Holland is to launch a road-charging scheme from 2012.
GPS tracking systems will be fitted to all of the country's vehicles, with drivers being charged for each kilometre they travel.
The scheme will replace other motoring taxes , which will be dramatically reduced to compensate for the pay-as-you-drive fees.
Holland's car purchase tax – which adds up to 25 per cent to the price of a car – will be abolished, as will annual road tax charges.
The Dutch Government estimates that six out of 10 drivers will be better off under the pay-as-you-drive system, and that overall tax revenues will remain the same.
Details of each journey will be recorded by a billing agency, with drivers charged around seven cents (about 6p) per kilometre. Charges will be increased on busy roads and during peak hours. Lorries, vans and cars that emit higher levels of CO2 will also be charged more.
Holland suffers from some of the worst congestion in northern Europe, and the government hopes the scheme will reduce peak traffic levels by up to 15 per cent.
It also estimates that the reduced number of vehicles on the roads should cut accidents by around 7 per cent, while cutting overall CO2 emissions by around 10 per cent.