Finland removes VAT from train tickets
As a temporary measure, Finland will reduce VAT on train and other public transport tickets from 10 per cent to zero from January 1 to April 30, 2023. Parliament decided on the course action as a means to compensate households for the sharp increase in the price of electricity and costs of living.
The zero tax rate will be applied to all currently taxable passenger transport services, for example train, bus, taxi, plane and ship transport. Railway operator VR stresses that the VAT reduction goes for all train tickets regardless of the travel time, including already discounted tickets, such as tickets for students, children and senior citizens and for group and company tickets.
Public transport tickets can be bought tax-free as far into the future as there are tickets on sale at that time. When the tax reduction starts in January, night train tickets of VR can be purchased until August, long-distance daytime train tickets until 19 June and local train tickets until 25 March. Other summer season tickets will go on sale in the spring.
VR, the country’s only passenger railway operator, welcomes the measure. “We are happy about this government’s hand-out, which supports public transport and especially the everyday movement of Finns at a time when inflation is high and many households are looking for ways to save on everyday costs”, said VR Group CEO Elisa Markula. “The VAT discount is tied to the time of ticket purchase, so spring is a good opportunity to take advantage of the discount also on season and series tickets and grab cheap trips even a year in advance”.
‘Train already cheaper than car’
Depending on the length of the journey and the number of passengers, the train is already a cheaper option than the car for many journeys, even without tax reductions, states the railway operator. Use of private cars has become much more expensive as fuel prices have risen.
“As the tax bear hibernates, even the most dedicated car drivers have a great opportunity to swap a few everyday journeys for a carbon-neutral train and enjoy not only the price savings but also the other benefits of train travel. For example, on a round trip from Helsinki to Oulu, a train passenger saves at best more than 80 euros, about 80 kilos of CO2 emissions and up to 1.5 hours of time compared to driving a car”, Markula points out.
The tax reduction is temporary, and the normal 1- percent VAT will revert to the price of train tickets from 1 May. It is estimated to reduce the state’s tax revenue by 60 million euros in 2023. Next to the VAT reduction for public transport, the taxes for electricity in Finland will be reduced from 24 percent to 10 percent in the same period, which is estimated to reduce the state’s income by an additional 290 million euros.