The analysis found that one of the most common arguments about the much-criticized car tax — that it makes up too large a share of a car's price — does not stand up when compared to other countries.

"Estonia's car tax burden is modest in the European context and remains significantly below the level of most Western and Northern European countries," the analysis states, based on an assessment of vehicle-related taxes in 31 European countries.

Car ownership is taxed very differently across Europe. For example, in the case of a compact gasoline-powered SUV, the total tax burden for a private individual over 10 years ranges from €0 in the Czech Republic to almost €45,000 in Denmark.

Differences in tax burden between electric and gasoline cars also vary by country. In Estonia, this difference is relatively small, at €1,905 over 10 years.

Looking at the registration fee for an electric SUV, Estonia ranks 10th in Europe, indicating a relatively high tax burden on electric vehicles. In many countries, the total tax burden on electric cars, including purchase subsidies, is negative.

According to the analysis, the registration fee as a one-time large payment typically has a greater impact on purchasing decisions than the same amount paid as a motor vehicle tax over 10 years.

Electric vehicles account for the highest share of new cars in countries where the difference in tax burden at the point of purchase between environmentally friendly and more polluting vehicles is greater.

Due to the relatively small differentiation, the share of electric vehicles in first-time registrations in Estonia has not increased since the introduction of the car tax; rather, consumers have tended to shift toward more economical internal combustion engine vehicles. However, planned increases in registration fees in 2028 and 2031 create an expectation, according to the analysis, that the share of electric vehicles in first-time registrations will increase in the future.

In Latvia, the tax burden on gasoline-powered vehicles is lower than in Estonia, while at the same time, a bigger difference between electric and internal combustion engine cars is created through tax incentives.

From the perspective of legal entities, Estonia remains one of the more favorable countries in Europe for vehicle ownership even after the introduction of the car tax. Companies purchase the majority of new vehicles, which is why their taxation plays an important role in making Estonia's vehicle fleet more environmentally friendly.

The analysis notes that the situation is particularly striking in the case of larger SUVs, where the total tax burden is negative, with only Germany — which has Europe's largest automotive industry — ranking behind Estonia.

The authors of the analysis believe that, in connection with the Riigikogu elections taking place next year, the issue of changing or abolishing the car tax will likely once again come to the forefront of public debate.

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