Monday 19 August 2019

Exchequer still rakes in €5.5bn despite big switch to lower-tax vehicles

Our emissions-based taxation system heavily favours cars which use less fuel and spit out fewer harmful emissions. Stock Image
Our emissions-based taxation system heavily favours cars which use less fuel and spit out fewer harmful emissions. Stock Image
Eddie Cunningham

Eddie Cunningham

Thousands more drivers are buying cleaner, greener cars to help the environment and beat the taxman - but they still forked out more than €5.5bn in motoring-related taxes during 2016.

An Irish Independent analysis of motoring trends shows how 25,000 more people bought a car in the lowest tax band (A) in 2016.

That is a 27.5pc increase (to 114,488) on the 89,791 purchased in 2015.

Our emissions-based taxation system heavily favours cars which use less fuel and spit out fewer harmful emissions.

And the figures show how there has been yet another major shift to lower-emissions motoring.

The vast majority of buyers qualified for the lowest bundle of VRT and road-tax charges (Band A) as well as paying less in fuel taxation with their new and more economical engines.

But with car sales up strongly on 2015, the Exchequer still trawled in a massive €5.665bn from all areas of motoring, official Simi figures show. That was €265m more than the Exchequer claimed in 2015.

Other central data available to the Irish Independent revealed how around €12 in every €20 spent on fuel goes to Government coffers.

Those figures were supplied in reply to parliamentary questions from Longford-Westmeath Fine Gael TD Peter Burke.

Excise on fuel is by far the hardest on motorists' pockets with the €2.4bn collected accounting for nearly half the total tax figure.

Despite the huge numbers buying new lower-tax cars, road tax remains one of the other big drains on our disposable income, costing us €1.05bn in 2016.

That figure can be partly explained by the fact that hundreds of thousands of car owners are driving pre-2008-registered vehicles, whose road tax is still calculated on engine size rather than emissions.

In many cases these cars, registered before the switch to the emissions-based system in 2008, are costing from €199 (under 1,000cc) to €1,809 (3,001c or more).

Popular two-litre cars of that era cost from €710 to €906 a year to tax, whereas owners of their modern counterparts, especially diesels, pay as little as €180.

Diesels remain the overwhelming choice of buyers, with more than 102,600 registered in 2016, while around 40,500 petrol vehicles were chosen, mostly for smaller cars.

Hybrids are on the increase, with nearly 2,600 bought (up from 1,406 in 2015).

But electric cars, which benefit from VRT relief of €5,000 and an equivalent Sustainable Energy Authority of Ireland grant, fell from 466 to under 400.

In the Budget, Finance Minister Michael Noonan extended the €5,000 VRT relief on electric vehicles for five years to give the motor industry and consumers a chance "to invest in cleaner technology".

His decision means buyers will get a total of €10,000 off the price of an electric car as they also qualify for the SEAI grant of €5,000.

With ever-tightening regulations on emissions looming, we can expect carrot-and-stick policies to drive more motorists into even cleaner and greener cars.

However, it is unlikely that such policies will lead to a reduction in the overall tax take from motorists in the years ahead.

Irish Independent

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