The government last week presented the ordinance draft replacing the pollution tax with an environment stamp duty. This is the 11th modification of the first registration tax in force since January 1, 2007 also known as the environment or pollution tax. The modification comes after none of the previous versions was in line with the European legislation in force.
Once enforced, the new tax will help imports of second hand cars older than 15 years, for which the tax is now 90% lower. On the other hand, the tax for Euro 3 and Euro 4 cars, which are the most imported cars in the country, will be up to 50% lower for diesel-powered vehicles and higher for gas-powered vehicles.
“The fears about the imports of non-Euro, Euro 1 and Euro 2 cars are ungrounded, because there are few such cars left in the West. We need to pay more attention to the local production and a higher environment stamp duty for the Euro 3 and Euro 4 cars is good in order to protect the investments of Renault in Dacia and of Ford, because Germans, too, took steps to protect their own carmakers. We also need to be interested in Euro 5 cars and at the same time stimulate [buying of] Euro 6 cars with small non-polluting engines and hybrid and electric cars as in the West, Brent Valmar said.
According to the data of Porsche Romania there are 1.5 million cars for sale in Germany, 7% of which are Euro 0 to Euro 2 cars. Most of the cars, 61%, are Euro 5 compliant, while Euro 3 and Euro 4 cars account for 33%.
On the other hand, Constantin Stroe, vice-president of Automobile Dacia, said last week that the significant cut of the tax for old cars via the environment duty stamp would turn Romania into Europe’s junkyard, because Romanians with limited purchasing power will go for cheap old cars.
Porsche Romania data also show that a non-Euro car can be bought for EUR1 to EUR400 or EUR500 in Germany, while the price for a Euro 1 vehicle is EUR300 to EUR800 and EUR500 to EUR1,000 for a Euro 2 one. Valmar says the companies need to discuss with the authorities and convince customers that such cars are in a very poor condition so their maintenance costs more than the price paid to buy them.
He added Euro 3 and Euro 4 cars cost EUR1,500 to EUR8,000 and Euro 5 cars start at EUR8,000.
Brent Valmar also said that the Environment Ministry had given reassurance that there would more checks into the old and polluting cars.
“Non-Euro, Euro 1 and Euro 2 clunkers have to go away naturally and proper technical inspection has to be conducted in traffic to eliminate such cars.”
The environment stamp duty in its current version should be complemented by an annual tax that reflects how much pollution a specific car generates, as the current tax only varies with the engine capacity.
“The pollution tax or environment stamp duty comes with a complementary step in every country – the annual tax calculated in line with the emission level. For instance the annual tax can be paid in full for cars older than eight years and the newer ones be subject to a lower tax. A higher tax on car ownership cannot be implemented in Romania right now because costs and taxes have gone up over a short period of time. Maybe it could implemented in a year or two and announced in good time,” Valmar said.
As for the effects of the environment stamp duty, Dacia officials said the current version of this tax would cause a 50% decline of the individual customer segment compared with 2012, or up to 10,000 fewer cars sold. The Porsche official does not see any negative impact on the market and reiterates his forecast of 70,000 new cars sold this year. On the other hand, the environment stamp duty would lead to an almost 15% decline of second hand car imports.
“We expect about 150,000 second-hand cars to be imported this year from 175,000 in 2012 and new car sales at about 70,000 units again. The market has to grow with the customers’ purchasing power. In time it can return to the 1 to 1 new car to second-hand car ratio of 2011,” Brent Valmar said.
The market was directly affected by the talk about the environment stamp tax in January, with sales expected to be below the 3,400-unit level of January 2012.
The second step that needs to be taken this year is the modification of the clunkers program, Porsche Romania’s boss believes, because last year’s version, which allowed sellable vouchers hurt the car market rather than help it.
He also says that as of 2013, the clunkers program should be announced for several years and allow fewer and fewer vouchers before being ended after a reasonable number of years.
“There is no other such program anywhere else in Europe. We are the last country to run it. We suggest a low number of vouchers and a budget announced from the start, as well as a voucher validity of 30 to 60 days to avoid trading them for profit,” Valmar said.
(English version by Loredana Fratila-Cristescu)