Ten out of the 15 incumbent states, and four of the ten newly joined countries levy a registration tax on every car that receives a license. According to the EC members behind the draft proposal, such registration taxes distort the market and harm the consumer’s interests. Car manufacturers set their prices from country to country depending on the registration tax, or the lack of it. In the case of imported used cars, some countries levy the tax even if such a tax has been paid in the country of origin already.

The new EU regulation will most likely prescribe that the registration tax has to depend on environmental features of the cars and a tax paid in one member state has to be accounted for in another member country. The proposal also requires that amortization has to be accounted for the tax, and bans the practice followed by some countries including Hungary that different taxes are applied for new cars and used cars. According to some EU experts, the new proposal will help pave the way for the recent motion of the National Association of Hungarian Car Dealers against the Hungarian government for applying different taxes for new and used cars.

The preparation of the proposal was preceded by an open, internet-based debate between July and September 2004, to which 2,033 suggestions were made, 1,481 from Portugal and 115 from Hungary.