Suspend the registration tax, a fast track to encourage the purchase of cars

Vehicle dealerships are just beginning to open their doors in Spain, after two absolutely catastrophic months due to the coronavirus. The Government has already opened the door to an incentive plan for the demand for vehicles, for cars with all kinds of technologies. However, they emphasize, the problem is that the lack of Budgets (those approved by Mariano Rajoy and Cristóbal Montoro in 2018 are still being extended, extended) greatly limits the performance of the administration. The entrepreneurs, however, propose another way, which would allow to avoid this impediment.

The Círculo de Empresarios raised yesterday a document in which, among other stimulus measures, the temporary abolition of the registration tax is suggested until next December. It also suggests temporarily lowering the VAT on new vehicles. Both measures would not only fuel demand but would have a positive effect on reducing emissions, according to the document (in PDF).

Tribute in the pillory

The registration tax is a tax levied on vehicles at the time of purchase based on their _CO2 emissions, and which has already been abolished in most European countries, understanding that it hinders the renewal of the park. The sector has been demanding for years a reformulation of the taxes that affect the automobile in Spain, to tax its use and not its acquisition. This reform should also affect, therefore, the road tax, which is collected annually by the municipalities.

It is also the case that if the registration tax is not reformulated before the end of the year, the tax bill for most vehicles will suffer a notable increase, since on December 31 the extension that the Ministry of Industry approved to minimize the impact of the new WLTP emission regulations ends. At the time, it was calculated that the extension of Industry reduced the increase in emissions for tax purposes to only 5%. But when this “correction factor” ends, the same vehicle will yield higher emission results, up to 20% higher, which can motivate up to 60% of the vehicles on sale in Spain to skip one or more sections.

This Spanish tax framework provides for exemption from the payment of registration tax to vehicles emitting 120 grams of CO₂ per kilometer or less, while those between 121 and 160 grams face the payment of 4.75%; those between 161 and 200 grams, 9.75%, and those over 200 grams, 14.75%.

In March, with dealerships closed for half of the month, registration tax collection sank 68% to €17.37 million compared to €53.75 million in the same period in 2019. If compared to the 38.13 million it raised in February – which has two days less – it represents a fall of 54%.

Source: ABC