individual Member States, subject to the importance of ensuring the smooth functioning of the single market."


  17.5  We note that the Commission presents this document for discussion and does not at the moment propose any particular legislative action. And we note also that the UK does not have a car registration tax and that other UK taxes on passenger cars are already based on carbon dioxide emissions. Nevertheless we are pleased to see the Minister's caution in regard to issues of subsidiarity and proportionality which might arise if the Commission does come forward with draft legislation. We clear the document.

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Prepared 25 November 2002