The Estonian Ministry of Finance has prepared a new bill on the motor vehicle tax, which takes less account of the age of the vehicle, whereas relief for people with disabilities is still being considered, Postimees reported.
The bill, which would make the registration fee lower than previously planned for aftermarket cars first bought as recently as two or three years ago, will be submitted by Finance Minister Mart Vorklaev to the government on Wednesday. According to the minister, it is such fairly new cars that people who prefer not to buy a brand new car should be replacing their old polluting vehicles with.
The age of the vehicle will reduce the fee for vehicles that are at least one year old and up to 15 years old. After that, there is no further reduction, and for vehicles 15 years old and older, the emission and mass component will be multiplied by 0.2.
“With this, we want to encourage people who are thinking about buying a used car to buy a newer and more economical car. As the age multiplier of the registration fee for vehicles older than 15 years will not decrease any further, the ratio of the registration fee to the vehicle’s value will be higher for older vehicles, which should discourage people from bringing old and polluting cars into Estonia,” Vorklaev said.
According to the explanatory memorandum, the car tax is still expected to generate 232 million euros per year for the treasury. The principle that the age component will reduce the registration fee and also the annual tax for category M private vehicles will remain in place. This is an indirect way of supporting people who may not be able to afford a newer and more economical vehicle, but for whom owning a car is the only way to be mobile, the minister said.
The registration fee has to be paid only when the vehicle is first registered in Estonia. Vorklaev believes that this is the main lever to encourage bringing newer and more economical vehicles to Estonia.
As regards the annual vehicle tax, the logic remains in place that age affects the amount of the tax for vehicles five years old and older, bringing the tax for vehicles 20 years old and older to the base rate of 50 euros a year.
“These vehicles are already moving on our roads, and if they are in a good technical condition, you can continue to drive them and you don’t have to worry about a higher tax burden. Also, not all those who wish can buy newer and more economical vehicles, whereas a car can be an essential means of transportation for them — we have to think about such people as well,” the minister added.
The new draft takes into account the feedback from the owners of mobile homes, and now the annual tax and registration fee for mobile homes will be calculated similarly to those for vans.
In order to encourage the purchase of hybrid cars, the point where the mass component will start to apply to such vehicles will be 200 kilograms higher than for internal combustion vehicles, that is, 2,200 kilograms.
The head of the Social Democratic Party (SDE) group in the Riigikogu, Jevgeni Ossinovski, said that SDE wants reduced tax rates for disabled people and for vehicles with a temporarily suspended registration. The most important thing for the Socialists is to find a way to introduce a relief measure for disabled car owners. The possibility of compensating disabled people for the car tax with benefits is under consideration. The alternative is to introduce a system whereby they would immediately benefit from a lower tax, but that would be technically difficult to implement.
Secondly, the issue of the annual tax on vehicles with suspended registration remains unresolved. There are cars that are driven seasonally or only a few times a year. It would be logical that when a person is not using their car, the registration could be suspended and the annual tax would not have to be paid, the MP said.
Opposition Isamaa party meanwhile stands firmly against the car tax, the party’s deputy chairman Aivar Kokk says.
“There’s no need for a car tax, period! Isamaa is opposed its imposition in any form and has made a promise to abolish this unnecessary asset tax when it comes to power,” he said.
In his words, it’s enough to take a look at the result of the fine-tuning of the bill to see what its real purpose is — to collect money from the pockets of the Estonian people.
“This is a huge amount, which would affect the livelihoods of families and rural residents the most, in a situation where the government’s tax decisions and the rise in various excise duties and fees keep pushing up the cost of living,” Kokk said.
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