 |
|
Talking
English
Your Passport to Better Language Communication |
|
|
|
|
|
|
Car Taxation
Last summer, a good friend of mine living in London asked if I would like to buy his neighbour’s Audi A4. After living in London for six months, his neighbour, a German IT consultant, had been posted to Australia where, as in England, they drive on the left. The consultant could see no benefit in taking his left hand drive Audi with him. At only 15,000 euros (£10,000) it was a bargain – I was definitely interested! The next day I contacted Finnish Customs.
I was informed that the value of an identical car in Finland is 33,000 euros and I would need to pay tax accordingly. Calculated at 30%, this came to 9,900 euros. Not too bad, I thought. Then came the hammer blow: I also had to pay VAT (on 9,900) at 22% i.e., a further 2,178 euros, making a grand total of 27,078 euros. I quickly decided that this was excessive and exorbitant, especially since I would also need to buy winter tyres and an engine heater. There was no way I was prepared to pay that much for a second hand car.
Afterwards, I wondered how the system would work in reverse. Quite honestly, only an idiot would buy a second hand car in Finland for export. However, I am told that many people (especially UN soldiers) buy new cars in Finland which they can export tax free as long as they take them out of the country within 24 hours.
Contrastingly, should I wish to import a used car to England from the EU, it is both easy and cheap. Providing that the VAT has been previously paid and the car is over 6 months old and has done more than 6,000 km, the only costs are (i) a first registration fee of 75 euros (£50) and (ii) road tax which is paid annually and costs between 0 – 400 euros, depending on CO2 emissions. The only additional stipulation is that the car should be road worthy and pass an MOT. Alternatively, I could import a new car (less than 6 months old and less than 6,000 km) and pay only 17.5% VAT.
In the UK car prices are substantially 37 per cent pre-tax and 26 per cent post tax above the EU average. As the tax on cars varies enormously from country to country, manufacturers adjust the price of their vehicles before tax to even out the final retail prices. That means cars in countries with the highest taxes have the lowest pre-tax prices (as in Finland). Car supermarkets and internet companies track these down, import them to Britain, pay the tax (17.5%) and save money.
For example, tax on new cars in Spain is 28% of the car’s price, 22% in Italy and 19.6% in France. Combined with favourable exchange rate and it’s easy to see how some big savings can be made (up to 20 per cent). The irony is that thousands of cars are exported and brought back into the country in this way every year. Hondas built in Swindon go to France and back. Nissans built in Sunderland go on a round trip to Spain. Jaguars - built in the Midlands - go to Belgium and back.
With well over 20,000 used cars imported into Finland annually and tax often more than the initial purchase price surely the tax laws need to be revised not only in Finland, but across the European Union.
I am of the opinion that if the government were to reduce the tax on new cars it would result in a significant jump in sales. This in turn would result in an increase in tax for the government.
Mike Bangle is the owner of Talking English language consultancy and can be contacted at mike.bangle(at)phnet.fi
Word List
|
|
|
|