The state's annual accounts show a large drop in revenue from registration tax. The popularity of electric cars is coming at a high cost, and now the agreement is due to go to a pit stop in 2025.
The state's new annual accounts reveal a significant financial gap. Revenue from car registration tax has fallen noticeably more than expected.
This is mainly due to the sale of electric cars. The state had budgeted revenue of 9.9 billion kroner from the tax.
However, the result was only 7.2 billion kroner. This is a decrease of 2.7 billion kroner compared to the budget. The primary reason is the Danes' rapid switch to electric cars.
Electric cars are subject to significantly lower registration taxes than traditional cars. This development negatively affects the state's finances.
Gradual increase in registration tax – also for electric cars
The current low taxes on electric cars stem from a political agreement.
The agreement was concluded in 2020. The then Social Democratic government made the agreement with support from the Danish Social Democrats, the Socialist Party and the Unity List.
The agreement means that the registration tax for electric cars will be phased in gradually. The phase-in started in 2021 and will run until 2035. This is to give car buyers time to adjust.
The tax has been set until 2025. It is 40 percent of the full registration tax for electric cars during that period. This has made electric cars economically attractive for many.
From 2026, the registration tax will start to increase. It will increase by 8 percentage points each year. This will continue until the tax reaches 80 percent in 2030.
After 2030, the increase will continue at a slower pace. The tax will increase by 4 percentage points annually. This will happen until 2035.
By 2035, electric cars will be fully phased into the system. They will then be subject to 100 percent of the normal registration tax. They will thus be taxed in line with gasoline and diesel cars.
However, we may not get that far. The government, led by Tax Minister Rasmus Stoklund (S), does not want to make electric cars more expensive.
Upcoming pit stop for the tax on electric cars.
An important part of the 2020 agreement is a planned review. The agreement will undergo a so-called pit stop in 2025. This gives politicians the opportunity to adjust the agreement.
The sharp drop in government revenue could affect the discussions. Politicians will need to assess whether the current model is sustainable. They will need to decide on the pace of tax increases.
The rapid spread of electric cars has exceeded expectations.
This raises questions about the balance between green transition and government finances. The 2025 pit stop will therefore be central to the future of car taxes.
Developments in the car market and the tax system are closely monitored. Many factors influence drivers' choices and the state's finances.
The Danish car importers, who today call themselves Mobility Denmark, fear that interest in electric cars will disappear completely if the tax skyrockets.
While the state is losing money on new electric cars, the police are making money like never before from the country's record number of photo vans. Read more about it here .
