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Revamped Romanian first registration car tax to hurt Dacia
By Yoann Besnard on 29 January 2008 | 
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Dacia deputy chairman, Constantin Stroe, is fighting the Romanian government and the EU over the method used to calculate first registration tax. As a result of the future car tax, he is expecting the growth of the Romanian market to slow in 2008 and therefore foresees personnel cuts at Dacia.
The Romanian government is currently handling talks with the European Union over the calculation method used for first registration tax. The tax was introduced as a means for the government to stop the inflow of used cars onto the Romanian market expected when the country joined the European Union last year. However, the EU pointed out that the tax is discriminatory and decided to start procedures regarding the infringement of the European Union Treaty.
The Romanian government made some modifications to the calculation method in April 2007. According to these modifications the amount of the tax will fall with the growth of the age of the car, but European Union experts still considered the tax to be discriminatory, especially in regard to the taxation of imported and domestic second-hand cars. Last November, the European Union launched the second stage of the infringement procedure and Romania now has two months to comply with EU requirements.
The current tax is applied the first time a car - either new or used - is registered in Romania. The amount levied is calculated based on the car's age, engine capacity and emission output. Older, more polluting cars pay more. In the final variant due to be established at the end of January, the registration tax will be reduced by half for non-Euro vehicles over 20 years old, with a capacity of 1,600ccm, while for a car of 3001ccm, 15-16 years old, the tax will be reduced over three times. The tax remains unchanged for new Euro 4 compliant vehicles with a capacity of between 1,400 and 3,000ccm.
Dacia is likely to be damaged by the revamped tax as it holds a market share of around 30% on the Romanian market. According to Dacia vice president Constantin Stroe, the tripling of the tax imposed on new cars and the decrease by up to ten times on taxes on non-Euro compliant cars may leave the doors of the Romanian market wide open to all the non-functional cars in Europe. He said in an interview for BBC that the number of old cars arriving in Romania after the new tax comes into force may reach 500,000 units, compared to 125,000 in 2007.
This year, Automobile Dacia will hire 3,000 people at its assembly plant and 600 university graduates in its administrative departments in order to hit its production target of 400,000 cars in 2009. Should the tax be adopted and Dacia sales go down, the number of new employees will shrink in the following years.
