Ireland’s motor tax system is so high in terms of price that motorists are finding it too costly to switch to new, greener car models, a major new report will say today.
Leading economist Colm McCarthy states that the current level of tax on new cars is hindering motorists from switching to newer, greener models, thereby preventing a reduction in carbon emissions.
In addition, the report says motor taxes should be used for the maintenance and safety of Ireland’s transport.
The independent report was commissioned by the Irish Car Carbon Reduction Alliance, which includes the majority of car dealers across the country. Denis Murphy, spokesperson for the ICCRA, said Ireland had ‘one of the highest levels of car emissions in Europe’. He continued: ‘Reducing it can be achieved in one of two ways – by reducing the number of car journeys or by driving cleaner cars.
‘The former requires a cultural change and significant investment in public transport, particularly in rural Ireland, where car mileage is highest. The latter can be achieved almost immediately by addressing the main underlying reasons preventing the purchase of greener cars – namely taxation and the Vehicle Registration Tax (VRT).’ According to the report, the current level of VRT is not only reducing sales of new cars, it is also having a detrimental impact on the used market by inhibiting the availability of two- and three-year-old models.
It says that this is creating an artificial demand for used imports, which Mr McCarthy says is being met with older UK models, with poorer fuel efficiency than the equivalent new variant.
He further highlights that with the current motor tax system, the Irish purchaser of a used UK vehicle is paying less tax to the Irish Government than a purchaser of new vehicles at the same price.
‘The current system does not make sense for the economy or the environment. VRT is a dysfunctional tax. New cars in 2021 with internal combustion engines (ICE) will emit 28% less CO2 than the average car currently on Irish roads,’ said Mr Murphy.
Under its Climate Action Plan, the Government proposes to have one million electric vehicles on Irish roads by 2030, while the sale of fossil-fuel cars will be banned from that date.
The ICCRA claims that replacement of the car fleet with newer models should not be discouraged prematurely.
‘Currently electric vehicles are just 3.5% of new car sales,’ said Mr Murphy.
‘As manufacturers are working towards the EU’s emission target for 2040, electric cars will not be available in the quantity required to allow such a transition until late in this decade.’ However, the current system of taxation of motoring generates about €6billion annually for the State.
Mr McCarthy says revenue must be maintained to cover the direct and indirect costs of motoring, even if carbon emissions are cut.
The report shows that the switch to electric vehicles will eliminate a large part of the current revenue base, as it is linked to taxes on fossil fuels.
Mr McCarthy says this necessitates a change in how taxes are levied and suggests some form of road-user charging is required.