1

Road Transport Charging ~ Road Pricing
Jani Saarinen
Financial Director, Finnish Road Administration

Kalvosarjan nimi

pp.kk.2001 / tekijän puumerkki

2Earmarked roadtransport taxes

General taxes

Loans, bonds etc.
Fundingsources
User charges,
vignettes, tolls

State tax revenue

Road fundRoadmanagement

State department

Road corporation

Road network

In house Road
production/publicworks
Kalvosarjan nimiRoad production bycompetitive tendering

Concession

Projects

Road
network /links

Road production by
concession / jointventures

Roadproduction

pp.kk.2001 / tekijän puumerkki

3Background and European policiesKalvosarjan nimi

pp.kk.2001 / tekijän puumerkki

4Viable arguments for the use of Road Transport
Charging ~ Road Pricing
Transport infrastructure traditionally funded from the government
budget The bulk of the government’s revenue comes from taxation,
including taxes and charges levied on transport, vehicles and fuel.
Revenue is usually NOT connected with transport infrastructure
management costs.
 Transport infrastructure usually funded from government
expenditure, the extent of which is NOT connected with therevenue received from the use of the transport infrastructure.

Kalvosarjan nimi

pp.kk.2001 / tekijän puumerkki

5Viable arguments for the use of Road Transport
Charging (2)The direction in transport infrastructure funding is towards theprinciple where costs are allocated to the users ~ transport
infrastructure charging
 User charges canenable cuts in general taxation and in taxes on vehicle ownershipbe used to cover increasing capital costs and costs arising from the adverse
effects of traffic
be used for transport demand management

Kalvosarjan nimi

pp.kk.2001 / tekijän puumerkki

6Road Transport Charging in the European
Transport PolicyUnion-wide problems related to road infrastructure, which includea financing gap in investments
related internal and external transport costs
congestion



A key solution proposed is transport infrastructure charging
 Charging is based on the economic theory of socio-economic
charging I) enabling the improvement of the efficiency of thetransport system, II) the reduction of external adverse effects and III)the funding of maintenance and development, all at the same time

Kalvosarjan nimi

pp.kk.2001 / tekijän puumerkki

7Road Transport Charging in the EuropeanTransport Policy (2)Charges can also impact

the need for and scaling of investments
major investments may be avoided by controlling the temporal or modal
demand of transport.

The policy documents recommend the utilisation of newtechnologies in traffic control and charges

Kalvosarjan nimi

pp.kk.2001 / tekijän puumerkki

8

The White Paper on transport charging(European Commission, 1998)


A policy towards harmonised transport taxes and charges
 Set out the principles of the appropriate charging


for wear and tear of infrastructure
capital costsexternal costs.

Although the White Paper did not address infrastructure funding, it
pointed out that user charges support the direct funding ofinfrastructures. Where there is sufficient demand forinfrastructure, user charges are justifiable.

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pp.kk.2001 / tekijän puumerkki

9The White Paper European Transport Policy for 2010:
Time to decide (European Commission, 2001)
Introduction of cost-based user charges in the road network
connected to the challenge of funding Utilisation of private capital and private sector expertise(public/private partnerships) as well as user charges as keyelements in closing the financing gap
 Funding transport networks across the modes, regardless of thesource of funding; development of the Swiss motorway and rail
network was given as an example

Kalvosarjan nimi

pp.kk.2001 / tekijän puumerkki

10Road Transport Charging in the European CountriesHarmonisation of transport charging (Directive on the charging ofheavy goods vehicles, 2003)

the Directive is needed as most Member States have adopted or areplanning road network user charges for heavy goods vehicles
the user-based charging and funding of the road network is becoming areality in many countries, although the new systems do not comply strictlywith the principles of the White Paper on transport charging

All the other countries than Finland and Baltic countries are
utilising user-based charging at some level After 1.1.2007 charging has to be based on GPS (Galileo), GSMGPRS, or 5,8 GHz microwave technology

Kalvosarjan nimi

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11Case Finland
Jani Saarinen
Financial Director, Finnish Road Administration

Kalvosarjan nimi

pp.kk.2001 / tekijän puumerkki

12Taxation versus Road Budget
5 000
4 500
4 000

Milj. euroa

3 500
3 000
2 500
2 000
1 500
1 0005000

1990
Fuel tax

92
Vehicle tax

Note: Figures do not include Value Added
Taxes -22%
Kalvosarjan nimi

9496

98

2000

Motor vehicle tax

User tax

Price level: Year 2001

Source: The Finnish Centre of Automobile Sector

Road funding

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13

Taxation of road transportation in FinlandVehicle tax:
28 % of the end price of a private personal vehicle - 650 € / - 450 € (diesel) 35 % of the import price of vans income 1 300 mill. € in 2006

Motor vehicle tax:annual tax 35 cnt/day / 26 cnt/day (vehicles registered before 1994) from all theprivate personal vehicles and vans (< 3 500 kg)
 6,7 cnt/day from diesel cars per 100 kg
 0,9 cnt/day from vans and trucks per 100 kg
 income 560 mill. € in 2006


Fuel tax:
Benzin 58,76 cnt/l / diesel 31,94 cnt/l including additional tax and huoltovarmuustax
 total income 2 979 mill. € in 2006, 2204 mill. € from road transportation
Kalvosarjan nimi

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14Taxation of road transportation in Finland (2)Insurance tax:
22 % of the insurance fee total income 460 mill. € in 2006, 219 mill. € from vehicle and traffic insurances

VAT:
22 % of the price of the products or services.
 total income 871 mill. € in 2006, from fuel consumed in road transportation
 total income 1 051 mill. € from motor vehicles, spare parts and repairing andmaintenance

Total:
direct taxes 4 064 mill. € (10 % of the state budget) VAT's etc. total 2 141 mill. € (5 %) total 6 205 mill. € (15 % ) 700 mill € (17 % / 11-12 % of income) allocated to roads

Kalvosarjan nimi

pp.kk.2001 / tekijän puumerkki

15

Taxation of road transportation in Finland
Taxes € million / year 2006

1 051
871

2 204

Vehicle tax
Motor vehicle tax
Fuel tax
VAT (vehicle)
VAT (fuel)

1 300
560

Kalvosarjan nimi

pp.kk.2001 / tekijän puumerkki

16

Taxes and fees from other modes of transportation
Aviation
landing and passenger fees (paid by airlines) to cover the costs of Finnish Civil
Aviation Administration (State-owned enterprise, maintenance and investments ofairports) ~ € 240 mill. / year aviation control fee for Aviation Administration (State Department) ~ € 5,8 mill. /yearRailroads
railroad fee (paid by transportation companies) to cover the costs of Finnish
Railroad Administration (State Department, maintenance only without capital costs)~ € 42,5 mill. / year
 railroad tax (paid by transportation companies) for the state € 18 mill. / year
Maritime
Kalvosarjan nimi

sea way fee (paid by the ship owners) € 76,3 mill. / year to cover the cots ofFinnish Maritime Administration (State Department, maintenance and capital costs)
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17Road Transport Charging - what it is about?

Kalvosarjan nimi

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18Road Transport Charging; Costs
Internal costsExternal costs






wear and tear of infrastructure; maintenance costs
reconstruction and new investments; capital costs
accident costs
environmental costs, pollution etc.
other socio-economical costs

Other costsKalvosarjan nimitransferring costs between the traffic modes
subsidising public transport etc.

pp.kk.2001 / tekijän puumerkki

19Road Transport Charging; Income

General taxationEarmarked taxationvignettes, annual fees
insurance etc.

User charges


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fuel etc.

Charges or fees on transportvehiclesfuelvalue added taxes etc.

vignettes
fees, tolls etc.
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20Road Transport Charging; Impacts
General taxation
 Transport infrastructure fundingReducing the adverse effects of trafficmaintenancecapital investments
less polluting or safer vehicles
costs arising from the adverse effects of traffic such as accidents,pollution, noise etc.

Transport demand managementtraffic management etc.



Macro-economic, social or other impacts (?)
 Regulation (?)
Kalvosarjan nimi

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21Transport Charging; ConclusionTransfer towards the principle where transport infrastructure
costs are allocated to the users~ transport infrastructure
charging Transport charging should include all income and costs oftransportKalvosarjan nimi

all tax revenues, fees, vignettes, user charges and tolls related to thetransportation, vehicles and fuelall costs of transport; maintenance, capital costs, external cost

pp.kk.2001 / tekijän puumerkki

22Transport Charging; ConclusionTransport charging should be utilised for







financing maintenance, operations and investments
to cover external transport costs
to manage congestion > increase efficiency of the road transportation
systemother purposes set by the local policies (cross subsidization etc.)

Should be transparent

Kalvosarjan nimi

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23

Framework of Road Pricing

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IncomeCosts• taxes• fees• user charges• others ?

• maintenance• capital• external• others ?

Tariffs

Goals or objectives• driven kilometres• time, place• vehicle type, axel load
• other ?

• infrastructure funding• covering external costs• traffic management• subsidizing of other modes• other ?

pp.kk.2001 / tekijän puumerkki