Expert: Car tax aimed at tax revenue, green package hitched to the back

Arno Sillat.
Arno Sillat. Source: ERR

Arno Sillat, car expert and former head of the Estonian Association of Vehicle Dealers and Services (AMTEL), finds that Estonia's car tax bill is aimed rather squarely at generating tax revenue and does little to reduce the number of cars on Estonian roads.

Minister of Finance Mart Võrklaev (Reform) presented the ministry's car tax bill on Monday, which he said is geared toward mitigating environmental effects and the trend of motorization. Võrklaev said the aim is to dial back motorization by 1-3 percent compared to the 2021 level.

Arno Sillat said that the tax itself and the accompanying regulations will achieve this goal automatically.

"In 2021, there were over 800,000 cars registered in Estonia, and a reduction of 3 percent is 24,000 cars. This will be achieved with the effect the tax will have on so-called phantom cars (vehicles still registered but that likely do not exist anymore – ed.) of which there are roughly 50,000. Next come cars that are not driven, which account for another 100,000 in the register," Sillat told ERR.

"In other words, the tax and the relevant regulations will see the total fleet shrink by roughly 100,000 vehicles in a relatively short time," Sillat said.

He added that the state budget is deep in the red, which this tax aims to address.

"That is what I perceive as its main goal today. While it has a green component, official communication betrays it is more of a trailer dragged behind the whole thing."

Sillat said that reducing the number of cars is a problem everywhere in the world as even Denmark and the Netherlands where millions ride bicycles still have not seen their car fleets shrink by much.

"There are 1.5 billion cars in the world today, one for every five people. The problem is not replacing ICE cars with electric ones, the problem is that there should be fewer cars all told."

The expert also said there are an estimated 200 million car wrecks in the world 95 percent of which could be recycled based on EU rules.

"In other words, we could get materials to make 185 million cars from 200 million cars and wouldn't have to keep drilling holes in the Earth."

Sillat also said the new tax is unjust toward new entrepreneurs and car museums.

"The tax reduction only applies to private individuals. It does not work for companies in whose case it has been suggested they buy new cars. But fledgling entrepreneurs might not be able to afford brand new and environmentally friendly vehicles," he said.

"It shows that the government doesn't really understand business logic," Sillat added.


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Editor: Mart Siilivask, Marcus Turovski

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