New tax will be imposed on hire cars in the Balearics to stop unfair competition

THE Balearic Government will be imposing a new tax on hire cars from 1 January 2006 with the main aim to put a halt to “unfair competition” in the sector. This news, which could lead to the disappearance of around 20'000 hire cars, was announced yesterday at a presentation for the new budget law by the Minister for the Economy, Taxation and Innovation, Lluis Ramis d'Ayreflor. The estimated amount to be raised by this new tax is around 12.5 million euros, which will be invested into the health system.
However, the principal outcome of the proposal is to regulate the activity which at the moment seems to “be out of control”.
Furthermore, the Balearic Islands will be the first Spanish region to impose such a hire car tax “which has been agreed with the sector to get it through the current crisis”, added Ramis d'Ayreflor. In addition the government will be creating a hire vehicle register, which will oblige the hire car companies to pay 70 euros for cars and 15 euros for motorbikes to become enrolled. The companies will also have to pay a further 50 euros for cars and 10 euros for motorbikes to withdraw their vehicles from the government register.
According to predictions, this extra hire car initiative will raise around 1.5 million euros each year.
The aim behind this register is to get a grip on the actual number of hire vehicles, which are being offered on the islands. This will also make it more difficult to export hire cars. One of the main problems in this industry, said Ramis, is that some car hire companies are buying vehicles, which are exempt from vehicle registration tax and which also carry VAT deductions. They then hire them out for only one day and then sell the vehicles abroad. There are around seven or eight hire car companies whose true business is allegedly buying and selling cars, said Ramon Reus, President of the Balearic Vehicle Hire Business Assocation. (AEVAB). “We know that this tax will not be popular” he added, but at the same time it will be “necessary”. “We do not want all these companies to disappear but we want prices to be reasonable”. Finally he announced that it is still not possible to calculate the repercussions of the tax, but “taking into account the current prices, it will not be excessive”. The rate of tax to be paid by the car hire companies will be based on the amount of days it is hired out, the type of vehicle and the number of kilometres driven.