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New car tax bill makes older vehicles more expensive

Mart Võrklaev.
Mart Võrklaev. Source: Jürgen Randma / Government Office

Minister of Finance Mart Võrklaev (Reform) has presented the government with the latest version of the ministry's car tax bill that would consider the age of vehicles to a lesser extent than previous versions, while also adding a concession for people with special needs.

The change mainly concerns the registration fee portion of the tax where the fee starts falling for vehicles five years and older in the current version. Võrklaev said that it was suggested this would make newer second-hand cars too expensive and foster the import of vehicles older than five years. That is why he decided to amend the bill.

"So as not to rob people who want to buy a newer and more economical vehicle of the opportunity. He believes people could replace their older and more polluting vehicles with ones just a few years old.

But changes would also lower the fee for slightly older vehicles. For example, registering a five-year-old Toyota RAV4 was initially subject to an age coefficient of 0.91. The new version lowers it to 0.73, bringing the registration fee down from €3,225 to €2,587.

The bill's explanatory memo suggests the tax is still expected to yield revenue of €232 million annually. The reason is that the coefficient for vehicles older than ten years would rise. "So as not to promote the import of old vehicles," Võrklaev remarked.

For instance, the registration fee of 15-year-old vehicles would be multiplied by 0.2 instead of the previous coefficient of 0.1. And while the age coefficient disappeared altogether for vehicles 20 years and older in the previous version, the new version retains the 0.2 coefficient for all vehicles. The finance minister said a balanced approached was sought to avoid the pendulum swinging too far in the other direction and making old cars disproportionately expensive.

The age coefficient was changed less for the annual portion of the tax. Vehicles up to five years old are still subject to the entire fee, while a little more needs to be paid for older ones. The age coefficient for the annual component would rise from 0.82 to 0.84 for vehicles six years old. This change would be slightly bigger for older vehicles, with the annual tax of a 13-year-old Audi A3 going from €70 to €77.

While Minister of Regional Affairs Madis Kallas (SDE) has said car tax plans should include regional exceptions so as to keep from adding to inequality, no such proposals made it to the new version of the bill.

Mart Võrklaev said that the age coefficient mechanism already considers level of income and that the car tax will make up just 1-5 percent of all vehicle-related expenses. He suggested that the problems of people who cannot afford a car at all should be solved through Estonia's transport reform, which is in Kallas' administrative area.

While the Reform Party's coalition partners Eesti 200 and the Social Democratic Party (SDE) want exceptions put in place for large families, people with disabilities and vehicles temporarily removed from the register, the recent version will at least include an exception for people with serious disabilities, while relevant details need to be put together by the Ministry of Finance.

Work on the car tax policy and deliberations in the coalition continue.

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Editor: Mirjam Mäekivi

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