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Wednesday 16.10.2019 | Name days: Daiga, Dinija

Latvian Transport minister says the road fund will not be restored

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThe Road Fund will not be restored, said Latvia’s Transport Minister Tālis Linkaits during a meeting with public initiatives portal representatives.

According to the minister’s general opinion, proposals from ManaBalss authors can be divided into three groups. One group consists of initiatives that require funding form the state budget. ‘If those are relatively small budget funds, it can be allocated easily. However, the initiative for the restoration of the Road Fund means allocates as much as EUR 4 billion for reads, and this is simply not happening. This is why such requests are pointless,’ said the minister.

«I have said as much in recent months – we are not alchemists. We cannot turn water into wine or promises into money,» said Linkaits. «This is why all I can say about initiatives that request restoring the Road Fund is this – it will not happen.»

When asked about diverting road tax to the maintenance of roads, the minister that this is a bubble of information maintained by the lobby of road maintenance companies. «For years they have been telling media that the road tax is the money the sector needs. They also say that if we divert the tax to roads, they will be immediately fixed. First of all, this is not the case. Secondly – fuel excise tax, similarly to other excise taxes, is diverted to healthcare and culture. There is no country that diverts fuel excise tax specifically to roads. So how is it possible for Latvia to afford this?» adds the minister.

Linkaits said that during a recent conference, colleagues from the Saeima and government agreed it is not realistic to hope for a sudden appearance of money out of nowhere. «This simply will not happen. We physically cannot find this kind of money,» said Linkaits.

The minister says that following the tax reform Latvia’s income has declined. Additionally, previous coalition and social partners had previously agreed on maintaining the tax policy unchanged in the next several years. «We will soon become an EU member states with the smallest tax revenue from GDP. We are promised 28% next year. In this context, saying we can easily afford road repairs is nothing more than misleading people. While I am a young politician, I can afford to tell this scary story – there is no money and there won’t be. But this is reality,» admits Linkaits.

The second group of initiatives, according to the minister, includes proposals that came to be as a result of direct or indirect lobby.

The third group of initiatives, according to the minister, includes «rational initiatives that do not require a lot of funding that offer a look at something from a new perspective. Those could be previously unaddressed questions or questions that do not seem important.»

One positive example for the third group is the permit for bike drivers to use public transport lanes. This initiative was taken and proposed by the minister’s represented New Conservative Party. Starting from August 2019, this rule is expected to come to force.

There was also a proposal to include credit card function for driver licenses. «We read through it and concluded there is no point in it. A driver’s license does not take up much space. Soon enough it will no longer be needed in Latvia, as we plan to transition to e-environment. It will be enough to present a personal identification document, because information regarding driver’s license will be available in a unified database,» said Linkaits.

Explaining the ministry’s attitude towards the proposal to include fuel price to vehicle operation tax, Linkaits referenced EU practice – only Estonia, Lithuania and Poland add the tax to the fuel price, as it is collected as a separate tax. If the tax were to be added to fuel prices, it would mean growth of excise tax to compensate uncollected tax – 8.2 euro cents (with VAT) in 2020 and 8.5 euro cents per 1 litre of fuel in 2021.

On the other hand, there are several counter arguments to the ministry’s analysis for this policy’s change. Firstly, according to the relevant EU directive, the vehicle operation tax for cargo vehicles, trailers and semi –trailers should be maintained in any case. Secondly, abolishment of the tax would also abolish existing advantage – benefits for specific groups of residents: invalids and large families. Compensating this loss will not be possible. Thirdly, transitioning the tax towards excise tax would increase costs for using service vehicles. Fourthly, costs would increase for other forms of transports – public transports, international bus services, railway and transit industry, affecting their collective competitiveness.

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