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Finland: Radical road tax changes proposed

YLE NewsEye on the Arctic

Finland’s road tax system could be in for radical changes after a working group recommended the current lump sum payment be replaced by a charge of an average of 3.3 cents per kilometer driven, or 5.3 cents per mile.

The working group’s proposed reforms, which were presented to Finland’s Transport Minister Merja Kyllönen on Monday, would see a flexible taxation system introduced in Finland.

Owners of low-emission vehicles and those living in sparsely-populated areas will pay a lower rate than city-dwelling drivers of larger, less fuel-efficient vehicles.

Road freight and public transport would not be affected by the kilometer-charging scheme.

According to the working group’s calculations, the new scheme would keep taxation costs at current levels for car owners that drive 10,540 miles per year. The tax paid would rise in line with the distances driven, so those who drive less than the average could even see their tax bill drop.

The average tax would hit 3.3 cents by 2025, according to the proposals. Jorma Ollila, who led the working group, says that privacy issues should not be an obstacle to the reform.

Privacy concerns?

Ollila said that data would be gathered via satellite tracking, and held in an individual’s “account.” Information would then pass to the tax administration, which would only receive what it needed to set the tax payment. Real-time tracking of a vehicle’s movements is not technically possible under the proposed system, according to Ollila.

Setup costs would be around $180 million, while drivers would be expected to pay 10 euros a year -- $13.80 at current exchange rates -- for the tracking device installed in their cars.

According to Ollila, who used to lead Nokia and now chairs oil company Shell’s board of directors, the group did not even consider congestion charging—that was not part of its remit.

He claims that kilometer-based taxation could prompt drivers to cut out 30 million car journeys each year. He said that there was as yet no timetable for the new system, as that would require a political decision. No such decision has yet been made.

Transport minister Merja Kyllönen said on Monday that it would be best to introduce such a new system in stages with a long transitional period.

This story is posted on Alaska Dispatch as part of Eye on the Arctic, a collaborative partnership between public and private circumpolar media organizations.