During a debate on the much discussed car tax bill in the Riigikogu on Tuesday, Evelyn Liivamägi, undersecretary for tax and customs policy at the Ministry of Finance, said that fringe benefits allowances need to be updated and brought into line with the rise in living standards.

Liivamägi confirmed to ERR that fringe benefits are currently being reviewed and will be amended if necessary. There are for instance, plans to increase the tax liability on cars.

"A review of the fringe benefits for cars is being conducted alongside a review of compensation for personal car usage, the tax-free thresholds for which date back to 2014 and require updating. Since the costs associated with owning and using a car have increased, it is necessary to modernize both aspects – both the amount of the fringe benefit and the compensation for personal car usage," Liivimägi said.

As the process is still in its early stages, we have not yet reached concrete figures regarding how much the tax will increase, Liivamägi added.

The tax liability of the fringe benefit is calculated according to the engine power of cars. It is currently €1.96 per kilowatt (kW) or, if the car is more than five years old, €1.47 euros per kW.

Liivamägi said that tax liability levels on the remaining fringe benefits will also be reviewed.

"In addition to this, we are also reviewing a number of other exemption thresholds and adjusting them where necessary – other thresholds have also remained unchanged for a long time, while overall price levels have risen sharply. These would all be increases that benefit the taxpayer," she said.

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