Background information

The government of Finland has lowered the basic tax on vehicles though an amendment to the Act on vehicle tax 1281/2003 [Ajoneuvoverolaki]. The lower tax rate is especially adjusted to favour cars older cars as these are more fuel and carbon intensive and are thus most affected by the rise in fuel prises since 2022. The government argues in their proposal that the amendment will especially help low-income households that may not have the financial capacity to update to a newer car.

The amendment entered into force on 1 January 2025

Content of measure

The basic tax is paid on passenger cars and vans and is determined on the basis of the carbon dioxide emission value reported by the manufacturer. Such carbon dioxide emission values have been reported since 2008. Cars registered before 2008 have their basic tax value determined based on vehicle mass. The tax is paid by the owner of the vehicle to the Tax Administration.

The government proposal suggests lowering the tax on vehicles between the carbon dioxide emission rates of 111g/km and 210g/km. In practice, the lower tax affects vehicles registered before 1 September 2018. For the vehicles covered, the tax rate is lowered by between €28 and €55 annually.

The amendment is estimated to lower fiscal revenue from vehicle tax by €50 million in the fiscal year of 2025.

Use of measure

The government estimates in their proposal that the lower tax rate will affect approximately 1,8 million cars in active use, corresponding to approximately 60% of all passenger cars and vans in Finland

Target groups

Workers	Businesses	Citizens
Does not apply to workers	Does not apply to businesses	Applies to all citizens

Actors and funding

Actors	Funding
National government	National funds

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	No involvement	Consulted
Form	Not applicable	Direct consultation outside a formal body

Social partners' role in the implementation, monitoring and assessment phase:

• No involvement
• Main level of involvement: Sectoral or branch level

Involvement

The proposal has undergone a consultation round.

Views and reactions

In their consultation response, the Finnish Hospitality Association MaRa has stated that the amendment is poorly motivated. While the lowering of fuel taxes support domestic tourism, the government proposal to lower the basic vehicle tax only targets the most emission intensive cars and does thus not incentivise the modernisation of the car stock in use

Sources

• 27 October 2023: MaRa's response to government proposal 35/2023 [MaRab lausunto hallituksen esityksestä 35/2023] (www.eduskunta.fi)
• 02 July 2025: Government proposal 35/2023 vp [Hallituksen esitys HE 35/2023 vp ] (www.eduskunta.fi)