TB4369 GS/GK 08-12-1999
Country Report Estonia
Road Transport Charges
Final
On behalf of: Phare Multi-Country Transport Programme
NEI Transport, December 1999
Table of contents
Pages
Summary i
1 Background RTC in Estonia 1
1.1 Road Transport Policy 1
1.2 Road Transport Legislation 2
1.3 Accession process 3
2 Database 4
2.1 Road Network 4
2.2 Traffic 5
2.3 Fleet 6
2.4 Fuel consumption 6
3 Actual and planned RTC systems 8
3.1 Tax on fuel 8
3.2 Motor vehicle tax 8
3.3 Other taxation 9
3.4 Future perspective 9
4 Revenues 10
4.1 Revenues allocated to the road sector 10
4.2 Revenues generated by the road sector 11
5 Allocation mechanism 13
6 Expenditures and infrastructure cost 14
6.1 Expenditures on roads 14
6.2 Normative road costs 15
7 Cost recovery ratios 16
8 EU Compliance 17
9 Recommendations 19
GK/Tb4369r18
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Summary
Country characteristicsRoad fiscal policy
There is no general motor vehicle tax in Estonia, but an annual tax (5 EEK (0,3 Euro) per kW of the vehicle) is collected in Tallinn and the Alajoe District.
Excise duty is collected on petrol and gas oil (diesel). The rate for leaded and unleaded petrol is the same. Although the rate of increase has somewhat slowed down, it is expected that fuel excise duties will reach the EU minima in the coming years. / Cost recovery
Ratio Actual/Normative maintenance: 21%
Remarks
Capital investment costs are based on TINA estimates.
External cost estimates are based on air pollution ratios per vehicle km.
Institutional and legal setting
Financing of the implementation of the transport policy in Estonia is made through the State Budget and through loans from IFIs and grants.
Establishment of a Road Fund has been under discussion in Parliament, so far without success.
Earmarking 75 percent of revenues from excise tax on fuel is on the agenda, however, the date of realisation has been postponed. A percentage of 55 percent is aimed for by the beginning of 2001, 65 percent by the beginning of 2002 and 75 percent by the beginning of 2003.
Most relevant issues are laid down in the Road Law of the Republic of Estonia, the New Road and the Motor Fuel Excise Act.
EU Comparison
Excise tax on fuel / (Heavy) vehicle taxation
Remark:
Currently there is no national vehicle tax in place.
Direction of move
Introduction of a national vehicle tax is under discussion. A draft Act regarding national vehicle taxation has been discussed in Parliament three times, so far without success.
Similar to the EU principles, emphasis will be put on usage related taxes (excise tax on fuel and annual vehicle tax), instead of purchase and ownership related taxes.
The establishment of an EURO vignette is still under discussion.
Bottlenecks and constraints
The Estonian Parliament seems to be a bottleneck regarding acceptance of road charges related amendments (national annual vehicle tax, Road Fund).
Envisaged increases in excise tax on fuel and percentage of revenues from excise tax on fuel allocated to the road sector have been delayed. As a result the available road budget remains (too) limited and roads continue to deteriorate.
Impacts
Market prices for fuel have gone up by 30 percent over the most recent period. The new Government takes the position that the tax burden cannot be further increased for the moment. The opportunities to increase excise taxes on fuel are limited.
Conclusions and recommendations
Road Transport Charges
It is recommended to introduce (and develop) a vehicle tax in accordance with EU Directive 99/62, as regards structure (based on axle weight and suspension) and minimum levels.
The introduction of a road user charge in the form of a (Baltic) Vignette should be considered this in accordance with the principles of EU Directive 99/62, i.a. differentiating according to emission standards of the vehicles.
It is recommended to continue to increase the levels of excise taxes on fuel towards EU minima. In addition a differentiation of the levels for leaded and unleaded petrol in accordance with the EU legislation is recommended.
Road sector revenues
A Road Fund could be an option to secure a stable and sufficient flow of revenues to the road sector. Nevertheless, if through the General Budget 75 percent of revenues from excise taxes on fuel will be earmarked, there is no problem either. Efforts should be made to safeguard this 75 percent in the future.
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1 Background RTC in Estonia
1.1 Road Transport Policy
Core of Road Transport Policy
In the development plan of the Estonian road maintenance up to the year 2005, compiled in 1995, priorities for the road sector has been worked out in order to: a) minimise backwardness; b) develop network, in case of better financing. The first priority includes maintenance activities on main roads, supply of traffic control devices and rehabilitation of pavement to ensure passableness. According to possibilities we continue the construction works that have already been started.
The second priority, in case of better financing, includes standard rehabilitation of pavement, developing and restructuring of road network and paving of gravel roads (where needed) according to regional policies and economic and traffic studies.
The biggest problem of the Estonian road maintenance is financing. In 1996, priorities of road financing were set up based on the idea that road users should cover the costs of road maintenance as directly as possible. Still the Estonian government has not succeeded in avoiding prevailing shortage of money. However, a solid step in the right direction has been set by the Estonian Government by passing the new Road Act in Estonia, which earmarks 75 percent of excise tax on fuel and the automobile excise tax for road maintenance purposes (see below).
Road Fiscal Policy
The road fiscal policy foresees the following measures up to the year 2002[1]:
The gradual increase of the excise according to the Motor Fuel Excise Act in the period 1997-2001 for petrol (72 percent) and diesel (173 percent) in order for Estonia to reach minimum EU levels.
Laying down a common motor vehicle tax system for the whole of Estonia in 1999.
In parrallel to the EU principles, Estonian emphasis in taxation is put on user charges and taxes (excise taxes on fuel and road user charges), limiting the taxes on acquisiation and ownership of a vehicle (excise tax on vehicles, annual vehicle tax). The latter type of charges only totals 10-15 p[ercent of total transport taxes.
The Roads Act stipulates the principles of the system of single proposed financing of road keeping from the State Budget. The following road user related charges are aimed for:
75 percent of revenues from excise taxes on fuel.
100 percent of excise taxes on vehicles, motor vehicle tax and state duties for the operations of registration and the penalties on road use and protection.
The distribution of financial resources for the budget of road keeping to maintain state roads, municipal roads and streets and for the structure of resources is being adopted by the Government op proposal of the Minister of Transport and Communications.
1.2 Road Transport Legislation
1. Motor Fuel Excise Act
This Law and related amendments set the level of excise tax in fuel for the coming years including the gradual increase (1997-2001) and the percentage that is transferred to the road sector. Recent amendment have postponed the process of increase with some years.
2. Road Law of the Republic of Estonia 19.12.91 RT 92,1,1.
Road Law regulates relations of road maintenance, use and protection between road’s owner or administrator and road users. Law lies as a basis for other acts of legislation dealing with roads.
3. New Road Act
The law includes the principles of the system of single proposed financing of road keeping from the state budget, through motor fuel excise (future: 75 percent) and motor vehicle tax ( to be raised at the state level). The intention to allocate 75 percent of revenues from excise taxes on fuel to the road sector is still in place, however, recent amendments have postponed the allocation of this share. According to the most recent amendment, 55 percent should be available to the road sector by the end of 2001, while the 75 percent should be available by the end of 2003.
4. Traffic Law of the Republic of Estonia 23.03.92, RT I 95,2/3,76-78, 1345
Law enacts basic rules and requirements of traffic management on the roads. The Government of Estonia is responsible of elaborating the traffic safety policy, guaranteeing the safety of participators in traffic and traffic safety situation. The Ministry of Roads and Communications is responsible of realising the national traffic safety policy.
5. Enactment of the Ministry of Roads and Communications 20.10.94 No 58: Confirmation of Instruction of large scale and/or extra heavy automobile transport.
RTL 94,55,P.1859,96,8,51.
Instruction enacts rules of large scale and/or extra heavy automobile transport as well as rules and conditions to get licence for this.
1.3 Accession process
Estonia is within the ‘first wave’ of countries to join the EU. Economic performance has been strong since 1993. Bolstered by a widespread national desire to reintegrate into Western Europe, Estonia has adhered to disciplined fiscal and financial policies and has led the FSU countries in pursuing economic reform. Estonia has successfully reoriented its trade toward the West, two-thirds of exports now going to Western markets. Estonia's free trade policies were the cornerstone of its negotiations with the European Union, and led to the signing of an association agreement in June 1995. Estonia was the only Baltic State not to have a transition period imposed by the EU prior to its implementation of a free trade agreement.
2 Database
2.1 Road Network
The roads classification in Estonia consists of five categories:
Public Roads.
· Main Roads
· Basic Roads
· Local Roads
Ramps & Connectors.
Other Roads.
The following table indicates the distribution of the network constituents amongst these different categories
2.1 Length of different road types in kilometres. 1998%
Type of roads (classification used in Estonia) / kmPublic Roads
· Main Roads / 1.359
· Basic Roads / 2.473
· Local Roads / 12.568
Ramps & Connectors / 38
Other Roads / 25.096
Total / 41.534
Source: ERA
2.2. Percentage of different types of roads that is in good, fair, poor condition 1998%
Type of roads (classification used in Estonia) / Good / Fair / PoorMain Roads / 25% / 67% / 8% / 100%
Basic Roads / 35% / 56% / 10% / 100%
Local Roads / 10% / 71% / 19% / 100%
Total / 25% / 63% / 12% / 100%
Source: ERA
2.2 Traffic
2.3 Average Annual Daily Traffic (AADT) for key types of roads AADT.
1994 / 1995 / 1996 / 1997 / 1998Main Roads / 2.490 / 2.635 / 2.610 / 2.811
Basic Roads / 1.008 / 1.092 / 1.054 / 1.187
Local Roads / 269 / 293 / 299 / 254
Other (e.g. agriculture, forest etc.) / 55 / 70 / 75 / 68
Source: ERA
2.4. Average Annual Daily Traffic (AADT) counts for key types of roads per vehicle category AADT, 1998
Type of Roads(classification used in Estonia) / Passenger cars / Buses / Rigid light trucks / Rigid medium trucks / Rigid heavy trucks / Articulated trucks* / Others**
Main Roads / 2.018 / 99 / 694
Basic Roads / 872 / 34 / 281
Local Roads / 178 / 6 / 70
Source: Technical University
2.5 Number of vehicle kilometres over last five years x1000.000 Vehicle kilometres
Year / 1994 / 1995 / 1996 / 1997 / 1998Vehicle km’s by road / 3.738 / 4.136 / 4.313
Source: TTU
2.6 Number of vehicle kilometres on the main core network per x 1000.000 Vehicle
vehicle category kilometres, 1998
Pass.cars / Busses / All trucksVehicle km’s by road / 3.025 / 106 / 1.182
Source: TTU
2.3 Fleet
2.7 Total numbers of vehicles over the last 5 years numbers
1994 / 1995 / 1996 / 1997 / 1998Passenger cars / 372.156 / 383.444 / 406.598 / 427.678 / 450.954
Vans & Utilities
Buses / 6.918 / 7.009 / 6.829 / 6.457 / 6.306
Trucks / 61.124 / 65.598 / 71.304 / 76.605 / 80.617
Others
Total / 440.198 / 456.051 / 484.731 / 510.740 / 537.877
Source: / EVRC
The overall fleet increase between 1994 and 1998 is 22.2%
2.8 Passenger car ownership per 1000 inhabitants per over the last 5 years numbers
1994 / 1995 / 1996 / 1997 / 1998Passenger cars / 246 / 257 / 275 / 291 / 307
Source: NEI computations
2.4 Fuel consumption
2.9 Country fuel totals over the last 5 years Current prices, 1.000.000
EEK
1996 / 1997Petrol
Production
Imports / 722,8 / 960,3
Exports / 142,1 / 294,7
Total / 580,7 / 665,6
Diesel / 508,1 / 714,8
Production / 146,9 / 230,1
Imports
Exports
Total / 146,9 / 230,1
2.10 Domestic consumption (1) 1998%
Petrol / 81% / 19% / 100%
Diesel / 59% / 41% / 100%
Source: Oil Union
3 Actual and planned RTC systems
3.1 Tax on fuel
Excise duty is collected on petrol and gas oil (diesel). The rate for leaded and unleaded petrol is the same. The key legislation is the Motor Fuel Excise Act which foresees a gradual increase of the excise duties in order to reach EU minimum levels.
Similar to the principle applied in EU countries the main emphasis in Estonia in direct and indirect taxation is put on user charges and taxes (e.g.motor fuel excise duty as regards road transport) limiting the taxes for the procurement and owning of motor vehicles (motor vehicle excise, annual fee of the motor vehicle) to 10-15 % of the total transport charges.
The Roads Act stipulates the principles of the financing of roads. The Estonian Parliament has on 17 November 1999 imposed a change in the Roads Act through which up to 75 % (55 % in 2001, 65 % in 2002, 75 % in 2003) of the excise tax on fuel is earmarked for the financing of the roads.