THE Government plans to drive up the cost of taxing the most popular family cars.
Car owners face a massive hike in the cost of their motor tax bills under a new scheme being considered.
The system of basing road tax and Vehicle Registration Tax on the level of emissions may soon be a thing of the past, and instead the tax band could be based on both vehicle size and emissions.
Popular family brands including Ford, Volkswagen and Toyota all could be pushed up into higher tax bands.
Minister for Finance Michael Noonan and Minister for the Environment Phil Hogan have agreed that radical changes are needed to reverse falling motor tax revenues.
The Government believes that too many cars are graded in lower tax bands based on carbon emissions, which were introduced by the previous administration of Fianna Fail and the Greens.
Under the new proposals, each group would pay a different tax rate based on a combination of emissions and engine sizes. The current system of the AA band was seen to be unfair because it disregards the cost and size of cars, meaning drivers of larger vehicles enjoy the same tax rates as smaller ones.
Drivers of cars such as the BMW520d diesel, which qualifies for the lowest tax band despite having a two-litre engine, could now be moved into a much higher tax bracket.
But even car owners in the 1.4-litre or 1.5-litre bracket would have to pay a lot more.
Motor tax revenue dropped to €988m last year, a fall of €72m from the peak in 2008.
The motor tax rate was attractive for new car buyers since 2008 as 90pc purchased have fallen into the lowest three tax bands of A, B and C which cost a maximum of €330 a year.
This means that, for example, the BMW 520d diesel with a price tag of more than €45,000 qualifies for the lowest tax band, as does a Toyota Yaris, which costs just €15,000. The Fine Gael-Labour administration has since increased motor tax across the board.
It is understood that only drivers of small, super eco-friendly cars would escape the hikes. But there are fears the new changes may discourage people from buying new cars.
This would mean lower purchase and road tax returns and could affect employment in the industry.