MotorsOpinion: VRT tax bands are unfairThe Budget changes to the antiquated system of car taxation should be welcomed, but have they been implemented in the best possible way, asks Prof John Simmie
The recent changes to Vehicle Registration Tax (VRT) and to the annual motor tax are to be welcomed. By ensuring that the money paid is in proportion to the amounts of greenhouse gas emitted per kilometre travelled, the ministers, Cowen and Gormley, have done the right thing. Since the grams of carbon dioxide per kilometre amounts are directly related to mileage, these measures are rewarding engine efficiency or, put simply, reducing wastage of precious and soon-to-be-scarce fuel. So a good day's work all around, replacing a clumsy and antiquated set of taxes based purely on the cubic capacity of the engine, which is not directly related to overall efficiency.
It can, of course, be argued that rather than tax the vehicle, all the tax should be placed on the fuel, so that the owner of a Lamborghini Murcielago 147 Roadster doing 5,000km per annum and thereby emitting 2.5 tonnes is not unduly disadvantaged as against a Toyota Prius driver doing 25,000km and emitting 2.6 tonnes.
This argument, if adopted, would place many people at a disadvantage, as public transport is conspicuous by its absence outside the Luas/Dart magic circle. So the correct decisions were made: firstly, to place the tax squarely on the vehicle, and secondly, to take emissions as the guiding principle.
But was the implementation of these measures done in the best possible way?
Here, both situations are open to the criticism that they are deeply and needlessly unfair. Consider, if you will, an Audi A3 with a 2.0-litre TDI diesel engine which emits 156g/km as against a Renault Laguna II hatchback with the 2.0-litre dCI 150 engine which emits 155g/km. The Audi will pay €430 annually in motor tax, but the Renault only €290, for a saving of €140. The Audi is thus being penalised by having to pay 48 per cent more. Yet in truth there is no discernible difference between these two cars . . . certainly the Laguna is not 48 per cent greener than the A3.
These inequalities crop up all over the place. A Volkswagen Polo 1.2-litre emits 140g/km, and will pay €150, but a Ford Ka with a 1.3-litre engine and no air conditioning at 141g/km has to stump up €290 - a penalty of nearly 100 per cent. The poor old Audi A3, this time fitted out with the 3.2-litre V6 quattro S-Tronic power plant, now generates 226g/km and will cost €2,000, while the equally un-green Volkswagen Sharan, at 225g/km with its 1.8-litre Sport engine, is only €1,000.
So why did the department promulgate this unfair scheme? In a phrase, because they simply adopted the system used in the UK of seven bands, with band A the greenest at less than 120g/km, up to band G in excess of 225g/km. The UK is often used as a security blanket by some Irish civil servants who appear to be incapable of developing new initiatives - it was not always thus. The only marginal excuse for this spinelessness is that each car will end up with a colourful sticker.
Note, too, that there is no incentive to buy vehicles which emit substantially below 120g/km because the A band goes all the way down to zero emissions. So there is no reason for car manufacturers to improve engine efficiencies and reduce emissions - hardly a green policy to encourage manufacture, or R&D of new more fuel-efficient systems, or indeed better biofuels.
The final iniquity is that so-called flexible-fuel vehicles have been treated as a very special case, for which there is no logical or scientific justification. These cars are not particularly fuel-efficient, yet because they can be run on bio-ethanol with a dash of petrol they can claim to have low emissions. Figures of 80 per cent less emissions than comparable cars have been bandied about, but there are no reputable EU or other official bodies willing to stand over such claims.
In addition, once purchased these vehicles can be run quite happily on ordinary petrol, and indeed this is often the case given that there are large areas where the alcohol/petrol blend cannot be bought. Clearly these vehicles do not deserve any tax breaks at the expense of the ordinary motorist.
Prof John Simmie is Emeritus Professor at the Environmental Change Institute, National University of Ireland, Galway