The motor industry is proposing an increase in the cost of fuel as part of its submission to Government on how a new emissions-based vehicle tax system will operate. The revised tax system on new cars is due to be introduced next year.
Although the Society of the Irish Motor Industry (SIMI) submission argues that buoyant tax revenues make such any increase unnecessary, the submission proposes the option as a potential change in emphasis away from tax on the new car owner and instead towards the user. The revenue would compensate the Government for a likely fall in tax receipts if industry proposals are accepted.
The Department of Finance is planning to adapt the current Vehicle Registration Tax (VRT) system to take account of a vehicle's CO2 emissions.
The tax system focuses on penalising motorists who drive heavily polluting vehicles - those that produce more than 200 grams of carbon-dioxide per kilometre - while favouring those who buy vehicles that produce less than 140g.
As part of the process, the department invited submissions on how the new tax regime should work.
SIMI, the Irish industry lobby group, will make its submission in advance of tomorrow's deadline and will say that it favours retaining but adapting the three-band tax system already in force under the current VRT system.
In addition, it will recommend that any shortfall could be recouped by increasing the price of fuel by almost 3 cent per litre in the form of higher excise duty. The society says it is favouring a combined tax system that takes into account both a car's CO2 emissions and its engine size. The recommendations are that cars with an engine smaller than 1,400cc and that produce less than 145g of carbon dioxide per kilometre should have a combined VRT and carbon tax of 17.5 per cent.
A car with an engine larger than 1.9 litres and that produces more than 190g of CO2 per kilometre should be taxed at the highest rate of 30 per cent. But if the SIMI submission is adopted, it would lead to a revenue shortfall estimated to be €132.3 million.
This, the society proposes, would be recouped by adding 2.4 cent to the excise duties levied to petrol and diesel, which would give rise to price increases of 2.9 cents for each fuel after VAT has been added.
While the majority of the industry is backing the society's proposals, some of the car importers are making their own separate submissions.
Toyota, which sells several hybrid models that currently enjoy a tax incentive through a 50 per cent reduction in VRT, has confirmed that it will approach the department separately to make a submission.
BMW has also said it will make a separate submission calling for a move to a full CO2 vehicle tax system, such as that operating in Britain, rather than the dual system backed by SIMI and the Government.
BMW says the three proposals suggested by the department are "confusing" and do not fully take into account the reduced CO2 emissions many new engines emit when compared to smaller but older engines.
As the deadline for submissions approaches there is also growing doubt over whether the target date of January 1st, 2008, for the adoption of the new tax system will actually be met.
While the department said it is continuing to aim for that target date, the motor industry is saying the New Year deadline is unrealistic and will lead to "chaos" if left unchanged.
Importers work to at least a six-month lead-in period when ordering new cars. "We need at least six months notice of any changes," says SIMI's Cyril McHugh. "January 2009 would be our preferred date. It will be impossible to carry on business if the deadline is not extended."
According to the department, around 30 submissions have been received to date, mainly from individuals.