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Finance minister: We should explore options for cars with foreign plates

Mart Võrklaev.
Mart Võrklaev. Source: ERR

In an interview on ETV show "Aktuaalne kaamera," Estonian Minister of Finance Mart Võrklaev (Reform) discussed the draft car tax bill, which was published on Monday. Võrklaev also said that the state should explore the potential tax options regarding cars with foreign license plates.

On Monday, the Estonian Ministry of Finance published a draft car tax bill, which focuses more on the environmental impact of vehicles than had been planned in the drafting proposal. According to the draft, owners of heavier vehicles and those with higher CO2 emissions will pay more. Minister of Later that day, Minister of Finance Mart Võrklaev (Reform) appeared on ETV show "Aktuaalne kaamera" to discuss the draft.

Is this the car tax of your dreams, or have your party colleagues put the brakes on your ambitions?

I have to admit that the finance minister does not dream about devising new taxes. What we are doing with the car tax is reducing car ownership, particularly in cities, to encourage more sustainable mobility and to nudge people in the direction of using more sustainable and environmentally friendly cars. And I would go as far as saying that this version [of the draft bill] certainly takes greater account of that environmental impact, and hence the sums [involved]. If you've still got a more polluting and heavier car, then the tax is higher. If the car is more economical and lighter, the tax is lower. Of course, as Minister of Finance, it is important that there is also money coming into the state budget. It is a significant amount and will certainly help the state budget in difficult circumstances and will also assist in the financing of future investments.

Your job would probably be easier if, for example, large and very expensive luxury electric vehicles were also taxed more heavily. This was originally included as part of your draft proposal, but now the emphasis has been placed elsewhere.

We are still looking at the environmental impact. And actually there are two components. CO2, so if you pollute a lot, you pay more. And the other one is the weight component. If we talk now specifically about electric cars, then the limit for electric cars is 2,400 kilograms. So, maybe for those cars that are heavier than that, the [weight component of the] tax will go up because the heavier the car, the higher the environmental impact. Now, to say whether a more luxurious electric car should be taxed very heavily, I think has to be based on the environmental impact. If there are no CO2 emissions, but the weight is higher, then you do have to pay somewhat more because there are tire emissions and there is wear and tear on the roads.

You talked a lot during the drafting of the bill about the priority of getting scrap [vehicles] off the register. The registration fee for old cars will be around €50. Will that motivate people to deregister them?

We have a big problem with scrap, we see it all over Estonia. From the car parks of apartment blocks to fields and farm yards. And, in fact, we can see that the issue, which has been left unsolved for decades, in which these scrap heaps are piling up, has actually started to move in the right direction due to this debate on car tax. That's what scrap metal collectors are saying. And, I do believe that if you have a worthwhile scrap vehicle, you would be willing to pay €50 a year for it. But I think that's reason enough to consider whether you're still going to restore that car, or whether you're going to give someone else a chance [to do that], or if it's no longer of any value and you're to sell it up. I think that €50 is exactly the right limit.

What will you do with people who register their cars in Latvia, for example?

This is certainly something we will monitor. The current rules are that if you are an Estonian citizen, you have to register a car with a foreign license plate within a certain number of days. We will definitely have to improve the monitoring of this and see what happens. However, I think that now, in addition to the draft car tax, we also still have to work through the options regarding whether to introduce a toll for cars with foreign plates. There are limitations and problems there, which is why we did not propose it in the current draft, but I think it does need to be reviewed.

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Editor: Michael Cole

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