Governmental Regulations
Taxation of automobiles is sometimes based on engine displacement, rather than the actual power output. Displacement is a basic fundamental of engine design, whereas power output depends a great deal on other factors, particularly on how the car manufacturer has tuned the engine from new. This has encouraged the development of other methods to increase engine power, such as variable valve timing and turbochargers.
There are four major regulatory constraints for automobiles: the European, British, Japanese, and American. The method used in some European countries, and which predates the EU, has a level of taxation for engines over 1.0 litre, and another at the level of about 1.6 litres. The British system of taxation depends upon vehicle emissions for cars registered after 1 March 2001, but for cars registered before this date, it depends on engine size. Cars under 1549 cc qualify for a cheaper rate of tax.
The Japanese method is similar to the European taxation by classes of displacement, plus a vehicle weight tax.
The United States does not tax a vehicle based on the displacement of the engine (this is also true in Canada, Australia, and New Zealand). Engine displacement is important in determining whether or not smaller vehicles need to be registered with the state and whether or not a license is required to operate such a vehicle. A common threshold is 50cc.
In the Netherlands and in Sweden, road tax is based on vehicle weight. However, Swedish cars registered in 2008, or later, are taxed based on carbon dioxide emissions.
Displacement is also used to distinguish categories of (heavier) and lighter motorbikes with respect to driving licence and insurance requirements. In France and some other EU countries, mopeds of less than 50 cm3 displacement (and usually with a two-stroke engine), can be driven with minimum qualifications (previously, they could be driven by any person over 14). This led to all light motorbikes having a displacement of about 49.9 cm3. Some people tuned the engine by increasing the cylinder bore, increasing displacement; such mopeds cannot be driven legally on public roads since they do no longer conform to the original specifications and may go faster than 45 km/h.
Wankel engines, due to the amount of power and emissions they create for their displacement, are generally taxed as 1.5 times their stated physical displacement (1.3 litres becomes effectively 2.0, 2.0 becomes effectively 3.0), although actual power outputs are far greater (the 1.3-litre 13B can produce power comparable to a 3.0 V6 engine, and the 2.0-litre 20B can produce power comparable to a 4.0 V8 engine). As such, racing regulations actually use a much higher conversion factor.
Read more about this topic: Engine Displacement
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