Drivers and smokers to make up bulk of extra taxes

Drivers and smokers will contribute most of the €270 million that the Government hopes to raise from extra taxes announced in Budget 2021.

A carbon tax hike that will apply to motor fuel from Tuesday night and an extra 50 cent on a packet of 20 cigarettes are expected to yield €165 million in total next year.

The Government will increase carbon tax to €33.50 a tonne from €26 in Budget 2021.

Increase

Minister for Finance Paschal Donohoe said on Tuesday that the increase would apply to auto fuels from midnight, and to all others from May 1st, 2021, bringing in €108 million next year.

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Carbon tax will increase by €7.50 a year until 2029 and by €6.30 in 2030 to bring it to a total of €100.

The Government will also shake up vehicle registration tax to bring it in line with the Worldwide Harmonised Light Vehicle Test Procedure.

Smokers face yet another 50 cent hike in the price of 20 cigarettes, bringing the most popular brands to €14.

All tobacco products will be subject to pro-rata increases, the Minister said. The Government calculates that smokers will contribute an extra €57 million to the State next year as a result of the increase. Mr Donohoe noted that the price hike was in line with public health policy aims to discourage people from smoking.

He also explained that the new car tax system would be based on emissions tests that are “closer to real-world performance” than is now the case.

The Government is also changing the nitrogen oxide surcharge so that owners of vehicles that emit higher quantities of this gas will pay more.

Taxes

Minister for Public Expenditure and Reform Michael McGrath said €100 million of the cash raised from carbon taxes would be earmarked for spending on making people’s homes more energy efficient. He predicted that the extra cash would fund the national home retrofit scheme and others designed to make houses more energy efficient.

“This will lower greenhouse gas emissions while also supporting thousands of additional jobs in the construction sector,” Mr McGrath said.

He added that extra resources would be given to the Department of Climate Action and Environment, and the Sustainable Energy Authority of Ireland, for these changes.

The Government will spend some of the carbon tax cash on welfare increases, which Mr McGrath said he would outline at a later date.