The confusion of differing tax systems

MICHAEL McALEER HELP DESKAnswering all your motoring queries

From D Mason: Whatever about the confusion here over the upcoming change to CO2-based tax, why is it that we have a different band compared to Britain for instance? I've recently moved from there and it seems ridiculous for the Irish Government to introduce a different system to our European partners.

Surely they can impose different tax rates for the bands than other countries - thereby protecting their tax revenue - while at the same time allowing car firms to work on getting their cars to fit into the lowest band on a European scale.

Almost all western European countries now levy some form of CO2 tax on passenger cars.

A survey done by ACEA, the European Automobile Manufacturers' Association, shows that over the past 15 months, France, Spain and Finland introduced CO2-related car taxation.

This brings the total number of EU Member States with such a system up to 14. In addition, countries such as the Netherlands, Denmark and Portugal implemented significant changes to their existing schemes.

However, as James Muir, chief executive of Mazda Europe, stated in an interview with The Irish Times last month, only a harmonised tax scheme will give the necessary clear market signal which will be decisive in achieving the desired cuts in CO2 emissions.

His view is supported by ACEA secretary general Ivan Hodac, who says: "The fragmentation of systems has a distorting effect on the internal market."

Current CO2-related car tax schemes differ widely across the EU. Italy, for example, offers a one-off incentive when purchasing a new car. France has a complex tax discount or punishment, depending on the emissions level of a particular vehicle. Similarly, Britain and Luxembourg use CO2 emissions as the only factor for car taxation, whereas others apply a combination of criteria including car price, engine capacity and CO2 emissions.

The biggest problem is that most countries impose rather arbitrary cut-off points to increase tax rates. What you get is a series of bands rather than a linear tax per g/km of CO2. While they may all claim to be working towards the same goal, clearly European governments are creating nothing but confusion in their approaches to this issue. Out of this confusion comes a frustrated motoring populace.

From Gerry Curran, Monaghan: I am now in my 70s and I am considering buying a small, automatic car.

I had in mind a Honda Jazz or a Toyota Yaris, 1.0-litre or 1.3-litre. I drive only 6,000 or 7,000 miles per year and I would welcome advice on which of the above, or indeed any other small automatic, would be suitable.

The local Honda dealers were unable to tell me whether the car would cost more or less after July 1st, so perhaps you could enlighten me.

Both of these are good buys, and all are due to benefit from a reduction in Vehicle Registration Tax (VRT) and road tax from July 1st.

For me, the Jazz would be the most attractive option, even though it is currently slightly more expensive than the 1-litre Yaris. For a start, its CVT gearbox is slightly more amenable than the Yaris's multimode system, which is more lurching between changes than the Honda transmission.

Hopefully both Honda and Toyota will pass on the savings made due to the tax changes.

In that case the VRT on the Jazz - which has a CO2 rating of 139g/km - will drop by a very welcome 6.5 per cent, while the annual road tax will fall from €320 to €150. Given the car's pedigree and flexibility in terms of interior space, it is set to become a very attractive proposition comes July.

From BC, Dublin: We are moving one of our cars to our French holiday home next month, where we will re-register it and use it to get around when we visit. However, we've decided this only in the last few weeks, and had taxed it back in March. The bill then came to €1,231 for the year and I'm loathe to throw that away. I'm told the French authorities don't give us any credit for Irish tax when we arrive. Can I reclaim any of this or is it yet another tranche of cash lost to the State coffers?

You can reclaim the remaining tax on the car. If a car has been scrapped or exported permanently, you can reclaim the tax. The only rule is that you need to have at least three months outstanding.