Formal amendments to the Law on Vehicle Maintenance Tax and Company Car Tax are made with the aim of “preventing the registration of old and ecologically harmful passenger cars in Latvia”. But in reality, there is nothing to do with concern for the climate. The goal is solely to collect more money in the state budget, at the same time benefiting from the precious business of your dear friend.
Government calculation
By increasing the rates of vehicle maintenance tax and company car tax, it is planned to collect an additional 7.8 million euros per year. In turn, with the introduction of the vehicle registration tax, 15.6 million euros will be collected per year. Calculating the changes in the medium-term budget, the government intends to collect an additional 70,140,276 euros over the next three years. So more than 70 million. The draft law approved by the government and its annotation can be studied here.
When an even more draconian increase in car taxes was planned last year under the guise of climate concerns, public outrage cooled the government a little. The planned ban on importing used cars into the country was not accepted either, although the association of new and expensive car dealers “Auto Association” with professional lobbyist Andris Kulbergs under its leadership tried to achieve it at all costs.
The defective is looking for a market
A brand new car loses about a quarter of its value when rolled through the cabin door, more expensive brands also lose more than a third. That’s why even wealthy people refrain from buying brand new cars. It is a waste. In addition, an additional argument for such action is the problems of engine quality in the automotive industry in recent years. A large number of low-quality cars have been produced, which already live by the service during the warranty period, and now they are desperately looking for an outlet. Aldis Čīma, the head of the Latvian Association of Vehicle Dealers, explains its situation. This organization defends the interests of used car dealers and buyers. So, unlike the association “Auto Association” – the absolute majority of the Latvian car fleet. The average age of cars in Latvia fluctuates around 13 years. Only for one year more than in the much richer Finland. Such a fact is neither good nor bad in itself.
It is utter nonsense to declare a five-year-old car old. A car is almost as big an investment as a home, and the house is not demolished or rebuilt every five years.
Even the rich sitting in the government and the Saeima do not.
The poor will become poorer
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Once the machine has passed the roadworthiness test, it is in working order, and there has been no revolution in the world’s internal combustion engines in recent decades. So a newer engine does not automatically mean better. As for electric cars, for which the government promises zero tax, their performance has not increased significantly, but the price remains at levels below the average income level. This means that taxing used cars at a higher rate is unlikely to change the situation in the car market in particular, as there is no sensible alternative to a used internal combustion engine, but it will cause significant damage to household budgets. The Association of Vehicle Dealers points out in an open letter to the government and the responsible ministries: In these circumstances, it is highly likely that the vehicle registration tax will become a regressive tax, the main payers of which will be the poor. Thus, it is expected that old and environmentally harmful vehicles will continue to be purchased without achieving a significant improvement in environmental protection. In contrast, the poorest will have even less money at their disposal. “
An example with a family car
The association emphasizes that Latvia’s vehicle tax policy is unfair compared to that implemented in the neighborhood, and here is an example:
typical family car “VW Sharan”, 2-liter diesel engine, 2016 release. In Estonia, such a car is subject to a one-time registration fee of 190 euros, without further payments. In Lithuania – a one-time registration fee of 65 euros, without further payments. In Latvia – registration services cost 106 euros and vehicle operation tax annually 120 euros. If the Saeima accepts the changes in the law submitted by the government, a vehicle registration tax in the amount of 150 to 180 euros will have to be paid for the import of a five-year-old sharan into the country, depending on the diesel model. But the payment for a ten-year car will reach 536 euros. This is an unfair additional burden that the ruling coalition intends to impose on drivers from next year.
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