Car tax plan criticised by Estonian Chamber of Commerce

The Estonian Chamber of Commerce and Industry has sent a letter to the Estonian parliament’s finance committee regarding the draft law on vehicle tax, which would introduce an annual car tax and a one-off registration fee for the registration of passenger cars and vans in the traffic register from 2025.

The Chamber of Commerce says that in the current economic downturn it is opposed to any new tax, including a vehicle tax. The new tax will reduce the international competitiveness of Estonia’s businesses and will do nothing to help the country out of the recession; in fact it will be counterproductive.

There is also the question of how a new tax would affect people’s livelihoods and the impact on households for whom car ownership is an essential part of their freedom of movement.

In many rural areas of Estonia, the public transport system is very patchy and the car is the main mode of transport. A bus stop in Estonia; photo by Danel Rinaldo.

If the parliament’s finance committee deems it reasonable to introduce a car tax and registration fee in the current conditions of an economic downturn, the Chamber of Commerce has several suggestions for amending the bill. In particular, the car tax and registration fee should be levied only on vehicles that are registered in the Estonian traffic register and are actively used, i.e. have valid traffic insurance.

The Chamber of Commerce also proposed that a provision be added to the draft law, according to which the amount of vehicle tax should be reduced or the tax partially refunded if the vehicle is not registered in the Estonian traffic register for the entire year.

At least some of the money should be spent on roads

The chamber found that the age component, which reduces the tax and registration fee, should be dropped and instead the rates of the car tax and registration fee should be reduced so that they comply with the principle of the taxpayer’s ability to pay.

The plan to also tax “phantom vehicles” should be abandoned and the problem of phantom vehicles should be solved by other means.

In addition, the chamber has proposed to “earmark” at least part of the money that will start to flow into the state budget in the form of vehicle tax and registration fees, so that at least part of it is earmarked for the maintenance and development of road infrastructure and the promotion of less polluting mobility options.

Mait Palts, the CEO of the Estonian Chamber of Commerce and Industry. Photo by the Estonian Chamber of Commerce and Industry.

“We understand that an important objective of introducing the car tax is to increase state budget revenues, which is linked to the desire to move towards a balanced state budget, but this objective must not be paramount and must not be based on attempts to raise more tax revenues by introducing new taxes,” Mait Palts, the director general of the Estonian Chamber of Commerce and Industry, said.

“In addition, we are concerned that there’s a wish to introduce the new tax and the registration fee in a hurry and in disregard of the legislative and tax policy principles important for businesses.”

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