Finland moves to further reduce taxes on high-emission cars

Finland's government plans further tax reductions for older petrol and diesel vehicles, public broadcaster Yle reported on Tuesday.

The government intends to lower annual vehicle taxes on older internal combustion engine cars beginning in 2028, according to a draft proposal released for public consultation.

The planned measure follows an earlier decision announced during spring budget negotiations to provide €10 million ($11 million) in tax relief for owners of petrol and diesel vehicles more than 10 years old.

The government earlier approved a separate €50 million reduction in vehicle taxes aimed at older medium- and high-emission vehicles, arguing that the measures are needed to ease rising transport costs for low-income households.

Industry representatives, however, say Finland must accelerate the transition to low-emission transport if it hopes to meet its environmental commitments.

Tero Lausala, managing director of the Central Organisation for Motor Trades and Repairs (AKL), said the latest tax reduction would have only a limited effect on consumer behavior because the average benefit would amount to around €6 ($6.8) per vehicle annually.

He argued that larger tax reductions for high-emission vehicles would move policy in the wrong direction.

Finland has committed to halving transport emissions by 2030 and achieving carbon neutrality by 2035.

According to AKL estimates, around 900,000 rechargeable vehicles will be needed on Finnish roads by 2030 to meet emissions targets. The country currently has fewer than 400,000 such vehicles in operation.

Lausala warned that failure to reduce transport emissions could result in additional costs if Finland is required to offset excess emissions under European Union regulations.

He said Finland's tax system should be reformed to encourage lower-emission transport by shifting the focus from vehicle acquisition taxes toward taxes on vehicle ownership and use.