Finnish Prime Minister Juha Sipilä’s Government (The Centre Party, The National Coalition Party and The Finns) aims to legislate a new annual tax on motorcycles with engine displacement above 125 cc and registered for active use. The proposed tax rate is flat 150 euros for a 12 month period. Annual revenue target of the tax is 25 million euros. Parliamentary decisions are to be taken soon and the law is to enter into force May 1st 2017.
According to SMOTO, a Finnish FEMA member, the proposed new tax has fundamental flaws which make its’ enforcement utterly unacceptable. The tax conflicts with the European trend of including environmental and safety incentives to all motor vehicle taxation, and the tax seriously violates equal treatment of different road user groups. Due to dynamic impacts on motorcycle related consumption the new tax will lead to diminishing tax revenues contrary to the politicians’ hopes. And, the tax will be harmful to motorcycle businesses and employment. Laws similar to the Finnish Governments’ proposal where common in the remote past but have been abolished long ago.
The blunt properties of the new tax make it a pure fiscal tax on motorcycle ownership. At the same time existing annual taxes on cars are paid per days of the vehicles’ actual use in traffic and according to its’ environmental characteristics (fuel consumption or weight). Since these flexible features and incentive structures are not included in the proposed tax on motorcycles, a clear case of inequality is created between different road user groups. Also due to the short Nordic motorcycling season, the taxes’ effective rate per actual days of use in traffic will be many times higher for motorcycles than for cars. Furthermore, the new tax will slow down the renewal rate of the motorcycle fleet, which seriously conflicts with both environmental and safety targets set by the government in transport policy.
According to SMOTO’s impact assessment and extensive survey among the Finnish motorcyclists, at the end of the day the State will not receive additional net revenue from the new tax. Today Finnish motorcyclists contribute to the public budget by paying car taxes at registration of new motorcycles (by cc from 9 to 24 percent of tax value), a 24 percent value-added tax on prices of motorcycles, parts, accessories and services, fuel tax and value-added tax on fuels (total of one euro per every liter), and a 24 percent tax on insurance premiums. Motorcycle businesses harbor hundreds of tax-paying employees. Travel and tourism service businesses forward value-added tax and income tax revenues from sales to motorcyclists.
Due to the disincentive which the tax will bring forth on motorcycle related consumer demand, the outcome will be a significant net loss in taxes. SMOTO’s study shows that a very large proportion of motorcyclists will reduce their spending on e.g. new motorcycles, spare parts, accessories, services and domestic motorcycle travel. The State will lose car tax revenue, value-added tax revenue, fuel tax revenue and very importantly, income tax revenue due to the negative spiral of the motorcycle business sector and jobs lost. The preparation of the new tax law has displayed total failure of quality in the parliamentary system.
SMOTO and representatives of the motorcycle importers and businesses have guided politicians towards the truth on the disastrous outcomes of the unsuccessful tax law proposal. Where other parties have more or less accepted the facts provided by SMOTO it has become evident, that to The Center Party and The Finns only political stubbornness counts. Finnish motorcyclists and the voting public cannot accept such arrogance and enforcement of an explicitly harmful tax law. SMOTO looks for support from all motorcyclists in Europe to make this progress known to your local communities and media.