Vehicle, road and fuel taxes generate billions of euros in revenue for governments across Europe, helping to fund both infrastructure as well as paving the way for the development of non-auto related projects.
Taxation on motor vehicles in the EU-15 countries alone (including VAT, sales, registration taxes and excise duty on fuel) is worth €428 annually, or more than two and a half times the total budget of the European Union.
However, there is still a huge variation in both the basis for taxation and tax levels across the European Union. Several member states tax cars on their power, price, weight, cylinder capacity or a combination of these factors though, increasingly, countries are adopting CO2 based taxation. Presently, 21 EU member states tax vehicles on their roads according to their CO2 emissions levels.
The automobile industry in Europe is in favour of tax harmonisation as a necessary component of the internal market. However, harmonised taxation must be neutral between transport means, targeting energy usage, CO2 and emissions. This is a first necessary stage before it becomes possible to have a single European market for transport and energy.