The European Commission initiated the second step in its infringement procedures and gave Malta two months to conform its legislation on car registration tax with European laws, after which the matter might be sent before the European Court of Justice.

On Thursday, the European Commission formally requested Malta, along with Austria and Finland, to change their legislation regarding the inclusion of the amount of the car registration tax within the amount on which VAT is paid.

The Commission gave a reasoned opinion, the second step of the infringement procedure provided for in article 226 of the EC Treaty. If the legislation is not amended within two months, the Commission may decide to refer the matters to the European Court of Justice.

Malta, Austria and Finland include the amount of their car taxes within the amount on which VAT is levied.

The registration tax is usually paid by the supplier to the tax authorities and afterwards repaid to him by the purchaser along with the price of the vehicle.

In a brief statement issued yesterday, the government said that it is reviewing the car tax system in a “holistic manner, aiming to bring it in line with the EU while bearing in mind the social, economic and environmental impact of such a review”.

It also said that the government is “seeking to overhaul the present car tax system in such a way that would not significantly impact the local economy, keeping in mind that hasty decisions in this sensitive sector could prove detrimental to both consumers and car traders”.