Is the Government's plan to base annual road tax on a car's CO 2 emissions a green initiative or is it just another way of getting more money from overtaxed motorists? Daniel Attwoodtakes a look at how the tax system will work from 2008.
This year motorists will have paid €870m just to tax their cars, which is €68m more than last year. This annual tax bill levied on the owners of the 2.3 million vehicles on Irish roads (along with a 30 per cent Exchequer contribution) is a major source of income for local authorities and is intended to support among other things investment in non-national roads.
Now the Government intends to change the way annual road tax is administered. When the Minister for Finance Brian Cowen, announced that road tax, along with Vehicle Registration Tax (VRT), would be based on CO2 emissions rather than just on engine size, the Minister for the Environment Dick Roche, jumped for joy, heralding the move as "one of the most progressive environmental measures to be introduced in recent years".
The move will encourage people to drive smaller, less polluting cars, he said, by penalising those who drive larger and therefore more polluting vehicles. It is possible that the current lowest annual rate of road tax of €151 will remain, but that there will be higher punitive rates for more polluting cars, although Mr Roche assured motorists that any changes would be revenue neutral.
When the new rates are introduced in January 2008, they will not be retrospective.
This means that a motorist who invests in a 5.0-litre V10 powered BMW in December 2007 will continue to pay the same €1,343 annual road tax, despite the car producing one of the highest CO2 emission levels of any car on the road at 357g of CO2 every km.
Buy the same BMW at the start of 2008 and it is certain that you will be paying substantially more not only for the car because of the changes to VRT but also every year in increased annual motor tax.
On the other hand, the decision not to make the new rates retrospective means that older, more polluting cars will continue to escape this so-called green tax.
Average CO2 emissions from a vehicle registered in 1990 was 3.7 tonnes as opposed to 3.4 tonnes for an average 2006-registered vehicle.
More encouraging is the fact that the average non-CO2 emissions, such as nitrogen oxide, from a 1990 vehicle was 0.45 tonnes - this figure has dropped by 80 per cent to just 0.09 tonnes for an 06 vehicle.
The new rates will, however, only be calculated using a vehicle's engine size combined with its CO2 emission data, which is supplied by car manufacturers under EU legislation.
The Department of the Environment intends to use this data to devise a simplistic colour-coded CO2 rating system - similar to that used to rate white goods. Therefore, from 2008, expect to see new cars colour-coded with yellow label cars producing the least CO2 and red label ones the most.
This is all to tackle greenhouse gas emissions from transport, which is the country's third largest producer of such emissions. Road transport accounts for 96 per cent of these transport emissions.
However, even these statistics are questionable with calls coming for the Government to reassess its calculations to take into account the substantial cross-border movement of fuel into Northern Ireland.
It is estimated that 12 per cent of petrol and 24 per cent of diesel sold annually in the Republic is consumed in Northern Ireland.
Without taking this into account, the calculations, which are based solely on fuel sales in the Republic are inaccurate, say transport lobby groups.
While this debate continues, it is clear that with the growing number of vehicles on the road (rising by 5 per cent annually) emissions will also continue to grow.
This problem is compounded by the fact that almost 50,000 used cars have been imported here from Britain this year. The average age of these imported cars is six-and-a-half years and over one-third of them have an engine larger than 1.9-litres.
Because of this high number of more powerful, older cars coming into the country, not only will all new cars have the adjusted rates applied, but so will all imported cars registered here after January 1st, 2008.
For diesel drivers there is also a growing concern that the latest Euro 5, which comes into force just one year after the new CO2 rating systems starts, and Euro 6 rules, which are intended to cut nitrogen oxide and particulate emissions from diesel engines, will actually increase CO2 emissions.
"What concerns us, is that the proposed limit values will not only be extremely difficult to meet, but will have a significant counter-productive effect on reducing CO2 emissions from passenger cars," Ivan Hodac, secretary-general of ACEA, the European carmakers association, told Just-Auto. "They also pose a serious risk for the market of small diesel cars."
There are also questions being asked about how Ireland's new CO2 rating system will work in practice. For example, a motorist importing a three-year-old car from Britain in 2008 will have to pay the new annual road tax rate (along with the new VRT rate). If the motorist bought a similar three-year-old car here, the car will still be judged for road tax without taking into account its CO2 emissions. Such tax regimes, favouring one's home market, is something the European Commission will take a keen interest in warns commentators.
As a result of such unresolved issues, the Department is continuing to talk with interested parties until March 2007, when it will finalise the new rates.