People's Party calls for reduction of excise tax on cars in Latvia

Feb 17, 2000

Excise tax rates applicable to imported cars should be reduced because actual revenues from this tax had failed to meet the estimated amount and the tax raise did not yield the expected results.

Last year it was planned to collect some 20 million lats ($34 million) of revenues from the tax. Only 4.58 million lats were actually collected.

The People's Party faction also noted the need for detailed analysis of market changes and the feasible reduction of old car imports that the excise tax raise sought to ensure.

The excise tax on passenger cars was increased in Latvia last April. The excise tax rate for used cars that are less than 10 years old was established as 10 lats per each year while for the cars that are older than 10 years the rate is 20 lats per each year.

For cars with 1,000-2,000 cubic centimeters engine capacity the excise tax rate is now 3 santims to 18 santims per cubic centimeter, for luxury cars with 2,500-3,000 cubic centimeters engine capacity the rate is 30 santims per cubic meter, while for cars with the engine capacity exceeding 3,000 cubic centimeters the excise tax is 55 santims per cubic centimeter.

Excise tax on passenger cars is assessed as the sum of the amounts calculated by the above rates.

The car imports rose sharply ahead of the effective date for the new rates but recently the tax-evasion practice of driving a car registered in Lithuania, for example, has become very widespread in Latvia.

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