Car tax exemption: savings of up to 240 euros for 14.5 million vehicles

It was 2008 when Silvio Berlusconi, two days before the 13 April elections that saw him triumphantly return to Palazzo Chigi, promised from the television studios of *Matrix* – presented by Enrico Mentana – phased abolition of the car tax. Over the past 16 years, the proposal has remained a staple of the centre-right’s manifestos; yet the funds have never been found to get it published in the Official Gazette.

Now the NRRP that will enable Giorgia Meloni’s government to go as far as the Arcore leader had managed. Or, rather, it is the savings on the measures funded to implement the Plan’s objectives that will provide a large part of the funding, 2.362 billion, needed to waive the 2027 road tax on 14.5 million small and medium-sized cars (over 13.2 million) and motorbikes, and to compensate the regions that would otherwise have received the revenue.
The cut, included in the decree-law approved yesterday – which also extends the reduced excise duty rates and the suspension of the tax on small parcels – now applies solely to 2027. But it is already ‘structural’, in the words used by Meloni to describe it at the press conference following the meeting at Palazzo Chigi. ‘We believe it will inevitably become so,’ confirms Economy Minister Giancarlo Giorgetti, reiterating the objective without neglecting the technical aspects of the measure. Deputy Prime Ministers Tajani and Salvini, meanwhile, are focusing on the next steps. The League leader hints at scrapping the tax for everyone and scaling back the ‘super-tax’ (on the most powerful cars), because ‘there is a budget bill available’ and ‘appetite comes with eating’. ‘Calm down,’ Meloni cuts them off.

For the time being, in any case, the exemption applies to cars with an engine power of up to 80 kW and all motorbikes, and also covers leasing and hire vehicles, as the tax is payable by the user, unless otherwise specified in the contract. According to the Prime Minister’s calculations, these parameters cover over 70 per cent of vehicles.
However, each beneficiary is entitled to only one discount. Those who own two cars will have the one with the lower power output exempted or, if the power output is the same for both, the vehicle with the lower road tax; the same will apply to those who own two motorbikes. If a person owns an exempt car and a motorbike, they will continue to pay road tax only on the latter.

The savings depend on the emissions class and power output. Excluding any local surcharges, a new small car (Euro 6) with a power output of 50 kW costs 129 euros (2.58 euros per kilowatt) under national tariffs; for older vehicles, the rate can rise to as much as 3 euros per kilowatt, setting the maximum possible saving at 240 euros. On average, the new measure amounts to just under 165 euros per beneficiary. The impact is reduced for hybrid cars, which in many regions already benefit from discounts and temporary exemptions, and for electric cars, which are exempt for the first five years and then subject to a tax reduced by three-quarters. ‘These cars do not benefit, but they have not suffered any negative effects from the increases in petrol and diesel prices,’ comments Giorgetti.

The move that brought the proposal to cut road tax – first reported in *Il Sole 24 Ore* last Wednesday – to fruition is a masterstroke that allows the government to shed its image of being constantly scrambling to find flimsy funding for short-lived measures. It also brings to the fore a measure that is easy to understand and therefore easy to communicate, with the positive impact on the government’s image made all the more evident by the almost total silence with which it was received by the opposition. Not only that: as it is designed, the discount is targeted at owners of smaller cars, and is therefore, on average, far less regressive than a blanket cut in excise duties, which favours those with greater spending power.
All this is made possible by the – not entirely unprecedented – rushing through of a decree-law introducing a measure with a delayed effect. And, from a financial perspective, by the savings on NRRP expenditure recorded in the Treasury accounts as provided for by the February NRRP decree. This is not a restructuring of the Plan – which would be too late – but rather the lower expenditure recorded in achieving the objectives. These sums are also accounted for over the coming years because the PNRR deadline relates to achievements rather than expenditure, and the non-repayable grants do not affect public finance balances.