A working group established by the Ministry of Finance to consider transport taxation reforms has recommended that an increase in fuel tax is the most effective means of reducing carbon emissions.
The working group’s report said that a car tax, which is paid when motorists purchase a car, and an annual vehicle tax provide less incentive for motorists to reduce emissions. For this reason, the working group recommended that Finland shift the focus of taxation from vehicle tax to fuel tax, while ensuring that transport tax revenue remains unchanged. This would mean a reduction in the annual vehicle tax rate in line with reducing emissions. However, the price of petrol would increase by about 12 cents per litre and the price of diesel by 13.5 cents per litre.
“Emissions should be reduced because the fuel tax has a greater impact on consumers’ fuel consumption decisions than the vehicle tax, and the behavioural effects are targeted at those motorists with the greatest emission reduction potential,” the working group’s report noted.
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The report added that, in the short term, the fuel tax increase would reduce emissions, especially as hybrid and electric cars become more common. In the longer term, the change will affect not only transport issues but may also have an influence on people’s choice of residence.
Furthermore, the working group suggested reducing the car tax rate on electric cars, which would encourage consumers to purchase electric cars. However, the annual vehicle tax on electric cars should increase so that tax revenue would remain the same.
A report published last year by a Ministry of Transport and Communications working group said that Finland needs 700,000 electric cars in order to achieve that 2035 carbon neutral goal.
Source: YLE