Low emission choices by new car buyers means current tax bands may come under scrutiny as the Government attempts to secure its tax income, writes PADDY COMYN
ALMOST 79 per cent of the 83,457 new cars sold in the first nine months of this year fall into the lowest two motor tax bands: A, with emissions of 0-120g/km (33.84 per cent) and B (121-140g/km; 44.99 per cent).
That’s great news for the environment – the aim of the emissions-based system is to encourage us to buy cleaner cars and reduce our motor-related carbon output.
When you combine this with a scrappage scheme targeting buyers of cars in bands A and B, that has accounted for about 14 per cent of this year’s new car sales, we’re quickly lowering our carbon footprint, at least on new cars.
In 2007, before the emissions-based taxation system, the largest-selling group of cars had emissions of 156-170g/km (band D).
We buy cleaner cars now not because we’ve all become eco-crusaders but because they cost less, are cheaper to run and tax, and the scrappage scheme gives many an incentive to do so.
But car firms are making it easier for us as well. Cleaner, low emissions engines aren’t confined to superminis any more.
This year Audi will give us a €67,000 A7 four-door coupé that will cost €156 to tax – as will BMW’s 520d. Ditto the Mercedes-Benz E-Class E200 and E220 CDI.
These are €50,000-€70,000 cars, and but a handful of examples of family cars matching city runarounds in terms of emissions.
Gas-guzzlers are no more, or at least have transformed into used cars that simply won’t sell. The executive SUV segment has disappeared. There are fewer petrol cars sold and very few with large engines.
As a result, Government coffers haven’t swelled much at all from motor tax on new passenger cars, despite a 52 per cent sales increase.
This year the Government will gain an extra 17.5 per cent on VAT and VRT on new cars in 2010, but this is after a horrific time in 2009 when there was an 85 per cent collapse in VRT receipts in January of that year compared with January 2008.
If the Government is to adjust the motor taxation system to capture more motoring euro, what impact might it have?
One of the simplest changes might be to change band charges, so band A is charged with band B rates, B with C – and band G could be merged with F, with a new single charge of €2,100.
Based on new car sales so far this year, the Government would earn another €10.7 million or 65 per cent more in annual motor tax, while still encouraging the purchase of cleaner cars. And that’s only in terms of tax on new cars sold: there would be a significant increase in revenue from the two million already on the road.
Alternatively, the Government might opt for something as blunt as a 10 per cent increase in motor tax across the board; a simpler solution than tinkering with tax bands.
While there’s a multitude of options to consider – including a sensible approach of bringing our emission bands into line with other European markets – the dramatic fall in tax hasn’t gone unnoticed in the Government’s urgent quest to shore up its revenue streams.
