According to Hardi Isok, a member of the board of directors of Avis Eesti, a company engaged in full-service car rental and leasing, the car tax forces companies to use different mobility options. “They are trying to make the trips, but at the same time the associated costs should be as flexible as possible,” he says and adds that preference will be given to rental services and less attention to leasing.
Isok admits that in the current difficult economic situation it is best to maintain as many variable costs as possible, so that they can be managed as needed. “Leasing is a long-term commitment, but the lease is very flexible and can be canceled quickly if desired,” clarifies Isok.
The car tax allows entrepreneurs to critically evaluate the real need for one or more cars and how trips can be made as cost-effectively as possible. “If the representative wants to go to Tartu, the car is rented on a short-term basis. If there is an ongoing project, the duration of which is not certain, it is good to use a long-term rental car,” he provides of Isok examples. “Only when you know that the need for a car is certain and permanent, you decide in favor of leasing.”
The taxes go to Latvia
Car tax in Latvia is one of the cheapest in Europe. Isok says Estonia has a plan to add millions to the budget through car taxes, but it may fail because the taxes will go to Latvia, as they once did after the excise tax increase on alcohol. To avoid this, he recommends making the tax more favorable and taxing every entry in the register.
“If every ledger entry were taxed, the budgeted budget amount would be spread over a larger number of transactions,” Isok says. “The lower the tax, the less likely it is that it will go to Latvia instead.”
In the current situation, for example, the inhabitants of southern Estonia may start to think seriously about Latvian license plates. Furthermore, it is as if two Estonias emerged: the vehicles registered in the register and those added to it.
Unhealthy competition
According to Isok, if the Estonian car tax starts to differ significantly from the Latvian one, this could lead to unhealthy competition. “Whoever can buy and register cars in other countries wins, not everyone can do it,” she explains. “Whoever can do it, register the vehicles in Latvia, bring them here, use them for a while and then take them away.”
Isok admits that there is a major risk scenario in which thousands of vehicles could start to be registered in Latvia instead of Estonia. The higher the tax rate, the more projects arise. His recommendation would be to take less risk initially and test the market.
The key word is flexibility
Isok predicts that companies will start to combine different mobility services and that new opportunities will arise in the market. “Mobility isn’t just about renting and leasing. It’s all together,” clarifies Isok.
Isok recommends keeping cost decisions as free as possible and emphasizes that for a company a variable cost is always better than a fixed cost. By combining rental services with, for example, full-service leasing, you can easily adjust the cost side if necessary.
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2024-01-08 18:08:00
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