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What is a Road Tax?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 09 December 2016
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A road tax is a tax people must pay to legally drive a motor vehicle on public roads. Governments can collect the tax in a variety of ways, and they use the money to fund improvements to transportation infrastructure, public safety, and related needs. The amount of the tax may depend on the size and value of the vehicle. People may need to pay additional taxes and tolls to drive on specific bridges and roads because their upkeep is more expensive, and typically taxes are also assessed on gasoline purchases.

One of the simplest ways to collect a road tax is through vehicle registration. In many parts of the world, people need to annually register their vehicles with a department of motor vehicles. The registration fee is the road tax. Drivers receive a sticker to affix to the plates, indicating they have paid their fees for the given year. The government can also collect taxes when a vehicle is sold, and the taxes are usually a percentage of the purchase price. Some countries use a vignette, a road tax where people pay a fee and receive a validation sticker for a vehicle.

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Everyone who wants to drive a vehicle on public roads will need to pay the fee. It may scale up for larger and heavier vehicles, as they create more wear and tear on the road. If people do not pay the road tax, they usually need to pay a fine, and will need to get current on their tax obligations for the year. In cases where stickers and other indicators are lost or stolen, the motor vehicle department may be able to look up the vehicle records and reissue them so people avoid being pulled over for invalid or outdated stickers.

It is usually possible to get a schedule of road taxes for a given region before buying a car so people know how much to expect, in terms of taxes. The chart will show the tax for different kinds of vehicles and provide information on whether it is a flat fee or percentage of vehicle value.

In addition to the road tax, people can incur other tax liabilities by driving. Some nations use congestion zone taxation to discourage people from driving on crowded roads during rush hour. Tolls for bridges, tunnels, and certain roads can increase revenues to pay for their upkeep. Individual municipalities and other regional governments may have their own tax schemes in addition to the one imposed by the government with the goal of paying for roads and public transit.

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