A draft proposal submitted by DIKO MP Nicos Pittokopitis to abolish the road tax for motorised vehicles and instead add three cents per litre to fuel prices will most likely favour retired persons with large capacity cars who seldom use them at the expense of the young, who are more mobile. If the bill is approved, it will be put into operation on January 1, 2007.
According to Pittokopitis, with the cancellation of road tax, the state stood to save over CYP 4 mln in administrative expenses, involved in the issuing and sending of documents and collection of fees.
His bill will also stamp out the practise of many people not paying their bills. In 2004, 85,000 car owners failed to pay their road tax, Pittokopitis told Parliament, while in 2005, 95,000 owners didn’t pay up. And the figures are expected to rise to 100,000 in 2006, costing the state at least CYP 10.5 mln annually.
According to a study commissioned by DIKO, with the three cents surcharge a family spending up to CYP 50 a month on fuel would bear an additional CYP 36 burden per year. Households forking out CYP 100 would pay an additional CYP 72 a year, and so on.
Pittokopitis said households stood to gain immensely from the abolition of road tax, with some families saving up to 45 to 60% a year.
His views are not however, shared by everybody.
By hiking fuel prices, Pittokopitis says tourists who use rental cars would also pay tax, earning the state an estimated CYP 2.5 mln annually.
His figures however, do not add up to the CYP 44 mln total that the government wants to receive in lieu of road tax revenue, since the addition of the 3 cents in fuel prices will bring in only CYP 27 mln, based on the assumption that every 1 cent rise brings in CYP 9 mln in revenue.
“The CYP 27 mln, when added to the tourist revenue of CYP 2.5 mln and the administrative saving of CYP 4 mln, do not add up to the CYP 44 mln that the state currently receives, which is why either the Ministry of Finance will reject the bill, or the MPs will need to agree on a higher levy,” said an analysts contacted by the Financial Mirror.
The analyst reckons that MPs need to hike fuel prices by at least 5 cents to cover the shortfall, something which is loathe to be approved by AKEL.
In fact, the same analyst said that the bill is tailored in such a way to support the retired or people who own high capacity cars, which are seldom used, at the expense of the young, who are more mobile.
