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Article title: Slovenian Market Dodges Both Ecological & Special Tax on Cars

Subhead: Special Tax Gone But Not Dead

Central Europe Automotive Report, Volume II, Issue 9, October, 1997

Ecological Tax Found to Actually Lower Government Revenues. A new "ecological" tax was scheduled to take effect in Slovenia on April 1. The government proposed the tax to parliament, along with a suggestion that parliament give it top priority. In the meantime, car experts studied the proposal and found that the proposed tax would cause new car sales to fall significantly. Moreover, it was determined that the tax would bring the government less money than planned due to lower car sales.

Critics charged that the tax was less about the ecology and more about getting money from car buyers. The proposal also lacked clarity due to its classification of cars by their fuel consumption -- it didn't define which standard should be followed, either the new EU or the old ECE standard. Had the law had been adopted as proposed, it would have been susceptible to multiple interpretations.

Pursuant to the tax, the price of a new luxury car (e.g. Audi A8) would jump by about $6,000. On the other hand, the price of a car from the lower class segment (e.g. Renault Clio) would increase by $600 to $1000.

Special Tax on Cars Enters the Fray. Parliamentary discussions on a new Law on Cars, later called the "special tax," started in the early spring. The law was expected to be passed by parliament and take effect in the beginning of July. The law, however, was nixed by the legislative court. The law was criticized for its harsh effect on the disabled (who normally can buy cars without paying any additional taxes) and families with more than three children (who also pay a lower car tax).

The "special" tax was then set aside, waiting to picked up by parliament again. Finally, parliamentary discussions started in the beginning of July.

Tax Talk Sparks Car Buying Binge. With a tax proposal on the table, consumers reacted by going on a buying binge. Car sales peaked in April, when more than 8000 units were sold (average monthly sales in Slovenia amount to about 5500 cars). Car dealers sold everything in stock, with some of them tapping into stocks left over from last year. At the end of June, car sales totaled more than 37,000 units, up 6% compared to the record sales in the first half of 1996.

Ecological Tax Returns, Car Owners Resist. Before the parliament renewed its discussions of the special tax, the leader of the Slovenian National Party (SNS), Zmago Jelincic, in co-operation with the Slovenian Association of Car Manufacturers and Resellers, came out with a new proposal for a real ecological tax. The key aspect of this tax was that it would hit the owners of old cars, especially cars not equipped with catalytic converters.

Although the reason for the law was easy to understand -- protect the environment -- it was extremely unpopular with the public. Many of the cars driven on Slovenian roads are ten or more years old, and the owners of such cars would end up paying more for the ecological tax each year than the value of the car.

Both the special and ecological tax proposals came up on the agenda of the July parliament session. The delegates first turned down the government special law, and after a stormy public response, the SNS shelved the ecological tax proposal.

Resurrection of Special Tax? So the tax situation in Slovenia is the same as it was at the beginning of the year. For the time being, the government is laying low, but it is rumored that the special tax will be endorsed again this Fall. Since customs duties on cars imported from the European Union will be lowered again January 1, the government will likely try to find some means for recouping the revenue lost from lower custom duties.