Inclusion of road tax in excise duties on fuel will burden farmers, economist

The annulment of the road tax, as the draft budgetary-fiscal policy document for 2021 suggests, seems to be a good initiative that is supported by politicians, especially amid the election campaign. But the negative effects of these changes are greater in number than the positive ones,  said economic expert Veaceslav Ioniță. According to him, the inclusion of the road tax in the excise duties on oil products will shift the fiscal burden from vehicle owners onto farmers and this is a big problem.

Contacted by IPN for a comment, Veaceslav Ioniță said the problem of this change is the fact that the road tax that is now fully transferred to the local budget will no longer get to the local public authorities. This problem can be yet solved if the Government and Parliament decide that 20% of the excise, for example, should be redirected, namely 10% to mayor’s offices and another 10% to districts.

He noted that a serious problem is related to farmers. The diesel fuel represents 70% of the used oil products and this is primarily consumed by agricultural producers who have tractors, combines, but at practical level they do not use them on the road, but in the fields. Therefore, the burden is shifted from vehicle owners onto farmers.

Also, the Road Fund will be in a risk zone as the road tax was a guaranteed income, while the excise, even if the law says that a part of this should be used for roads, the Government during the last five years allocated not 60-80% of the excise for roads, but 32-37%, through derogations from this law accepted by Parliament. So, the Road Fund in the period was deprived of about 6 million lei.

Veaceslav Ioniță explained that the road tax is a fixed tax that is also aimed at discouraging the people from travelling by car. Now they suggest excluding it at a time when only 2,000 km of roads were built during the past 50 years. However, the number of bought cars rose 40 times. “In 1970, we had 18,000 cars all over the country and now we have almost 700,000. In 2000, there were three cars per km of road, but now there are 75 cars per km of road,” stated the economist.

According to him, owing to the road tax the owners of older cars didn’t use these. “Currently, about 215,000 cars stay in garages and are not used, including due to taxes. If the road tax is annulled, there is a risk that the 215,000 cars or 50% more will join the 450,000 cars that inundated the streets. If the roads are not repaired, this is a populist move with negative consequences that cannot be estimated,” stated Veaceslav Ioniță.

The road tax could be incorporated into the fuel excise tax starting with next year. The authorities said the measure aims to ensure “fairness” as motorists will pay depending on how much they use the roads.

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