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 major European markets alone is worth €440.4 annually (EU-14 member states plus the United Kingdom), 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, 24 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.