In a situation where supply exceeds demand, there will be a fierce struggle for survival, predicts Ermo Perolainen, member of the board of the Estonian International Road Transport Association (ERAA).
Local entrepreneurs are celebrating the New Year without rose-colored glasses. Ahead are tax increases, reforms and new requirements, and all this against the backdrop of an acute, ongoing shortage of specialists. Almost all sectors of the economy have to survive in such conditions. Representatives from various industries shared their expectations with the Far East.
The trucking sector in our country is dominated by small businesses: about 75% of companies operate between one and five trucks. The international market in this area is characterized by fierce competition and low profits. Transport is a service sector, the demand for which depends on the general economic situation. If there is a recession in industry, manufacturing, trade and other sectors, it reduces the demand for transport services.
Over the past few years, there has been a steady downward trend in demand in Estonia, fueled by competition from carriers from Latvia, Lithuania, Poland and other countries due to an increase in the tax burden in our country and tightening restrictions on the import of foreign workers, as well as the cessation of transportation to east direction.
Expectations for 2025 are rather muted, as demand for transport services is not expected to grow. In a situation where supply exceeds demand, there will be a fierce struggle for survival, and rising costs (labor, trucks, insurance, ferry tickets, taxes, etc.), contrary to expectations, will lead to lower transportation prices, which will lead to entails a reduction in the number of carriers.
In addition to the tax burden, one of the main factors affecting competitiveness in the transport sector is restrictions on attracting migrant workers. The driver shortage will worsen over time: more than 40% of drivers are already 55 years of age or older, and less than 5% are under 25 years of age. International transportation, which involves working away from home, does not attract today’s youth, so to maintain the viability of the industry, it is necessary to look for drivers from third countries. In such a situation, the winners are states where it is easier and faster to hire foreign labor. Unfortunately, Estonia is not one of these countries.
Reviewing applications for documents (LTR + visa) necessary for hiring people takes us at least one month (usually even a month and a half), while, for example, in Lithuania this process is much faster. As a result, in order to remain competitive, Estonian companies are forced to hire labor from neighboring countries (Latvia, Lithuania, Poland), which means that the Estonian state loses out on labor taxes that flow abroad. For comparison: in Lithuania the number of foreign drivers is 80,000, and in Estonia – only 2,000, that is, a difference of 40 times, while in Lithuania the share of the transport sector in the country’s gross domestic product (GDP) is about 10%, and in Estonia – less than 6%.
In addition, an increase in excise taxes on diesel fuel in 2025 and 2026 and the introduction of an obligation to replace tachographs will have a negative impact on the Estonian transport sector. Thus, in accordance with the legislation of the European Union, all tachographs, except Smart 1 (manufactured before June 2019), must be replaced with Smart 2 digital tachographs by December 31, 2024 for vehicles engaged in international transport. The cost of replacing the device is around €2,000 per truck, which will create a significant additional burden on the sector as a whole and make EU carriers less competitive compared to carriers from third countries.
In cooperation with the Ministry of Climate Change and the Tax and Customs Department, ERAA has started negotiations to improve tax compliance in the transport sector and ensure a level playing field. We propose an amendment to the law that will oblige the customer of transportation (the forwarder) to check the tax behavior of the transport company, that is, compliance with statutory tax and wage requirements, before ordering, and the verification requirement should apply to both Estonian and foreign carriers.
On a positive note, the European Court in October this year abolished the requirement to return vehicles to their home country: vehicles involved in international transport no longer have to regularly (every eight weeks) be returned to the country of registration. This decision will create a more level playing field for European carriers.
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Source: www.dv.ee
