Phil Hogan, Minister for the Environment, Community and Local Government, said today (5 December 2012) that two critically important issues were being addressed in the budget announcements for motor tax: "Following a comprehensive review over the last twelve months on the motor tax bands, new bands for low emission cars are being introduced for motor tax – engine technologies are improving all the time and the new structures allow us to focus the incentive of the lowest rates on the very cleanest cars", and secondly, "necessary motor tax increases are being made to prevent further erosion of this important part of the tax base".
The increase in motor tax for most categories of vehicles is 7.5%. Flat rate increases of between €10 and €92, graduated to favour lower-emitting cars, will apply to cars taxed on the basis of CO2 emissions, averaging 19.8%.
Minister Hogan was commenting on the new motor tax structures for cars taxed on the basis of CO2, and the increases in motor tax included in the Budget as part of the overall taxation measures.
"Breaking up the A and B Bands, with 80g CO2/km as the lowest level for motor tax for cars, and applying an increase of no more than €10 per annum for the cleanest cars, reflects my contribution to reducing transport emissions as part of our overall commitment reducing national greenhouse gas emissions", Minister Hogan said. "Introducing a Zero Emissions Band for electric cars and a reduction in motor tax for these is further proof of my commitment to a cleaner environment", he added.
"The restructuring of motor tax in July 2008 to base it on CO2 emissions while bringing a welcome shift to lower emitting cars, also reduced the total amount being collected from motor tax as more new cars fall within the lower emitting A and B bands, with the lowest tax rates". This year, for the first time, over half of the new cars purchased fell within the most environmentally friendly A Band while, in total, over 92% of all new private cars were in the A and B Bands. "My restructuring of motor tax ensures that buyers will now have an incentive to buy the most efficient car below 120g CO2/km", Hogan stressed.
"The new structure for motor tax is part of an overall package with VRT. The same banding structure is being used for both, and the lowest rates of both taxes are applied to the cleanest cars", Hogan said. The restructuring is a result of an assessment across Government of the submissions made in response to the Minister for Finance’s consultation process announced in last year’s Budget.
Minister Hogan also stressed that "in current financial circumstances, we must ensure the yield from an important part of the tax base". Motor tax receipts were €1,060m in 2008, reducing to €1,010m last year. Final receipts for 2012 are expected to be in the order of €1,040m, mainly due to the increases in last year’s Budget. Had those increases not been applied, it is estimated that receipts for this year could have been significantly less. The reason for this decrease, in large part, is the shift to taxation on the basis of CO2, where the average tax per car is €263 compared to the average for cars taxed on the basis of engine capacity of €476. "Failure to address the structural weaknesses of the CO2 motor tax system would mean a steady reduction in total motor tax receipts, of the order of 40%, once the older cars are replaced by those taxed on emissions", Hogan said, adding "this shortfall must be made up within the motor tax system, or the burden transferred elsewhere in the economy".
The increase in motor tax for most categories of vehicles is 7.5%. Flat rate increases of between €10 and €92, graduated to favour lower-emitting cars, will apply to cars taxed on the basis of CO2 emissions, with increases averaging and just under 20%
The increases are expected to generate in the order of €86.5 million over a full year.
The new rates of tax are listed in the appendix.