Car Tax Systems

A Review of Car Tax in Industrial Countries

While there is no established definition for an ‘Industrial Country,’ a good basic definition is that it is a country where the citizens are allowed to enjoy a healthy and free life in a completely safe environment.’ In reality the term really refers to the economic development of a country. The more advanced the country is, the more likely its citizens are to purchase cars. Each country handles the tax on cars in a different way.

United Kingdom Car Tax

The United Kingdom utilizes a tax system for cars that is much simpler than the one used by the United States. The car tax, or tax disc as it is commonly called, is an annual form of registration and taxation for cars. This national system has seen several changes throughout the years, but the principle has remained the same. The UK supplements this national car tax with several other automotive taxes. These vary depending on where you live. For example, people who live in London may be subjected to a congestion tax. Parking taxes and road taxes are two other examples of automotive taxes. The government of the United Kingdom has recently announced a ‘Green Tax’ which will charge citizens an additional tax if they drive an older, larger car with poor fuel economy. The United Kingdom gathers car taxes in several different ways.

United States Car Tax

The United States is unique in the way that it handles car tax. Each separate state has control over the taxes paid for cars. Some of the different options utilized by states are sales tax, impact tax, luxury tax and fuel tax. Sales tax varies from state to state and often from city to city. On average, a consumer can expect to pay approximately 7.5% in sales tax on any new purchase, although this number may be higher or lower depending on the state the vehicle is purchased in. Impact tax or fees are charged in some states to reduce the cost the new vehicle will have on the infrastructure. These rates vary by state. Some states also charge luxury taxes on items like new cars, alcohol and cigarettes. Finally taxes on fuel are considered car taxes in the United States. While the federal government mandates some of these, states may add additional taxes on top of what the federal government charges. Further complicating matters, the government of the United State has recently announced tax breaks to citizens purchasing green cars.


The French have simplified the system even further. There simply is no ‘car tax’ in France. When a new car is first registered, a fee must be paid, but the concept of an annual car tax has vanished in France. There is a sales tax that applies to the purchase of a new vehicle and France is considering placing additional restrictions on citizens who drive larger vehicles or vehicles with poor fuel economy. There is no true car tax in France

Greece Car Tax

Greece also uses a simplified system for car taxes. The car tax rate in Greece is 20% of the original value of the car when you purchased it. Registering a vehicle in Greece also costs some money and there are road taxes and several other small fees depending on where the car came from and what type of car it is. It can be fairly expensive to own a car in Greece when you consider that you need to add 20% to the vehicle price in order to cover the taxes on it.

Japan Car Tax

Cars in Japan are generally considered to be inexpensive. What is expensive about owning a car in Japan is the car tax. There are several different types of taxes charged. The first is an acquisition tax which is paid a car is purchased. The second is a weight tax which is a tax based on the weight of the car and due every two years when the car inspection is due. Finally, there is an annual car tax which is varies depending on the size of the engine in the car. Other fees or taxes may also be charged depending on the car.

It is apparent that car taxes vary depending not only on where the car is purchased, but also on its weight, type and engine size. Taxes in the form of sales tax, acquisition taxes, road taxes, weight taxes and annual taxes are all used in various combinations to create a unique car tax for each industrialized nation. Knowing the types and amounts of taxes that will be charged for a new vehicle is important when considering purchasing one.

Which UK Car Tax Band is Your Vehicle in?

Use the form below to find out your car CO2 emissions and hence which car tax band you are in.