LONDON – Just because the European Union officially is named the “Single European Market” doesn’t mean vehicle prices among the 27-member countries are uniform.
A just-published European Commission report on new-vehicle prices as of last November finds there has been no narrowing of the gap between high- and low- price countries since the majority of EU countries adopted a single currency in 2002.
TheFocus, for example, costs about 30%, or roughly $5,000, more in Germany than in Finland. If EU countries outside of the Euro currency system are included, a VW Passat, for example, costs about 40% less in Denmark than in neighboring Germany. Lesser, but still substantial, disparities are found for many other vehicles.
The discrepancies are due to different taxes, which is the one major area where EU countries go their own way.
Traditionally, northern countries such as Finland and Denmark tax their citizens heavily. The registration tax on a new vehicle in Denmark can amount to a colossal $20,000, and auto makers wanting to sell vehicles there must keep prices at rock bottom. By contrast, France and Germany have a very low vehicle registration tax, while Luxembourg has no VRT at all.
Not surprisingly, because vehicle buyers are taxed in their home country rather than in the country the vehicle is purchased, a huge amount of cross-border vehicle purchasing takes place, with thousands of people driving north every year in search of new-car bargains.
The EC wants to end this and create a genuine single market by phasing out registration taxes and bringing in a common set of duties based on vehicle usage.
Auto makers generally like the idea, but governments are divided: Northern countries do not want to lose their huge tax generators, while other countries are opposed to introducing taxes or raising existing duties.