Working group chaired by Mr Jorma Ollila: Towards kilometre-based taxation

A working group of the Ministry of Transport and Communications is of the opinion that steps could be taken towards introducing kilometre-based taxation of car use in Finland. The working group proposes that the matter be approached through experiments.

Mr Jorma Ollila, chair of the working group, submitted the group report to Ms Merja Kyllönen, Minister of Transport, on 16 December.

"The group regards it important that before reaching a final decision on shifting to kilometre-based taxation it be fully ensured that the technology to be used is efficient and applicable to taxation purposes. Furthermore, privacy protection must be ensured and the amount of the costs involved must be known", Mr Ollila says.

At the first stage, a wide range of tests should be carried out to pilot the technological systems, monitoring, privacy protection and information security. The Ministry of Transport and Communications has launched an experimental project on electronic transport services for 2014-2015, which could be used to test kilometre-based taxation too.

"We don't take a stand on when the kilometre-based taxation system should be introduced, because the introduction is a political decision", Mr Ollila says.

Transport policy goals to be part of taxation

A kilometre-based tax would be an efficient tool of financial steering that could be used to influence traffic behaviour.

"Continuous growth in road transport, tightening environmental goals and general government finances call for more efficient measures in transport policy", Mr Ollila says.

The kilometre-based tax together with the fuel tax would be a better means to achieve the transport and environmental policy goals than the current taxation model. A taxation system based exclusively on the car use would decrease car traffic volumes and thus emissions and accidents, and increase the use of public transport services. Intelligent transport innovations will also enable new forms of transport pricing.

The working group stresses that early introduction of kilometre-based taxation would be conducive to creating business opportunities and jobs for the Finnish industry.

Taxation to be based on the car use

With the reform cars would be taxed solely on the basis of their use as the car and vehicle taxes would be replaced by the kilometre tax. In addition to the kilometre tax a fuel tax would be levied. The kilometre tax would be based on the CO2 emissions and on the region where the car is used.

The unit price of the kilometre-based tax and the regional emphasis are political decisions. With the traffic volumes of 2025 the average price would be 3.3 cent per kilometre. The unit prices the working group has used are not suggestions as such but have helped to describe the effects of various emphases.

Taxation based on the use would mean that for those who drive less than the average the costs would decrease and for those who drive more than the average they would increase. As a whole the new tax system would not increase driving costs of households or different population groups. The costs would depend on the type of the car used, for example.

The investment costs, as well as the annual running costs, of the kilometre-based taxation system would be around 130 million euros. The necessary vehicle equipment for all cars would cost around 330 million euros in total. A service operator (road toll operator, EETS service provider, private service provider) would install the vehicle equipment and collect an annual charge of around 10 euros from the driver.

Protection of privacy will be ensured

Privacy protection and information security must be taken into account already in the first stages of the system design. To enable regional variation in the kilometre-based tax, the system should allow vehicle positioning.

Advantage could be made of the electronic citizen's account now under preparation: vehicle owners or possessors would themselves administer detailed information on their vehicle usage. Only limited information necessary for determining the tax would be transferred to the tax authorities. Deferred data would only be sent at intervals defined by law. Real-time vehicle monitoring based on such data would be impossible.

The Ministry of Transport and Communications working group has convened since February 2012 to examine how Finland could move towards more fair and intelligent transport system and how the introduction of road charging systems could be organised in the long term. The basis for the work is laid down in the Government Programme.

Further information:

Chair of the working group: Mr Jorma Ollila (requests for interviews: Ms Taina Pieski, Communications Director, Ministry of Transport and Communications, tel. +358 295 34 2330)
Mr Tuomo Suvanto, Senior Adviser, tel. +358 295 34 2403
Mr Mikael Nyberg, Director of Transport Strategy Unit, tel. +358 295 34 2474
Mr Risto Murto, Director of Transport Management Unit, tel. +358 295 34 2639

The working group report and the related background reports and fact sheets are available in Finnish at the Ministry of Transport and Communications web pages www.lvm.fi.

Information about the working group (in Finnish) www.lvm.fi/tulevaisuuden-liikenne