Eesti 200 via its leader Kristina Kallas had previously proposed scrapping the tax, which entered into effect at the start of this year.

Uibo was joined by Reform MP Annely Akkermann in saying the tax will not be scrapped, arguing that state finances won't allow for its repeal in the coming years, and also citing a desire to maintain retailer and consumer certainty.

Around one month ago, just after the Ministry of Finance published its summer economic forecast, Kallas announced that in the course of the 2026 state budget talks, she would be proposing to Prime Minister Kristen Michal (Reform) that the tax be abolished.

The Reform-Eesti 200 government, however, decided to leave the tax where it is, at least in the context of the state budget talks.

The state budget strategy (RES), drawn up in tandem with the annual budget, has also been sent to the Riigikogu, and it sets a budget deficit for 2026 and 2027 of 4.5 percent — the absolute upper limit under EU rules.

Abolishing the car tax in 2027 would require tax revenues to have to be significantly better than the Ministry of Finance currently forecasts. Alternatively, the government would either have to cut spending or find another revenue source of about €200 million to replace the car tax.

Uibo said that even if it were financially viable to abolish the car tax next year, that should not be done.

"I think, and I believe, the party's position today is also that the car tax is here to stay," Uibo said.

He noted that car dealers and buyers alike want clarity above all, giving an added reason to retain the tax rather than revisit the topic each year.

Uibo added that while Kallas did propose abolishing the car tax during the budget talks, this was merely a sounding out of the idea in the context of the negotiations, and nothing more. According to Uibo, the Eesti 200 leadership had not decided that the tax should be abolished. "There is no such direct decision. There has been a discussion, but at present there is no firm decision," he said.

Akkermann, who heads the Riigikogu's finance committee, agreed

"I can say with full certainty that in theory it is not possible to abolish the motor vehicle tax in the next two, three, or four years — as long as the state's budget strategy is in force," said Akkermann, a former finance minister.

She added that people in the car trade want the idea to be taken off the table.

"They have said: 'Don't throw out more random ideas, so the market can finally stabilize'."

Akkermann added that even if the state's budget situation improves next year, she would personally prefer moving faster toward a balanced budget, ahead of abolishing the car tax.

"We also have nothing to replace the money from the motor vehicle tax that goes into road maintenance," she went on.

Within the Reform Party there are many people who believe fiscal policy should be conservative, and she is certainly not alone in holding that view within the party, Akkermann went on.

State plans to borrow to the max in next two years.

According to the RES agreed on by the government, the budget deficit will be 4.5 percent of GDP both next year and the year after and is then expected to start falling again from 2028.

ERR asked Raoul Lättemäe, head of the fiscal policy department at the Ministry of Finance, what the prospects might be of the state's financial position improving faster than the ministry currently forecasts.

Lättemäe said the purpose of those forecasts is to provide the best available knowledge of what will happen financially in the coming years.

"If we knew in advance that the picture was better, we would have included that in the forecast," he noted.

Lättemäe added that when forecasting both revenues and expenditures, unexpected things may happen that the ministry cannot foresee. For example, not all expenses currently planned may be realized at the exact time expected — for instance, if some procurements get postponed.

When it comes to revenue forecasts, Lättemäe said the most difficult thing to predict is those tax receipts which are more dependent on the behavior of individuals or companies.

"If we think about next year, when the principles of calculating tax-free income will change, a lot will depend on how people choose to apply that. For example, whether they ask for it to be calculated back into their paychecks throughout the year, or whether they decide to accumulate the tax-free allowance in their tax account and later reclaim it from the state with their tax return. On this, we have given our best estimate of how this might work, but in reality there is a lot of uncertainty involved," he outlined.

The Ministry of Finance has forecast that the car tax will bring the state budget a total of about €205 million in the coming years. Of this, €120 million will come from the registration tax and €85 million from the annual tax.

More information on the car tax, properly called the Motor Vehicle Tax, is here.

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