Car Tax

Car Tax

Car Tax Exemption for Economic Recovery is not Suitable
The government recalculated car taxes and purchase premiums, a first step: Owners of new cars categorised as European emmisions standard class 5 and 6, which will be sold again in the next few years, are exempt from taxes for two years. Those who purchase cars with emissions standards class 4 receive one year free of taxes. Any further differentiation between environmentally damaging and less environmentally damaging vehicles was not possible given the rush to pass these changes - or perhaps just not desired.

One has to be glad that the already finished package based on an appeal from the SPD-Fraction was confined to a lifespan of seven months. Much can be said for the fact that it not once overcame this deadline. Because, here, two objectives were tied together, two problems that one can only solve if one clearly separates them. Strong governmental aid in crisis, and consequent car tax reform.

With a time limitation to finish by the end of June, 2009, the coalition did not succeed in reducing the anxiety of producers and consumers, but rather worsened it.

In order to revive the ailing auto indusry, the car tax is completely unsuitable because the steps are not far enough reaching. For most vehicles it accounts for barely one percent of the vehicle price per year. That ends up at an average of only 175 Euros per year. For car buyers these mini rebates are laughable. Prices and costs of gas provide for the lion's share of costs. The average Golf owner spends 450 Euros per month, all in the course of four years of accruing costs included in the calculations - including purchase price and loss of value. The car tax constitutes barely eight Euros, or estimated at about two tank-ups per year. That's enough to make even the biggest spendthrift seriously question the decision to buy a new car.

The ecological differentiation created by the appeals of the SPD - a one year rebate for all vehicles at Emissions Standard Class 4, two years for those in class 5 and 6 - is much too coarse. At most, anything above 200 grams CO2 per kilometer would be too much for each Euro of subvention: such vehicles should be penalised, not supported.

In Place of Small Reforms: One Bold Reform with Six Elements
The government did not go far enough, even in their second attempt. The fainthearted "ecologicalisation" of car taxes through consideration of CO2 output as a base measurement is insufficient for a real restructuring of incentives. In truth it involves ambitious reforms with the following elements: