Governments levy taxes on car purchases, registrations, and use to encourage cleaner transportation and reduce greenhouse emissions. These taxes can include VAT, sales tax, excise duties, and other fees.

VAT rates on cars range from 17% in Luxembourg to 27% in Hungary, with most countries charging around 20-21%. However, VAT isn't the sole factor in price variation; other taxes and incentives also play a significant role.

For instance, a simulated price of an electric SUV before tax was €31,339, but after taxes, the price could drop to €26,938 in France or soar to €59,168 in Turkey, demonstrating the impact of national incentives and taxes.

Turkey consistently has the highest car prices due to a substantial Special Consumption Tax and VAT, dramatically increasing final costs. France and Luxembourg, conversely, often have the lowest final prices for electric cars, thanks to government bonuses resulting in prices lower than their pre-tax values.

Taxes on combustion engine cars are steep, with costs more than doubling in seven European countries. The OECD recognizes the potential of taxation in supporting the shift to greener transport. Some European nations offer purchase bonuses for low-emission vehicles, while others penalize high emitters.

Overall, the tax revenue from vehicles in 13 EU countries totaled nearly €400 billion. Tax policies greatly affect the overall cost of car ownership, reflecting each country's environmental and economic priorities.