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The increase in the price of diesel at the pumps and the revision of the motor tax regime are among the recommendations of the pre-budget review of the Fiscal Strategy Group, published on Monday.
Among the changes he proposes is the equalization of excise duties on diesel and gasoline, suggesting an increase of 2.32 cents per liter per year over the next five years, or an increase of 1.16 cents per liter for the next decade.
With regard to the car tax, he suggests increasing the number of tax bands for vehicle registration tax (VRT) from 11 today to 20. The new rates would vary from 7 percent for vehicles with CO2 emissions of up to 50 g / km, at 39 percent for cars emitting 191g / km or more. The group also suggests adjusting the NOx surcharge bands that apply to newly registered cars so that the lower band is 1 to 40 mg / km NOx instead of the current 1-60 mg / km NOx.
The document states: “Essentially, there is an argument that VRT charges were too low over the last decade, as the rates applied were based on highly underestimated CO2 values.”
“Average recorded emissions from new car registrations over the past decade have been based on the discredited laboratory-based NEDC emissions test, which has proven to be a very poor indicator of real-world emissions performance from automobiles.” .
With the NEDC system being replaced by a new system, known as the WLTP, the tax strategy group says any reform should seek to maintain a level playing field between the cars tested under the two test regimes for tax purposes.
Regarding subsidies for electric and hybrid vehicles, it proposes that for vehicles priced above € 40,000, the current VRT relief of € 5,000 would be gradually reduced, cutting off the relief on cars priced at € 50,000 or more. .
Motor tax
On the car tax, he estimates that the fall in the average rate per car, from € 443 in 2015 to € 346 last year, had caused a drop in Treasury income from € 880 million five years ago to an estimated of 707 million euros for this year. .
“The motor tax will need to be adjusted to take into account the new WLTP emissions testing mechanism from 2021.”
The group says the policy goals for motor tax reform are to ensure “a level playing field between NEDC and WLTP-tested cars, and to fulfill the Climate Action Plan’s commitment to reform the tax structure in light of more precise emissions “. tests.”
His preferred reform would be for separate tax regimes to apply depending on when a vehicle was first registered. Therefore, cars registered before July 2008 will continue to tax the engine size, while cars registered until December 31 of this year will be subject to the outgoing NEDC test system.
From then on, all taxes will be applied to newly registered vehicles based on their WLTP figures. It is estimated that the proposed changes would mean that 1% of cars would see a rate reduction of € 20, 88% would see no rate change, for 7% there would be a rate increase of € 10 per year, while the remaining 4% would see a rate increase of between 30 and 50 euros per year.
Scrapping schemes
In light of the impact of Covid-19, the Irish automotive sector has called for a new scrapping plan. However, the group’s paper says such schemes “produce poor environmental results.”
It also rejects claims by the automotive sector that renewing the Irish car fleet more quickly will lead to a significant drop in overall emissions. “Rapid car fleet renewal, when assessed on a life cycle basis, can significantly increase total emissions due to the relatively high emissions built into a car’s manufacturing and life cycle,” he says.
In the longer term, he warns that with the scale of the proposed ‘electrification’ of the national vehicle park, “there are significant annual revenues from the Treasury at risk.”
Established in the early 1990s, the group is chaired by the Department of Finance, and its members comprise senior officials and political advisers from various departments and offices. Your research articles are used to inform budget strategy.
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