Germany has finally announced how it will reform its tax system to factor in CO2 emission levels. After a long political struggle between the two main parties, the SPD and the CDU/CSU, the system will not only change from being based on engine displacement to be dependent on CO2 emission levels, but will change hands. Until now, car taxes were a matter of the Länder (states). This new system is a Federal one, and the switch is blamed as the reason for the delay. The Länder will get €8.9 billion from the Federal government to compensate their income loss.

The new tax system is expected to roll out on January 1st, 2010, a bit late according to Germany's ADAC car club. ADAC stated that consumers won't be convinced to purchase more fuel-efficient cars until that late date. Another car club, called VCD, said that the new tax was too light on cars that burn a lot of fuel.

The system will leave the tax as it is for vehicles following the Euro-2 and Euro-3 standards, which is calculated on engine displacement. It remains unchanged for owners of classic and vintage cars as well. Currently, the average car sold in German produces 170 g/km of CO2, which is quite a ways away from the EU's limit of 130 g/km expected for 2012.

[Source: Auto News]

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