TALLINN - The Ministry of Economy and Communications has sent a proposal to the Finance Ministry to cut the VAT rate applicable to tickets on public transportation to 5 percent from the present 18 percent.
"Reducing the VAT rate will expand the possibilities of financing public service and create conditions for adding more routes to the public transport network," said Ain Tatter, head of the roads and railway department at the ministry, adding that the application reflected public expectations.
In several EU member states, a reduced VAT rate is applied to public transport fares, and in others no VAT at all is attached, the ministry expert explained. Low rates have made transportation services significantly more accessible and boosted competitiveness, at the same time curbing the rate of increase in the number of cars and the environmental impact arising from that, it added.
In Germany, public transport service up to 50 kilometers from cities is taxed at 7 percent VAT. In Lithuania and Latvia, the VAT rate for regular domestic passenger service is 5 percent, while in Luxembourg it is 3 percent.