The Ministry of Transport will draft a bill stating that a Latvian citizen can drive a foreign-registered vehicle in Latvia only for a period of five days .
Motorists have been exploiting the cheaper vehicle tax system in Lithuania and driving the vehicles in Latvia for two years before re-registering the vehicles again in Lithuania. The Latvian government has seen that this situation of bringing cars from Lithuania by Latvian citizens as a loss in revenue from the economy.
"Even though the car tax is small in comparison with tobacco and liquor taxes, the implementation of a lower excise duty on vehicles will net the government more revenue," said Baiba Melnace, spokeswoman from the Finance Ministry.
Latvia over the past year has experienced a dramatic rise in foreign-registered cars being driven by Latvian citizens. The figures of 1999, show that the importation of cars in Latvia has fallen by 20 percent, compared to figures of 1998.
The Finance Ministry has seen the need to decrease the taxes on buying and registering cars in Latvia. Previously it cost a motorist the sum of 10 lats ($16.90) for every year a car is under the age of 10 years, and 20 lats ($33.80) for each year a car is over ten years of age.
Included in this tax is the size of an engine in motor vehicles. Effectively $0.05 is charged to a motor vehicle owner when registering a car for every cubic centimeter up to 16,000 cc. For engines 1600-2500 a levy of $0.08 is charged for every cubic centimeter and $0.17 for every cubic centimeter between 2500-3000. If a car's motor engine exceeds 3000 cubic centimeter then $0.34 is charged for every cubic centimeter over 3000.
Director of M-Motors, Gundars Margevics, said that Lithuania should be the ones to introduce a sensible excise duty on cars.
"Lithuania's government should be looking at their policies on the purchasing and registering of vehicles," said Margevics. "The lowering of vehicle taxes here in Latvia is of no good if Lithuania does not change their levy on motor vehicles."
"The legislation will pass through Parliament very quickly and the ministry's foreseen rise in revenue generated by the lowering of the vehicle excise tax is a rise in revenue from $6,78 million collected in 1999, to a predicted $8,98 million at the end of this year," said Melnace.
The new levy proposed by the Finance Ministry is considerably less and the ministry is hoping to recoup financial losses that have been going over the border to Lithuania and into its economy.
"The new vehicle excise duty will be $8.47 for every year a car is of age and we hope this will entice Latvians to buy and register cars here," said Melnace.
The sales manager of MDL Motors, Dainis Zalitis, said that the lowering of the excise duty will help used car dealers but no effect will be felt by new car dealers.
"The lowering of the tax will be of no help to new car dealers, if someone wants to buy a new car the tax will be of no concern to the buyer," said Zalitis.
The new excise tax is payable as one sum and the draft proposal that has already been proposed to the Parliament envisage a lowering of the levy to around half the current tax paid by Latvian motorists.
"The Finance Ministry goal is to entice Latvian motorists to buy and register vehicles in Latvia," said Melnace.
The excise duty for motorcyclists will also be changed and the levy paid for every year a motorcycle is of age will be reduced to $8.47. The tax levy on the size of a motorcycle's engine however will stay at $0.05.
The Transportation Ministry is now responsible to draft a bill stating that Latvian citizens can only drive a foreign registered vehicle in Latvia for a period of five days. The proposed bill is seen as a deterrent for Latvians to purchase and register cars abroad.
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