Special offer: 1 car for the price of 2, offer valid only in Finland.
@ 10:23 am As we all know, the price of a new car is roughly 50% tax. Cars in Finland cost nearly 2 times the price in many other EU member states because of this extremely high tax. One might wonder what the rationale is behind it. It doesn’t make a whole lot of sense. It keeps the standard of living down in the country, keeps the average age of cars high, and keeps new safety and pollution control innovations from being used. The original thought behind it was that if someone has money to buy a new car, then heck, they certainly should have enough money to pay a hefty tax as well. It was also probably partly due to the Finnish government’s  being pulled in to stuff like this with its membership in the Nordic Alliance. But nowadays the Nordic Alliance has little significance compared with the membership in the European Union.ÂÂ
But the question this time is, do people really have money nowadays to buy new cars, or do they buy them with borrowed money? One workmate of mine looked up the owner of a Hummer with the registration plate number and got, owner: GE Money, holder: (some Finnish guy’s name) So it was purchased on borrowed money. The guy driving it probably had a fairly modest salary - that could have been looked up as well due to our lack of economic privacy in Finland. Basically, this means that the Finnish government is collecting taxes in the form of borrowed money. This must be going against all sorts of guidelines, and probably even laws. I wonder what the OECD or WTO would have to say about collecting taxes in the form of borrowed money? This is why most countries have little or no tax on purchasing cars, but rather have tax on using the car to help pay for the use of the road infrastructure. Likewise, there is usually no tax on the purchase price of land or buildings, since those types of property are often also bought with borrowed money, but there may be property taxes to help pay for the infrastructure, such as sewage, water, access roads, etc, especially if it is property inside a city.
The high car tax also creates the need for all sorts of elaborate protectionism, such as incredible amounts of bureaucracy needed to handle the customs payments on imported cars. There are detailed lookup charts for calculating prices which are based on statistical analysis of consumer prices, which couldn’t have been very cheap to make.  This also really crimps the liberty a Finnish person could and should be enjoying in the European Union. Most people in the European Union can buy a car from anywhere inside the EU without worrying about having to pay enormous amounts of money just to register the car. I think Finnish people democratically voted to join the EU because they wanted this sort of liberty. It’s high time for some changes in this area.
Here is a pretty good explanation of how cars are taxed in Finland.
Boy, am I glad that I bought my Volvo V40 in NL before coming here and hopefully that car will last for a loooong time to come. At until the day where the EU will have made an end to such taxing stupidity. After checking the same model on oikotie with the same km and age, I noticed the price was indeed TWO TIMES HIGHER!!!!
You know, in NL one can really nicely get around by bike and public transportation, which is absolutely not the case in FI. At the same time cars are so expensive here!! In NL buying a car is really cheap while it is even cheaper in neighboring Belgium and Germany. The expensive part is driving the car, which is exactly how it should be given the amount of pollution a car may create.
Comment by bafana — Thu, Jul 19th, 2007 @ 11:42 am
If you don’t like it, ride a bike or take the bus. It’s better for the environment too.
Comment by Kimmo W. — Thu, Jul 19th, 2007 @ 1:10 pm
Sorry to say this but this has got to be the most repetitive and pointless blog post here so far. Even the piece Kristian wrote earlier didn’t have anything new to say on the issue. You may think that writing the same stuff about the same things over and over again somehow makes it more interesting but it’s actually the opposite…
So stop wasting everybody’s time (yours too) and concentrate on new issues or at least new angles to old issues. Oh please Phil, don’t let the guest writers take over this blog for good!
PS. Your Hummer anecdote didn’t make much sense. Not the best car model to observe if you want to understand Finnish car owners and taxation… Also, are you saying that it is wrong to tax purchasing a commodity if people borrow money to buy it? That sounds so absurd that I must’ve misunderstood.
I really don’t want to discuss this issue for the nth time but I have to wonder if you understand the function of taxes in a market economy at all when I read this: The original thought behind it was that if someone has money to buy a new car, then heck, they certainly should have enough money to pay a hefty tax as well.
Comment by Pave — Thu, Jul 19th, 2007 @ 2:13 pm
“Also, are you saying that it is wrong to tax purchasing a commodity if people borrow money to buy it? That sounds so absurd that I must’ve misunderstood.”
No, he implied that it’s wrong to require people to borrow money to pay an exorbitant tax. Transportation is a necessity; they don’t have a choice. Pave, could you please read more carefully—even ask someone else to explain it to you so that you understand it better—before you write a long and rambling post that only serves to criticize others? It really detracts from the issue.
I agree with bafana. I would NEVER buy a car in Finland. It’s necessary to own a car 1-year while living outside of the country to avoid paying the tax when moving to Finland. I’ve done it a few times and saved tens-of-thousands of Euros.
Except if you live directly in Helsinki, public transit is sparse in Finland–and expensive! In fact, it’s even kind of sparse in Helsinki, despite it being a major city.
Getting around by bike is good in the Summer, but it rains a lot otherwise, and wintertime is icy. The buses aren’t equipped to transport bikes, so if you get caught in a downpour or with mechanical problems, then you might have to spend the rest of the day pushing your bike home.
Transportation in Finland is a ripoff all-around. There’s no denying it. It’s too bad because, with it’s long travel distances, people could really benefit from cheap transportation.
The reason for the car tax debacle is that, since a high-tax, socialist-style economy can’t function properly, keeping money within the borders is always a priority. The protectionist car tax scheme is one way it’s done. There are many others—all at the expense of those who live in Finland.
Comment by Kristian — Thu, Jul 19th, 2007 @ 2:21 pm
#3.
Pave, I agree, it all starts to look like crazy person mumbling, repeating same obvious fact over and over and over again.
Sirkus, did you tell “one workmate of yours” off? Or you didn’t even notice that he got “access to private information”?
Comment by Alex — Thu, Jul 19th, 2007 @ 2:59 pm
#3 I agree with Christian: Pave, you are rambling and you obviously didn’t catch the meaning of the article, which was that governments, (other than Denmark’s and Finland’s), typically do not collect tax money that is in the form of borrowed money, such as on buildings, land or vehicles.
Link to car taxation infringement procedures by the European Commission against Denmark and Finland. It seems that the Danish government is lacking common sense as well.
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/06/1877&format=HTML&aged=0&language=en&guiLanguage=en
Comment by Sirkuspelle — Thu, Jul 19th, 2007 @ 3:00 pm
Kristian, what is the definition of “required” here: “No, he implied that it’s wrong to require people to borrow money to pay an exorbitant tax. “
My understanding is that no one is forcing you to buy car with own or borrowed money.
Otherwise we can start whining about anything - “I want to live in this house, but I have only 500 euro. Why am I required to borrow money to buy it?”. Exaggerating, but you get the point.
Comment by Alex — Thu, Jul 19th, 2007 @ 3:03 pm
#5 No, I didn’t tell him off, since that information is not private. It is legal for him to access it and the driver has not requested his name to be removed from the registry. So the information is there, for anyone to buy. In my previous blog entry, I point out that you do have a right to object to this particular use of personal data. You can ask them not to reveal your name, and when somone looks up your registration plate, they will get no name.
See:
http://www.finlandforthought.net/2007/07/04/what-happened-to-my-right-to-object
Unfortunately, you are given no right to object to your tax records being published, sold, and put in the internet.
Incidentally, I have never written about car taxes before, except briefly mentioning them. Kristian wrote an article a while ago, which I linked to here. The point of this article was that the Finnish government is knowingly collecting taxes on new cars in the form of money that is borrowed money.
I would be interested to know if anyone has come across any guidelines or laws regarding taxation collected on purchases that are widely known to be done with borrowed money.
Comment by Sirkuspelle — Thu, Jul 19th, 2007 @ 3:29 pm
Alex, can I assume that you are a student (or even worker) who lives in Helsinki? Commutes by bus/tram? So maybe transportation isn’t an issue for you?
That’s not meant to be condescending, but the reality is that most people live outside of the city region. And unless they are content sitting at home and collecting welfare—in which case, bike and public transit fits the lifestyle nicely—then one NEEDS a car.
With that said, one can easily live without a car in central Europe. I’ve done it. It’s not so easy in Finland though, unless you have LOTS of time to waste on getting around.
Comment by Kristian — Thu, Jul 19th, 2007 @ 3:36 pm
I don’t see the problem with paying tax on borrowed money. In reality your paying tax on the object, which if all things going as planned, you will eventually own in full.
The real issue is taxing taxes. Lets tax the car 100% at the time of importation and then lets tax the tax at 22%.
The other issue here is alternatives. Bikes are not alternatives. You can’t carry a week’s worth of groceries for a family home on a bike. You can’t reliably use them in the winter. (Yes, I know many of you psyshos use them in the winter.) Many of the roads, both inside the city and in the countryside are not designed for bike transport, especially those with the adjoining ditch. (You are also 5 times more likely to die while biking in a Finnish city.)
Public transport does not cut it in the countryside either. Both bikes and busses are fine, if you don’t value your time, but many don’t have the added time to waste.
Oh, yes, even the EU has a problem with this taxation. I also have some friends who imported their cars, were made to pay tax anyway, and are still waiting for the refund as they are entitled to one. I understand that the Government waits until the very last moment to give the money back. How is that for treating people like cr*p.
Comment by Fred Fry — Thu, Jul 19th, 2007 @ 3:52 pm
#8
Kristian, I am living in Tampere, somewhat 8-10 km from the city center. Graduated 1997, driving every day, rarely taking a bus. The car is not second hand, was bought with own money (0 borrowed).
And I totally support your position about needing a car, especially for families. Hardly can imagine the grocery shopping for family of 4 done using a bus…
Still no one is forcing anyone to borrow money to buy a car. Try to force me (or you, when you said that you are never going to buy car in Finland).
As for paying tax with borrowed money - don’t people do that every now and then, e.g. when buying TV or furniture on borrowed money?
Comment by Alex — Thu, Jul 19th, 2007 @ 4:16 pm
Ha:
“Irritation grows over taxes: Norwegians have long accepted high taxes to finance their social welfare state, but a new survey indicates rising dissatisfaction and, in some cases, outright hatred of some taxes that are viewed as way too high and unfair.”
http://www.aftenposten.no/english/local/article1891543.ece
Comment by Fred Fry — Thu, Jul 19th, 2007 @ 4:58 pm
Alex, in practice people are being forced to borrow money to pay the car tax ripoff. The fact that I’ve been able to avoid it is irrelevant. And that you payed it without borrowing is also irrelevant.
“As for paying tax with borrowed money - don’t people do that every now and then, e.g. when buying TV or furniture on borrowed money?”
Yes, and why not tax cars at the same rate as everything else? —22% By the way, Finland’s current practices are illegal according to treaties it signed with the EU; it’s already been tested in court.
Comment by Kristian — Thu, Jul 19th, 2007 @ 5:01 pm
No, he implied that it’s wrong to require people to borrow money to pay an exorbitant tax. Transportation is a necessity; they don’t have a choice.
That’s totally and utterly absurd. How does this require borrowed money? I personally don’t know anyone who borrowed money to buy a car (I bet the Hummer guy could’ve afforded something cheaper but just wanted a Hummer), once again it would be nice to see some statistics on this.
And even if the tax made people borrow money to buy cars it’s just an issue of politics. The tax is a tool for the state to make adjustments to economic life in Finland (something that libertarians obviously don’t like). If people disagree with the state, they vote new legislators to power (I know this is something you’re trying to have an effect on). Calling it illegal or whatever is a bit silly.
Plus: People buy all sorts of things with borrowed money (without anyone forcing them!), most of all apartments and houses. The state has all kinds of taxes and restrictions that keep the prices higher than they would be in a “free” market. And I would say housing is a lot more of a necessity than transportation. So surely the government (and every other government in the world) is making life difficult for normal people who just want to live in their own place? To the “barricades” Sirkuspelle and Kristian!
BTW Kristian, did you edit your comment after reading mine? I swear I didn’t see a response to me there earlier. Just saying, it’s kinda distracting when the comments change.
Comment by Pave — Thu, Jul 19th, 2007 @ 5:30 pm
Hey, if people seem to be so happy about paying high prices for groceries and they happily pay the car tax without fuss, wouldn’t you take advantage of that? If you could get people to hand over 2x more cash without a fuss, wouldn’t you?
And the folks claiming it’s good for the environment crack me up as they’re the same people who refuse to believe the deforestation going on around Finland and other environmental problems…but somehow big taxes on cars saves the environment. Sure.
Comment by hfb — Thu, Jul 19th, 2007 @ 5:35 pm
High taxes are usually defended by claiming that they are needed to take care of the poor, sick etc.
If you look at some statistics, you can see here that taxation is indeed really really high in Finland:
http://www.nationmaster.com/graph/tax_tot_tax_as_of_gdp-taxation-total-as-of-gdp
3rd highest in the world. That’s pretty bad, but hey, we must get the 3rd best heathcare too, righ?
http://www.nationmaster.com/graph/hea_hea_car_fun_pub_per_cap-care-funding-public-per-capita
Wrong. Makes you wonder where all the money really goes?
Comment by Anonymous — Thu, Jul 19th, 2007 @ 7:03 pm
In the US the government spends more money on healthcare than in Finland both as a % of GPD and the actual figure. Now, I know that the US system is quite inefficient and costly, but that’s not the point. How come a scary, competitive neo-liberal society can afford to spend more on it’s healthcare than a caring welfare state even though they tax much less?
Comment by Anonymous — Thu, Jul 19th, 2007 @ 7:17 pm
Sorry to spam these, but here you can see where Finland sucks/rocks:
http://www.nationmaster.com/country/fi/Top-Rankings
http://www.nationmaster.com/country/fi/Bottom-Rankings
Comment by Anonymous — Thu, Jul 19th, 2007 @ 7:41 pm
Pave, as you can see, we posted at similar times; I saw yours only after I sent mine. I figured an additional comment would be superfluous, so I changed the original instead. It wasn’t meant to trick you.
Insofar as the illegality of car tax goes, Sirkuspelle’s comment about infringement proceedings explains it. So, it’s not “silly” as you say; there’s legal basis behind it. And for those who don’t borrow money directly to buy a car, paying—e.g. 10K or 12K—for car tax just means their home loan will be that much higher. Either way, it’s borrowed money.
This is the wrong strategy at a time when Finland is trying to attract highly qualified professionals to pay for its aging population. Consider our comments an ‘early waring system’ for those considering it. It gives them a chance to figure the ripoff into their calculations.
Comment by Kristian — Thu, Jul 19th, 2007 @ 9:39 pm
Some funny opinions I noticed. Since when is a car a commodity (elsewhere than in Finland) and who borrows money to buy, among other things, furniture? Just goes to show what a REALLY RICH country this is…..
Comment by Punter — Thu, Jul 19th, 2007 @ 9:50 pm
High car taxes, they then take 60% of Income, and at the end of the day, you get the privilege to stand in a Medical Line for some mediocre medical opinion. ARe second opinions even allowed? No?
Phil, you make the USA here look real nice, paved with golden streets, lots of cheep rum, party with the sailors, pretty girls for all, and best point you made: A Hummer in every driveway.
Yep, theys why I live in the USA. Its a man place.
Comment by winter “Yea, Proton Power, now in remission†— Thu, Jul 19th, 2007 @ 10:34 pm
Kimmo:
If you don’t like it, ride a bike or take the bus. It’s better for the environment too.
The trouble is that when you’ve committed the atrocity of buying a car, there really is no financial incentive not to drive everywhere (unless it’s a Hummer or equivalent). Let me give you my situation as an example: I live in Helsinki, work in Espoo temporarily. My Helsinki travelcard is valid until the end of August, but crossing the city border costs me over 3€ every time. So, going to work by bus costs me over 6€ per day and takes about two hours total. Driving to work (appx. 20 km) takes about 30 minutes total. The fuel costs of driving to work are about half of the bus ticket. Hell, I can’t afford to take the bus. I’m poor!
About the environmental basis of car taxation, we should consider that you can get a big, ugly Korean SUV for 25k, whereas you need to shell out nearly 40k for a Toyota Prius (which is the only hybrid available in Finland). I don’t mind heavy taxes on cars, it’s just the tax structure that is messed up.
hfb:
And the folks claiming it’s good for the environment crack me up as they’re the same people who refuse to believe the deforestation going on around Finland
Is there really a deforestation going on? I’d like to see your source on this. You know, trees have this peculiar tendency to grow. The issue is and has always been biodiversity, not deforestation.
Punter:
who borrows money to buy, among other things, furniture? Just goes to show what a REALLY RICH country this is…..
Yeah, Finland is really the only country in the world where people have credit cards. The things we have invented!
Comment by Freeridin' Franklin — Fri, Jul 20th, 2007 @ 12:17 am
Freeridin’ - Drive north….note the often horizon to horizon view sans trees. They grow, sure, but not as fast as you can chop them up for cheap Ikea furniture and expensive wood products. I drove around lapland the autumn before last as was pretty shocked that the greenpeace hippies weren’t exaggerating like usual.
Comment by hfb — Fri, Jul 20th, 2007 @ 12:51 am
Punter: Some funny opinions I noticed. Since when is a car a commodity (elsewhere than in Finland) and who borrows money to buy, among other things, furniture?
OK, commodity wasn’t perhaps the best word. But as Franklin said we’re not the only country with credit cards.
Kristian: And for those who don’t borrow money directly to buy a car, payingâ€â€e.g. 10K or 12Kâ€â€for car tax just means their home loan will be that much higher. Either way, it’s borrowed money.
Twisted logic there. First of all home loans are not required either. And if it were the car tax wouldn’t be any special compared to other forms of state intervention. Are you suggesting we get rid of all taxes as they all make the home loan higher? Stick to the real arguments like the age of cars in Finland and the problem with imported cars.
I figured an additional comment would be superfluous, so I changed the original instead. It wasn’t meant to trick you.
Yeah I didn’t think it was but it would really be easier if you submitted a new comment instead of editing the old one because at least I don’t notice editing unless someone refers to it.
PS. Heh, I stratched my head for several minutes wondering what infringement proceedings Kristian was talking about until I noticed that a new comment by Sirkuspelle has mysteriously appeared at #6! I have to reply:
#3 I agree with Christian: Pave, you are rambling and you obviously didn’t catch the meaning of the article, which was that governments, (other than Denmark’s and Finland’s), typically do not collect tax money that is in the form of borrowed money, such as on buildings, land or vehicles.
I caught the meaning of the article, it was just too absurd to believe! 1) Show me a statement by Danish or Finnish government officials that says anything about not taxing borrowed money. If nothing else they get the borrowed money via taxing the sellers. (Houses and land are not taxed because the state wants to encourage buying them, unlike cars.) 2) Show me proof that a lot of Finns borrow money to buy a car. Better yet, show me proof that they borrow money for it because they wouldn’t afford a car otherwise (regarding the Hummer example).
People buy stuff with credit cards too. How is the government to stop them? It’s inevitable the state will tax borrowed money.
BTW your link didn’t say anything about borrowed money either.
Comment by Pave — Fri, Jul 20th, 2007 @ 2:39 am
I’ll be brief this time: in the US —if I’m following what you’re saying correctly— nearly *everyone* buys a new car (and pays its taxes) with a car loan, so isn’t that paying taxes with “borrowed money” ? Tax rates differ by state and are much lower (7.9 % where I am), but from the looks of things, that’s been discussed here before.
Comment by Cordelia — Fri, Jul 20th, 2007 @ 3:15 am
Pave: “Twisted logic there. First of all home loans are not required either. ”
The logic isn’t twisted, but you’re right in that home loans are not required. One can rent indefinitely. And paying 10K to 12K per-car makes that more likely.
Pave: “Are you suggesting we get rid of all taxes as they all make the home loan higher?”
No, I suggest adhering to the agreement Finland signed with the EU. Newly imported cars should be taxed at the same rate as ones already in the country. That should solve most of it.
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/06/1877&format=HTML&aged=0&language=en&guiLanguage=en
Pave: I caught the meaning of the article, it was just too absurd to believe!
Just because you didn’t understand something doesn’t mean it’s absurd.
Comment by Kristian — Fri, Jul 20th, 2007 @ 3:16 am
Off topic:
Hfb, maybe you saw the areas in Lapland where the previous generation had to chop down the forest, to pay war reparations to Soviet Union. It is true, that in these areas the trees grow really slow. It’s too bad, but maybe it had to be done. It’s not something that’s going on anymore, though.
Comment by hnd — Fri, Jul 20th, 2007 @ 8:22 am
#24 Pave: I am still looking for guidelines or laws regarding collecting taxes on items that are, in most cases, bought with a loan, like cars, land and buildings.
The infringement procedure is because of discriminatory taxation policies. Namely, the EC wasn’t satisfied with how the Finnish taxations was taking depreciation into consideration.
The simplest thing to do would be the common sense thing to do: tax the usage of cars, not the purchase of them. That would get rid of all the need for all this protectionism, that keeps ending up in the EC and European Court of Justice. The other thing that the EC doesn’t like is that the Finnish government hasn’t given people who move here from another member state for a temporary work contract the right to bring a car without having to pay the ripoff registration taxes, which usually maens 10-20K EUR, which is illegal.
BTW I have been driving an 86 Peugeot for about 3 years. I paid 200 Euros for it. In this way, I well avoid the ripoff cycle.
Comment by Sirkuspelle — Fri, Jul 20th, 2007 @ 9:26 am
Pertti Hemilä recently did an official question to the government regarding this on 20 June 2007. Here is his question and the answer. Unfortunately, it is only in Finnish and partially in Swedish. Bascially, Pertti asks if the government intends to do something about the taxation of new cars, which prevents people from having all the latest pollution control, fuel economy and safety innovations. Jyrki Katainen answers (28 June 2007) in a pretty vague and wordy way, talking about how the government is working on a tax model where taxation will be based on CO2 emmissions (fuel consumption), how it will take time, about taxing road use and how expensive it will be to do something like this, and perhaps in the future there will be use of satellites to track this and tax them based on that. Generally, it was an answer that leaves one scratching their head, and lacking confidence that something is actually being done about it.
http://www.eduskunta.fi/faktatmp/utatmp/akxtmp/kk_213_2007_p.shtml#VASTAUS
Comment by Sirkuspelle — Fri, Jul 20th, 2007 @ 9:57 am
Sorry, I misspelled Pertti Hemmilä’s name. It is “Hemmilä”.
Comment by Sirkuspelle — Fri, Jul 20th, 2007 @ 9:59 am
And regarding taxing of borrowed money. True, people do use credit cards and consumer loans. But the case of buying a sofa or TV that costs 1000 EUR and paying 22% tax is different from the government collecting 10,000-20,000 Euros, which is typically what is taken when a new car is purchased, and which is money known to be borrowed is a different story. The taxation on consumer goods is 22%, as opposed to 20-30% tax and an extra 22% tax upon that tax that the Finnish government is not allowed to call VAT by the European Commission. (There is another EC infrigement procedure going because of the Finnish government treating this 22% tax-on-tax like VAT in its deductibility for businesses. The whole thing is just one huge mess.)
“Jante Law” Legislation always leaves a big mess to clean up later. The new current government has to clean all this mess up that the previous governments have made using the Jante Law as the model for justice and legislation.
Comment by Sirkuspelle — Fri, Jul 20th, 2007 @ 10:12 am
When I am in Tallinn, I often wonder what Finnish tourists dragging their heavily-laden “beer trollies” think when they wait for the light to change on streets filled with Estonians driving by in top-of-the-line BMW’s, Mercedes’, Audi’s, etc.
I personally think the display of fancy cars in Tallinn is rather immature but I do see Finns looking on with abit of envy.
Comment by Peter — Fri, Jul 20th, 2007 @ 12:55 pm
#22: “The trouble is that when you’ve committed the atrocity of buying a car, there really is no financial incentive not to drive everywhere”
I agree on that. It would certainly be more environmentally friendly to focus the tax burden on the use, rather than the ownership of a car. I would very much like to be able to afford a second car at my country summer place several hundred kilometres away, which would allow me to travel the long distance in the comfort of a train and use the car at the other end for getting around locally.
Trouble is, that the people who like to complain about high car taxes rarely see higher fuel taxes as a viable alternative.
Comment by Kimmo W. — Fri, Jul 20th, 2007 @ 12:59 pm
HND - I don’t think so as it all looked pretty fresh. Even my husband was rather shocked by the landscape. It ain’t your grandpa choppin’ down those trees.
Comment by hfb — Fri, Jul 20th, 2007 @ 2:40 pm
#32 higher fuel taxes is a thought, but the fuel is taxed just about as much as the market will bear, so that there is no more room to play with there. I agree, a direct fuel tax would be one way of taxing C02 emissions. However, when there was a short-lived fuel crisis a while back, British truck drivers started protesting and even managed to cripple a major shipping port by blocking the entrance. A few big protests like that can start the economy of a county to go spiralling downward in a matter of days.
And, hopefully you won’t have to pay tax on a parked car in the future, one that is not emitting CO2. You might be consider getting a moped car (Aixam, for example) for use at your summer place. In that way, you avoid all the car taxes, future CO2 taxes, etc.
Comment by Sirkuspelle — Fri, Jul 20th, 2007 @ 2:43 pm
Back to the original post about prices, just got back from a motorcycle dealer who is searching for a bike to import on my behalf from Holland/Belgium. Price including a €500 fee for him approx €3000 before tax. Checking the Finnish Customs page shows me a tax fee of approx €1500 making a grand price of €4500. Now the same bike is for sale at a local dealer that services my current bike and what is the Finnish price I hear you ask? Try €10600. That’s right, €10600… Keep in mind of course that this is a “SUOMIPYÖRÄ” so we know that means it better. If you consider the dealer in Holland is making money on the sale of the bike at €2500, what do you think is the difference in real price?
Of course The Netherlands is also a rich EU member State that has very good social services and is also a high taxed country (sound familiar) however they have obviously seen the light somewhere. We poor people here in Finland will buy their old used vehicles and use them while still telling everyone what a rich and advanced society we have and how Finland really is a model of economic success. Go figure.
Comment by Punter — Fri, Jul 20th, 2007 @ 3:46 pm
Ha! Am moped car… How ’bout one of these instead?
http://www.youtube.com/watch?v=-N2ZvnplZsY
As for Holland, sure it has all those social services of Finland and more. But it’s not as highly taxed. Although it’s not the lowest, it does sits geographically nestled between the low-tax powerhouses of Germany and UK…
http://www.nationmaster.com/graph/tax_tot_tax_as_of_gdp-taxation-total-as-of-gdp
But I see what you mean about the “SUOMIPYÖRĆtrademark adding and extra 130% to the price.
Insofar as taxing fuel, sure, let them do it. I’m sure we can all pay for our excursions to Estonia with the money we save from filling-up our tanks there.
Yet one more thing for Finns to be jealous of Estonians about
This is the last country on Earth where transportation should be restricted. Why can’t we just have all-around prices that are competitive with the rest of Europe?
Comment by Kristian — Fri, Jul 20th, 2007 @ 4:13 pm
It is not just Tallinn with those new cars. I recently spent a week in Riga and the place was full of new luxury cars. I never saw so many BMWs in my life, and I sailed on a car carrier taking them to the US! Not just BMWs either. There was the rull range of luxury cars on the road. I only saw three Ladas the whole week.
Comment by Fred Fry — Fri, Jul 20th, 2007 @ 5:57 pm
Well, I’m in here only for a “history lesson”. Back in the “good old days” as in 1959 when the *temporary* car tax was first implemented, it was out of necessity. There was no domestic car production, so cars had to be imported, with hard currency. So you had to get a licence to spend frivolous amounts of foreign currency, so people had to have a “need” for a car. So a taxi driver, a veterinarian, a business… and there were queues. And there were then queues for those people who had a licence to buy - to then actually be able to buy a car, as the quotas were strict. However bilateral trade with the USSR and the bloc countries ensured you could get a DDR-made EMW in 1950 with much less hassle than a west-made BMW. So then the government decided to scrap the quaota system, and hit the importers with a tax, so as to compensate for the loss of currency. Time goes and goes and nothing is said of *temporary* no more. And the car tax used to be 120% + the 22% VAT, so people ought to stop whining about the 30% paid at present. Or then go to Denmark, where its 180% +25% VAT.
Comment by Hank W. — Fri, Jul 20th, 2007 @ 9:28 pm
[i]I’m sure we can all pay for our excursions to Estonia with the money we save from filling-up our tanks there.[/i]
Ummm… round trip with a car is 80 euros. Filling up is 45 euros/50 liters, so really no profit. Gas prices in Estonia have gone up as heck.
Comment by Hank W. — Fri, Jul 20th, 2007 @ 9:30 pm
Did you guys know that the car tax was supposed to
be temporary when it came into being back in 1958?
Here is a very good article about “50 years of
“temporary” car tax”.. Sadly. In Finnish only.
http://www.overdrive.fi/autovero50/
Comment by Who is it. — Fri, Jul 20th, 2007 @ 9:47 pm
Cordelia: “I’ll be brief this time: in the US â€â€if I’m following what you’re saying correctly nearly *everyone* buys a new car (and pays its taxes) with a car loan, so isn’t that paying taxes with “borrowed money†?”
The 7.9% you pay in the US is minuscule. Car tax in Finland equals roughly (or nearly so) the value of the car. Hence, cars cost about half Finland’s price in the US.
Also, the 30% that Hank mentions in #39 is irrelevant, since the issue being pressed by the European Court of Justice concerns depreciation schedules. By using an illegal depreciation schedule, the effective tax in Finland is nearly 100%. Not 30%.
And yes Fred, eastern Europe is awash with luxury cars—BMW’s, Mercedes, etc. Rising standard of living for sure.
Comment by Kristian — Fri, Jul 20th, 2007 @ 10:59 pm
#39:
Thanks for the history lesson. I always suspected that the car tax was imposed for that reason: to limit hard currency use to buy a “frivolous” consumer good. Perhaps, it is time for Finland to consider itself no longer a developing country and dump the tax.
With that being said, most of the BMW´s etc. being tooled around Estonia are bought on credit, which has been happily supplied by Nordic-owned local banks borrowing foreign currency from aboard to re-lend to their local Baltic customers. The Nordic owned banks are falling over themselves trying to wrestle market share from one another and have been lending on very favourable terms to locals to secure that aim. One wonders if this excessive credit extension is imprudent to the economies, to the individual borrowers and to the local banks and banking system.
That is one reason why the current account deficits in the Baltic countries are so high, to the point where they, the Baltic States, are being put on watch list by some of the rating agencies with respect to their sovereign ratings.
In many ways, at least in developing countries, current account deficits should be used for investing in productive infrastructure - such as new factories which can make export competitive products - than for the local post-communist super consumers to have an competitive social advantage in terms of a fancier car than their neighbours.
Comment by Peter — Sat, Jul 21st, 2007 @ 1:34 am
http://www.cemt.org/online/council/2003/CM0303Fe.pdf
The above(lengthy) research report shows that Finland taxes cars already too much.
The research is based on a general equilibrium model of the economy. The model takes into account the benefits that transportation produces (business produces more with quicker and less expensive transportation cost) and the social coasts transportation causes (pollution, accidents). The model was first run to simulate the current taxes and charges, then it run to simulate the optimal (=welfare maximizing) taxes and charges. Then the differences in welfare, government revenues etc. was calculated.
The model was applied to five european national economies: UK, Germany, France, Netherlands and Finland. Of the researched countries, only Finland is over-taxing transportation. The other four would and will benefit from any new CO2-tax. Finland will not. Or more accurately: the welfare of Finnish population will decrease, but the public organizations getting even bigger share of the GNP will benefit.
The report shows that optimally Finland would have a different tax structure, but most importantly it shows that welfare would reach its highest level if the the total money collected from cars were reduced by roughly 20%. With the optimal taxes the government would have to collect about one billion euros less than it did (data was from year 2000).
I consider this is one more example of researched facts about Finnish myths silenced to death by the politicians and bureaucrats. Instead, in the beginning of its reign the current center-right government agreed to increase the total amount of money collected from transportation (I don’t remember the exact numbers now, but I’m sure their hallitusohjelma could be found somewhere). Car taxes are purely fiscal taxes, the CO2-rhetoric is there to make the citizens feel quilty. Guilt is a great booster on willingness to pay. And we do feel guilty!
Comment by Mara — Sat, Jul 21st, 2007 @ 4:39 am
The Finnish tax system is in general about the same as in other rich EU countries. The car tax is strange exception, though, and counter-productive in many ways. Finns drive old cars wasting fuel and polluting more than necessary. What’s that about, really?
Hummers and such should be taxed even harder than they are now but an average family car should be taxed according to how much they waste and pollute, like in other civilized north-European countries.
But the change is gonna come. This or the next year the yearly tax on diesel and other fuel efficient cars will drop. But the big question is if the present government can revamp the whole system: big cars are a big to Kokoomus and Keskusta.
Comment by Anon — Sat, Jul 21st, 2007 @ 9:47 am
I don’t always agree about some blog article or comments, but I have to say that this article describe quite well and acurately the situation here in Finland concerning car price.
I have some friend who visited me from France and asked me why i was still having my old car. I just showed them the car price found in some finnish web site (oikotie, etc…). He was shocked and told me to buy a car in France..then I told him about the Custom/tax…He couldn’t believe it…
Beside that, my friend in general were shocked by high price in many products in general… Then i told them about land price as well, they started to laught, since when coming by plane they were wondering where was the city as empty land and forest were everywhere.
At the end, they left and agreed that Finland was a beautiful country to visit ..but not to live in…
Comment by Anonymous — Sat, Jul 21st, 2007 @ 10:55 am
#45:
That would be welfare-increasing, but that was not in the current government’s proposal. Their aim is to increase the total amount of taxes and charges collected, and to do it in a way that keeps Finns driving and paying. Reducing pollution is not as high up on their list of interest. Clean environment is mainly used as a convenient policy argument when explainig decisions to the unhappy voters.
Their thinking seems to be that at current levels taxes on production (work and productive capital) are even more damaging to political support and government income than taxes on consumption.
Transportation is both production and consumption, and the current taxes aim at targeting consumption and going lightly on production. Since the vehicles in business use are normally driven more and “utility vehicles” are usually diesel powered, we have a high yearly fee on diesel vehicles and lower tax on diesel fuel. With the current taxes, the rule of thump has been that you should consider driving diesel only if you drive clearly over 20 000 km/year (and even then calculate carefully). This ability to separate taxes between production and consumption has been a definite attraction to the government. The fact that it doesn’t fit into post-industrial society hasn’t quite sunk in yet.
My bet is that the other EU countries are going to increase their taxes on transportation. For the four other countries researched in the study, that would be welfare enhansing. Of course Germany and France also have domestic car industry, which makes lobbying for higher taxes on cars and driving a challenge.
Anyway, if the Finnish government did the right thing and lowered the yearly fee on diesel and fuel efficient cars, they would have to substantially increase the amounts collected via gasoline and diesel tax, and/or tax on car purchases. Those would still increase the cost of living through transportation costs and cost of housing, and our purcasing power would go down even further.
How then to lure all the finnish ex-pats & foreigners to live and work here? (Especially when we are as racist as we are, so the acceptable foreigners would have to look and live pretty much like we do, a major restriction).
The high tax has already created a need to live either so close to center/work that you rely on public transit, or to move to the outer rings and have a car for every driving-age household member. The housing prices have adjusted accordingly, the “move beyond the ring” has gained support, and now the “metropolization” is the trend. That has sped up the value differentiation between city parts, and lowered the relative value of the geographically in-between suburbs, mainly 60’s and 70’s apartment areas. That’s what the social scientists are so worried about (a negative spiral of lower real estate values, decreased services and increased social problems).
The parties with traditionally urban support are also worried about the trend, but mainly because it erodes their tax monopoly: only for the last ten years or so the metropolitan citizen has been able to vote with his feet and commute from a near-by city. That puts enormous pressure to provide good value for local taxes, the most unconvenient truth for the local politicians and bureaucrates. That’s why there is such a great political urgency to merge local governments in “growth centers” or at least block the competition by “metropolitan policy” agreements about land use and transportation.
As funny as it may sound, in this matter the center party has the most potential to promote environtally friendly transportation policy, including taxes on transportation. An that’s because the center party has its local government positions to protect, not because the party would care more about the CO2, particulates, noise, or any other external cost. (Greens accept whatever to stay in, they use their position to voice their views, not to vote for them).
The political division of power explains why center party is not blocking Helsinki overtaking Sipoo, and at the same time claiming that the principle should not apply to other “growth centers” like Jyväskylä.
Comment by Mara — Sat, Jul 21st, 2007 @ 12:33 pm
Mara, you have excellent arguments.
Generally, I’m not in favor of environmentally based taxes if they affect older cars. It just means those cars will be exported and used somewhere else, and those people with less money will continue to be denied the opportunity to own used cars at EU market prices. I guess a regressive scale would be ok—new polluters get hit worse than old ones.
If protectionism needs to be considered, then a progressive scale based on value should be used. It probably makes the most sense, but it won’t be popular with those who want expensive cars—i.e. many c-r supporters.
I’m worried that the politicians are going to botch this and favor their own special interests. That means the poor farmer in Savo who buys that 10-year-old Opel farmariauto will continue to pay 15K instead of the 8K market value. And we’ll all need to finance the difference with farm subsidies and other transfer payments.
The Finnish Ponzi Game(TM).
Comment by Kristian — Sat, Jul 21st, 2007 @ 3:27 pm
Reply to Kristian’s reply at #42: Hey, Kristian, that’s why I wrote the tax rate in my reply— I’m learning a lot here, the stuff about the “temporary” nature of the tax is fascinating, perhaps opens a door for legal recourse ?— I was asking if things worked basically the same way, i.e. if folks in the US could be considered to be paying tax on borrowed money. The difference in rate is not in question. I’ll add though, that I once paid a similar rate of sales tax on a new car, then moved to another state, where my car was then taxed as “property” every year! Let me make it clear that I am not whining, only comparing. Denmark, e.g., sounds rough when it comes to car purchases… Regards–
Comment by Cordelia — Sun, Jul 22nd, 2007 @ 5:36 am
the only reason ppl wanted into the Eu was because they we’re promised more work, and cheaper car and booze prices. now all those 3 proved to be lies. so I want out.
never trust anything the government, corporations and their bosses or anybody in the establisment says. it’s always only lies.
Comment by O'reilly — Sun, Jul 22nd, 2007 @ 6:42 pm
1). Work—you can work anywhere in the EU;
2). Booze—you can bring it from anywhere in the EU; and
3). Cars—same thing, except for the illegitimate car tax scheme.
Two-out-of-three is better than nothing. And the EU is working on #3. It’s not the EU’s fault that the government refuses to give you a square deal.
Same with #1 and #2; but at least you can get them somewhere else. It’s better than before when there was really no choice.
Comment by Kristian — Mon, Jul 23rd, 2007 @ 3:02 am
testing, ignore
Comment by Anonymous — Mon, Jul 23rd, 2007 @ 10:24 pm
“…Drive north….note the often horizon to horizon view sans trees…”
Well, the trees don’t grow on jänkä…
Finnish Forest Research institute has reported an increase from 259Mm3 to 341Mm3 in total wood volume at Lapland forest center’s area since the beginning of the 1970’s. Annual loss in the volume has been slightly more than annual growth in the 60’s and early 70’s, but the growth has exceeded loss ever since.
20% of the area is already off-limits for the wood production due to the nature conservation and 23% is in restricted use.
Comment by Antti rn — Thu, Jul 26th, 2007 @ 8:18 pm
Antti, what do you think will now happen seeing as though Finland will now have to “use” it’s own forests instead of buying Russian? For a long time now we have been saying how forest friendly our industry is and proving this by showing growth figures all the while ignoring the continuous stream of wood come in via the eastern border. Now that the Russians have wokn up to pricing and will start to charge prices comparable to local Finnish prices, we are going to have to start using our trees. Let’s look back at regrowth figures in a few years and talk then.
Comment by Punter — Fri, Jul 27th, 2007 @ 10:29 am
It’s also possible, that the Russian export tax works as intended, few factories move over there after cheaper raw materials and the demand for domestic wood goes down correspondingly.
A good thing about wood reserves over oil reserves is that it can be eaten though…
Comment by Antti rn — Fri, Jul 27th, 2007 @ 7:00 pm
It is very true: one definitely needs a car to commute in Finland, even in Helsinki.The truth is that the wait for city buses is quite long( about 5 minutes) , and bus stops are very far from each other.
Finns do not seem to be bothered by walking long distances to bus stops,and waiting a long time there for a bus, but it is quite irritating! Finns know nothing else, so their public transportation system is good to them!! I PITY THE POOR SOULS!
With regards to owning a car, few Finns are actually able to own a car. There are so many really old cars on the roads in Finland. Back in the Caribbean, drivers of such old cars would be ridiculed and laughed at, but here in finland, the owners even feel somehow privileged to have such old cars. No, I am not referring to antic cars kept by choice.
It is common for middle class families in my Caribbean island to own at least two new cars. Having a car is no big deal back home. Parents buy teenagers cars all the time. Here in Finland most teenagers have to be satisfied with BICYCLES. Pretty low standards if you ask me. Yet those Finns insist on beleiving that all immigrants here are really poor!!!
Hasn’t it ever dawned on you Finns that some immigrants had better lives back home, and are being kept here by their Finnish spouses???
FINNS NEED TO TRAVEL AND SEE THE REST OF THE WORLD, THEN THEY WILL BE BETTER ABLE TO CRITICALLY LOOK AT LIFE HERE!!
Finns love beleiving that the life in Finland is better than anywhere else in the world.Is that why they drink so much alcohol and commit so much suicide?? JUST ASKING!!!
Comment by wonderfully different — Tue, Nov 6th, 2007 @ 1:54 pm