The government's plan to increase vehicle taxes on fully electric cars and plug-in hybrids would contradict Finland's EU commitments and the administration’s own programme, say researchers from the majority-state-owned VATT Institute for Economic Research and the Finnish Centre of Excellence in Tax Systems Research (FIT).
Four researchers co-authored a report showing that a rise in the vehicle tax would weaken the relative advantage of electric vehicles (EVs) – while noting that rapid adoption of EVs is essential for Finland to achieve its legally mandated emission reductions and avoid EU sanctions over the issue.
When the government led by PM Petteri Orpo (NCP) took office in mid-2023, it pledged to "implement measures to reduce emissions from transport that will not increase everyday costs for citizens," including developing the EV charging infrastructure and changing car taxation so as to wean the vehicle fleet off dependence on fossil fuels.
The platform promised that transport policy would "promote the use of sustainable modes of transport and reduce emissions".
The Finance Ministry, led by Finns Party chair Riikka Purra, is planning to increase the vehicle tax by some 35 million euros in 2026, mainly targeting EVs and plug-in hybrids. In recent electoral campaigns, her party has vowed to rein in the costs of traditional combustion-engine motoring and downplayed the need for further climate measures.
The Orpo cabinet has already changed fuel tax and distribution laws to benefit combustion engine drivers and cancelled purchase subsidies for EVs – all of which the researchers say will hamper the electrification of the car fleet and the reduction of traffic emissions.
"The planned vehicle tax change and previous decisions directly affect consumers' purchasing decisions and slow down the electrification of the car fleet. Such decisions are clearly at odds with Finland's climate goals and EU commitments," says VATT research professor Marita Laukkanen, one of the authors of the report.
Share of new EVs has declined
After several years of steady growth, the share of EVs among new car registrations and imported used cars has declined this year. As of the end of June, 8.8 percent of passenger cars were fully electric or plug-in hybrids, far lower than in neighbouring Sweden and Norway.
"The Finnish car fleet is being renewed slowly, so the share of electric cars is also growing slowly. Strong incentives are needed to electrify the fleet quickly enough. Without sufficient incentives, we will not achieve our climate goals on time," research professor Tuomas Kosonen warned in a VATT press release.
The Finance Ministry sent out its proposal to increase the vehicle tax on EVs and plug-in hybrids for a comment round, which ended on Thursday.
The right-wing government aims to hand its proposal to the Parliament in late September. The bill is likely to pass, as the four government parties have a 108-seat majority in the 200-seat legislature.
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