The Finnish Government has reduced its rate of Vehicle Registration Tax (VRT) to a top rate of 25 per cent from 29-30 per cent, and in the process is expected to record an increase of about 11 per cent in car sales this year, writes Michael McAleer.
Last year in Finland 117,000 new cars were sold. As a result of the reduced rate, this year's figure is expected to rise to 130,000. Media reports in Finland claim consumer prices of cars have fallen by 8-10 per cent.
According to a spokesperson for the European Automobile Manufacturers Association (ACEA) the Finnish government has reduced registration tax on cars from 29-30 per cent on the customer price of cars to 25 per cent.
Finland, like Ireland, has one of the highest rates of VRT within the EU.The new registration rate was introduced as part of Finland's finance bill last Friday and the new rate will be backdated to January 1st.
The reduction comes as car distributors across the EU prepare to harmonise prices as a result of changes in block exemption rules introduced last year by the EU Commission. Previously car firms set different pre-tax prices in different states depending on the registration tax.
The new rules are due to be fully implemented by October 2005. Cyril McHugh of the Society of Irish Motor Industry (SIMI) has said it is likely the new pre-tax prices will replicate the ones in larger markets such as Germany, where they are 15-20 per cent higher than in Ireland.
Here, a study carried out by Goodbody Economic Consultants predicted that without a reduction in VRT, the price harmonisation resulting from the new rule on block exemption could reduce new car sales in Ireland by 9 per cent.
So far this year, with 41,617 vehicles sold up to last Thursday, the Government has collected VRT of over €242 million and VAT of €122 million.
According to the SIMI, in the first four months of last year motorists generated a total of 20.5 per cent of the tax bill.
In the last budget, the Minister for Finance raised VRT rates on cars with two-litre engines by about €2,000. Mr McCreevy included cars with engines greater than 1,901 cc in the top band of 30 per cent. Previously the band covered cars over 2,001 cc.