Sellers sour at new company car tax plan

Photo: cpa-omaha.com

These past months, finance ministry is in spotlight with plan to alter taxation scheme for private use of company cars. An object of scorn is ministerial desire to mark company cars used for private rides with stickers. 

Car dealers and service firms association (AMTEL) board member Sulev Narusk says the sticker seems strange. «I’d say this is old-fashioned to mark everything and then it is easy to tell on others,» he says.

Finance ministry deputy chancellor Dmitri Jegorov sees no problem. «Sure we cannot ignore the social control here. Which does totally exist even now,» said the official while admitting need for improved communication by the ministry.

«Like when you are on business trip to Tartu and stop at Põhjaka Manor to have dinner, that does not make the trip private. But when you go visit granny in the country and for the second year write that you are looking for real estate but cannot find it, people will smell something is foul,» explained the deputy chancellor and added all things must be approached reasonably.

Kilowatts not CO2

Worse than the stickers, for AMTEL, is that fringe benefit tax would be based on kilowatts of the car and not the exhaust fumes – as by the latter the state would also tax the environmentally harmful behaviour and enhance the green car trend, seeing that «CO2 is in good correlation with kilowatts and thus with the price of a car,» as explained by Mr Narusk who added that electric cars as a rule come with higher kilowatts yet are cleaner for the nature.

«Firstly, an electric car is more expensive to buy, and now this signal seems to be do not buy electric at all,» said Mr Narusk.

Mr Jegorov said the kilowatts surfaced while analysing the situation. «We wanted to link the tax to the value of the benefit, increasingly, and that’s the best link to the value as price may differ whether the car is purchased at a dealership or rented or gotten on secondary market,» he explained.

Also, the trouble is that older vehicles do not have CO2 cited technical passport, said Mr Jegorov.

Mr Jegorov does not think it right to favour purchases of electric cars by lower fringe benefit tax, as this would strongly smack of car tax.

Oldies favoured

AMTEL is also angry at old cars coming under tax incentive. «That would send the signal to go get an old used car in Central Europe and get tax incentive. While Estonia is suffering from a relative old car fleet as it is,» said Mr Narusk.

Mr Jegorov again begs to differ. «What would be the message if we would tax a ten year old clunker the same as a new car if kilowatts are the same?» He stressed that the benefit does differ.

He went on to say that on a new Honda CR-V an entrepreneur would pay €148 a month but for a car over five years old the sum would be €111. «Will the 37 Euros a month make one consider whether to get a new car from dealership of a six years old someplace in Europe? We do understand the thinking of AMTEL as they sell cars but we do not think it will have an effect,» he said.