When it comes to importation taxes and rules, the Portuguese government keeps on pretending it doesn’t have to follow the European rules. But is this about to end?
One of the biggest news of recent times in the Portuguese automotive world is that Portugal has been given one month to change the mathematic formula it applies to the importation of cars.
This has long been a struggle between companies who bring cars from other European countries, as well as privateers, and the government. The reason is simple: it is much more expensive to import a car to Portugal from, say, Germany, than it is to Spain, Italy or France, to name a few other countries.
And when I say ‘much more expensive’, I say it because there are cars that can be … wait for it … almost 10 times pricier to legalise over here than elsewhere within the European Union.
Until December 2016, the import process relied on a given formula that considered a depreciation of a car according to two factors: cubic capacity and CO2 emissions. The problem was that the depreciation only went as high as 55%, or five years, meaning that for the Portuguese government, whether you brought a car with six years or 16 years, its commercial value was the same and you could only assume a maximum depreciation of 55%.
The European Union stepped in and said this went against the European market rules because, within the EU, countries had to accept a depreciation of up to 80%. So our socialist government – always smarter than everyone else, of course – said ok, we will assume an 80%/eight years depreciation rate. And they did – but only on the cubic capacity element. The CO2 went from a maximum of 55% to ZERO. Yes, ZERO depreciation for any car.
Logically, older cars – or collector’s cars – became impossible to import. It was difficult before and it became just plain stupid – commercially speaking of course – from January 2017 onwards. For instance, a Ferrari F355, a car costing around €70,000 in Europe, costs around €60,000 to legalise. There are cars that are even cheaper to buy than they are to import. This is absolutely ridiculous.
The government says it is protecting the country against high-polluting vehicles and that is why it implemented this method, but get this: trucks and commercial vehicles – all diesel powered and much more polluting than anything else – have a specific import formula and pay next to nothing. So where is the eco-argument here?
Because taxes on new cars are so high – and totally disproportionate if you take into consideration the national average wage of around €1,000 – if the import taxes were not moronically high then the new car market would take a serious dive. But, of course, the government is not going to lower the taxes on new cars, so it will do everything it can to keep the import formula as it is now.
But why did this ultimatum from the EU happen at all? Well, simple: a Portuguese citizen decided to sue the government and demand the money he considered he paid over the legal limit back, on a car he brought from Germany. And won. The government sent the legal issue to the appeal court and lost again. So, it sent it to the supreme court. The verdict is not out yet but, in all likeliness, they will lose once more.
This made the European Union, who was turning a blind eye to the whole thing, do something, and so they gave the government until the end of the year to create a new formula of importation that abides by the European Market rules and doesn’t discriminate where a product comes from in order to calculate a given tax. Depreciation should be transversal to all EU countries.
Now of course, everything is on hold. Used car dealers, new car dealers and collectors are waiting to see how it ends. Imagine a car that used to cost €60,000 to import now costing closer to €10.000 (still very high when compared to some other countries, but still much cheaper than before). It will change the way business is made over here. It will revolutionise the market.
Will the government just let it go and do what the EU wants? Will they risk losing millions in taxes, both on new and used cars? Somehow I don’t think so. But I am curious as to how they will dodge this bullet and do it legally.
Meanwhile, after putting the kids to bed tonight, I will look at some F355s that are currently for sale. Who knows? Maybe I can dream about one after all…
By Guilherme Marques