Tax plan would force up car prices by €1,500, industry group warns

New car prices will rise by an average of €1,500, with some of the more popular family models receiving a price hike of up to €2,800, if changes proposed by Tax Strategy Group (TSG) are adopted in Budget 2022, an industry group has warned.

Describing the proposals as regressive, the Society of Irish Motor Industry (Simi) also said the proposals would push up the price of electric vehicles (EVs).

The Department of Finance’s TSG has proposed increasing vehicle registration tax (VRT) on regular cars with emissions above 100g/km by between 2 and 5 per cent.

It also called for a drop in the cap for tax relief on electric cars to €40,000, with the current €5,000 tapering off from €30,000. This would mean significant cuts or a total removal of tax relief on 70 per cent of the electric cars currently on the Irish market.

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Volkswagen Group Ireland, which is the biggest seller of EVs across its brands, said the proposals would add  €2,926* to the price of its popular ID.3 family electric car.

Car pollution

Brian Cooke, Simi director general, described the TSG proposals as retrograde, regressive and running counter to efforts to materially reduce transport emissions. He said the price rises would simply encourage people to keep their older, more polluting cars for longer, possibly adding to the 900,000 cars over 10 years old already on Irish roads.

“It is entirely unconscionable that the retrograde step of effectively increasing VRT on electric vehicles and low-emitting cars is under consideration when we are at such a critical juncture in driving down emissions from transport. The motor industry, while currently operating at recession levels in terms of new car sales, is now emerging from the pandemic and is a sector that is vital to the economy, as the second-highest contributor to retail consumer expenditure.

Environmental choices

“To reduce the EV supports now, or to increase VRT on cars already burdened by last year’s substantial tax increases, only serves to add tax to consumers who want to make better environmental choices. It also adds to customer confusion as to whether an electric vehicle is the right decision for them, at a time when there is more and more choice out there. These proposals, if implemented, will simply slow down growth in electric and low-emitting vehicle sales.”

Motorists already face a rise in fuel prices from October 13th due to increases in carbon tax, which will add 2.5 cent to a litre of diesel and 2.1 cent to a litre of petrol.

The Tax Strategy Group is chaired by the Department of Finance with its membership comprising senior officials and political advisers from a number of Civil Service departments and offices.

*Estimated price rise on VW ID.3 was adjusted after initial error by Volkswagen