The Riigikogu passed the updated Motor Vehicle Tax Act and the Income Tax Act

NordenBladet —

The Riigikogu first passed the Motor Vehicle Tax Act (364 UA),  initiated by the Government, on 12 June. The President of the Republic refused to promulgate the Act on 25 June on account of its provisions violating the principle of equal treatment. On 15 July, the Riigikogu decided not to pass the Act again without amendments and set the deadline for submission of motions to amend the Act as 19 July.

374 motions to amend the Bill had been submitted by deadline. The Finance Committee had consolidated them into 30 motions to amend and the Finance Committee in its turn had made three amendments to the Bill. According to the amendments, instead of the tax exemptions planned earlier, targeted support measures are provided for vehicles converted or adapted for disabled people.

According to the Act, a number of benefits for people with disabilities will increase and the state’s participation in the acquisition of technical aids will increase. In addition, there are plans to pay a one-off benefit to people with disabilities to mitigate the impact of the delay between the entry into force of the car tax and the amendment to the Social Benefits for Disabled Persons Act. The Act enters into force on 1 January, while the monthly benefits for people with disabilities and the provisions concerning technical aids are proposed to come into force in June 2025.

The social benefit for disabled people will be paid monthly to people with a moderate, severe or profound disability to partially compensate for additional costs due to their disability. According to a motion to amend, the benefits for children and working-age people with a severe or profound disability will be increased, and the benefit for working-age people with a severe or profound disability will be harmonised to a fixed amount (the benefit will no longer depend on the type of disability). This will ensure people with disabilities an important additional support in their monthly budget. At the same time, the disability benefit for children and working-age people with a moderate disability and the disability benefits for people of old-age pension age will be rounded upwards. The amendment will concern all children and working-age people with a severe or profound disability.

An amendment is planned to increase the benefits for children with a severe or profound disability to €180 and €270 respectively, which will bring families with disabled children an additional monthly benefit of €18.91 and €28.36. In addition, the benefit for working-age people with a profound disability will be increased to €100, which will ensure them an extra €46.3–56.53 per month. The benefit for working-age people with a severe disability will be harmonised at €50, allowing them an additional benefit of €0.91–15.22 per month.

There are also plans to pay a one-off disability benefit to children and working-age people with a severe or profound disability in 2025 to compensate for the costs added by the motor vehicle tax before the Act on the increase in disability benefits comes into force.

An amendment also provides that, in the future, the state will provide a discount for technical aids regardless of the degree of severity of disability or reduced capacity for work. As a result of the amendment, in no age group will the entitlement to obtaining a technical aid with a discount from the state be based on the degree of severity of disability identified or the reduced capacity for work as assessed by the Estonian Unemployment Insurance Fund. In the future, the discount will be based on the person’s actual need for a technical aid which will be determined by a specialist who will issue a certificate for the technical aid.

For children under the age of 18, the amendment will mean that the state will reimburse the cost of a technical aid within a threshold of 90% to all children who are identified as needing a technical aid. The state will reimburse the cost of a technical aid to the extent of 40–90% according to the list of technical aids on a means-tested basis to all working-age people who are identified as needing a technical aid.

The Act establishes a motor vehicle tax in Estonia which consists of a component to be paid every year by motor vehicle owners on vehicles registered in the motor register and a component formed by the motor vehicle registration fee which will have to be paid upon the registration of passenger cars and vans in the motor register. The purpose of the motor vehicle tax is to direct people to use less polluting vehicles and to support the use of old cars until the end of their useful life.

During the debate, Martin Helme (Estonian Conservative People’s Party), Urmas Reinsalu (Isamaa), Andrei Korobeinik (Centre Party) and Õnne Pillak (Reform Party) took the floor.

54 members of the Riigikogu voted for the Act and 28 were against.

The Act on Amendments to the Income Tax Act (443 SE),  initiated by the Government, amends the principles for the allocation of income tax to local governments. Starting in 2025, the share of the income tax paid to municipalities on pension income will be increased and the share paid on other income will be reduced gradually over three years, so that they will be equal at 10.23 percent by 2027. Currently, municipalities receive income tax to the extent of 2.5 percent on pension income and 11.89 percent on other income of natural persons.

The Act aims to reduce regional underdevelopment and urban sprawl. The amendment will accelerate the growth of income tax receipts in municipalities with a high share of elderly people and slow it down in municipalities with a higher share of working-age population and higher salary levels. The total amount of the revenue base of local governments remains unchanged under the Act.

Madis Kallas (Social Democratic Party) took the floor during the debate.

55 members of the Riigikogu voted for the Act and 10 were against.

Half an hour after the end of the sitting, today’s third extraordinary session will be held. The agenda includes the deliberation of a motion to express no confidence in Minister of Infrastructure Vladimir Svet.

The sitting ended at 6.26 p.m.

Verbatim record of the sitting (in Estonian)

Video recording will be available to watch later on the Riigikogu YouTube channel.

Riigikogu Press Service
Maris Meiessaar
+372 631 6353, +372 5558 3993
maris.meiessaar@riigikogu.ee
Questions: press@riigikogu.ee

Link uudisele: The Riigikogu passed the updated Motor Vehicle Tax Act and the Income Tax Act

Source: Parliament of Estonia