Car market, Estonia, Good for Business, Legislation, Taxation, Transport

The main reason is the impending December 1, after which a company can use only 50% input VAT deduction instead of the previous 100% when buying a new car.

Ministry of Finance Customs and Excise Policy Department Marek Uusküla said that car sales have increased by a fifth, and the main reason is the change in VAT laws. The Ministry of Finance expects to earn 46.5 million euros from changing the car VAT system.

"We factored in the advance purchasing. True, we underestimated Estonian consumers somewhat. They are buying more than we expected," said Uusküla.

Car sales and service companies alliance AMTEL leader Arno Sillat considers the Ministry's estimate overly optimistic.

"There are many very legitimate normal ways to make sure that the tax just won't be collected. I think that they could get a third or a half of it – and I am being very optimistic," said AMTEL's chief executive Arno Sillat, adding that one way is to register a car not as a passenger car but with a type code of utility vehicles, that are not subject to the tax changes.