Car tax turbo procedure hits ditch

Photo: SCANPIX

For the time being, no change to taxation rules for of autos.

As proposed by Reform Party and IRL factions at Riigikogu, the car tax part is cut from VAT and Income Tax Act bill. Finance minister Jürgen Ligi (Reform Party) deems the step hasty.

In a way, the minister’s assessment is ironic, as for its very hastiness the said amendment was being criticised. Still, Mr Ligi thinks the factions’ proposal hastier yet. Even so, he does admit the haste-critique regarding bill was justified.

As chief reason for the said haste, next year’s budget with its gaping dozens-of-millions hole has been cited – under «financing of roads». According to Mr Ligi, the government stood as one for the very reason that the money was needed for roads construction. 

Hastiness versus Forethought

Now, leaving out the car tax thing, the hole in 2014 budget remains. Factions suggest covering the shortfall by additional assets sales and increase of dividends from state-owned companies.

Mr Ligi says such suggestions would ruin budget balance; furthermore, the state just lacks the options. «Over-the-usual dividends would worsen budget balance, and these are also not available. Neither does the state has assets to sell, in such volumes,» said he. The minister added that one-off revenue would not solve budget problems for years ahead.

Mr Ligi proceeded to blame factions in double-dealing. «For two months running, the car issue has been under discussion, but, all said, they admit the need for tax amendments in a small country; even so, the public is quite critical and that is not too constructive,» said he.

As his next step, the finance minister intends to again meet with factions, in order to explain to them the alternatives and make proposals to balance the delayed law. 

Sven Sester (IRL), chairman of Finance Committee, denied not that the above bills by ministry were headed in the right direction and that the state indeed needed to reduce size of the big budget hole. The problem, he stressed, was mainly in how the amendments were being made and that interest groups were not involved sufficiently. 

«The bills have come to the table fast, many issues are still unsettled. Taking time out is not hastiness, it is forethought,» said Mr Sester, rebutting accusations by Mr Ligi. «Government and parliament are two different institutions,» he underlined.

As was to be expected, interest groups were happy about proposal by factions. According to Chamber of Commerce and Industry director Mait Palts, this serves to show the dialogue has been fruitful.

Interest groups happy

The car sellers union AMTEL chief Arno Sillat rejoiced that it was not attempted just to force the bills through parliament; he expressed hopes that it is now possible to find solutions suitable for all.

According to Carri Ginter, a partner at law office Sorainen, who used to rebuke government and parliament for the «turbo procedure», this is indeed a noteworthy decision. 

«The decision to postpone an important decision in order to better analyse the issue and discuss it with interest groups, is a rare thing. Perhaps, one might dream, this is a sign of the steamroll politics becoming harder,» said he.

As decided by Reform Party and IRL factions, the aforementioned bill will not be including limits to deduction of input value added tax on cars used in business, rules to private and job rides, removal of €64 compensation for use of private car, and fringe benefits to cars. Also, they proposed raising ceiling for invoices checked in electronic value added tax return.

The proposal by factions needs to be officially confirmed, next week, by Finance Committee of the Riigikogu. Being a proposal by coalition, the committee will hardly fail to support it.

Therefore, the government and finance ministry must now continue working at the bills. One thing is certain: the planned amendments will not be entering into force on January 1^st, 2014.