Friday 15 November 2019

Hard-pressed motorists face new round of car tax hikes

Padraic Deane and Paul Melia

THE cost of new cars is set to rise and and most drivers face increases in annual road tax from January.

The Department of Finance refused to comment last night but it is understood increases in Vehicle Registration Tax (VRT) and road tax will take effect from early next year.

The Government believes too many new cars are currently falling into lower tax bands, based on carbon emissions, which were introduced by the previous administration.

It plans to introduce a new system which will increase the vehicle registration tax (VRT) charged on all new cars across the board -- with knock-on implications for annual road tax.

New cars are currently taxed in seven bands according to their emissions.

VRT and road tax rates are based on these emissions -- effectively how 'green' the car is.

The bands, from A to G, determine annual motor tax bills which range from €160 to €2,258.

Cars registered before 2008 are taxed on a different system based on engine size.

The current bands also decide how much VRT a car attracts -- from 14pc to 36pc of its open-market selling price.

The lowest VRT applies to all passenger cars which emit between zero and 120 grams of carbon dioxide per kilometre travelled (g/km).

Under the new system, Band A will be broken down into four sub-categories and different rates applied.

It will be spilt as follows: A1: 0-80g/km (14pc rate), A2: 81-100g/km (15pc), A3: 101-110g/km (16pc) and A4: 111-120 g/km (17pc).

This will affect the cost of buying most cars -- and will hit families hard. Increases of 1pc will apply to all other bands as well.

The restructuring means that virtually all new cars sold will incur higher VRT rates, adding considerably to the price and potentially hitting sales which have fallen significantly over the past few years.


It is understood the Society of the Irish Motor Industry (SIMI) has grave concerns about VRT increases and is lobbying on behalf of the industry.

The existing system has been criticised by some as unfair because it does not take the cost and size of cars into account. That means drivers of larger, prestigious vehicles enjoy the same tax rates as smaller ones.

For example, an executive diesel costing more than €45,000 qualifies for the lowest tax band, as does a small hatchback, which costs just €15,000.

It had been hoped the Government might apply a more complex hybrid system, where the car's engine size and CO2 emissions would be taken into account when calculating VRT. But this has been ruled out.

The move to adjust the tax system was first revealed by the Irish Independent last March.

Now, the 'Auto Trade Journal' has just published in detail the proposed VRT changes and implications for road tax rates.

The Department of Finance is completing a review of motor tax rates. Saying it was a budgetary matter, it refused to comment.

Motor tax revenue fell to €988m last year, a drop of €72m from the peak in 2008. This prompted an increase in motor tax rates across the board, with the common A, B and C bands hit with increases of up to 54pc, and average hikes of 7.5pc across the higher bands.

This was designed to act as a "statement of intent", according to correspondence between Finance Minister Michael Noonan and Environment Minister Phil Hogan, seen by the Irish Independent.

The increases will impact on thousands of motorists, and all will be affected. Officials have warned that unless the bands are changed, revenue from motor tax will drop by more than 50pc by 2030.

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