Substantial increases in the price of larger cars as a result of higher tax imposed in the Budget have been deplored by the motoring industry and motorists' representatives. The tax increases will lead to a rise of £550 to £600 in the price of the average 1.6 litre family car. More powerful cars like the BMW 323i will rise by a massive £3,200 or more. The increases take effect from midnight on December 31st.
One short-term beneficial effect of the Budget is expected to be a buying rush in the last three weeks of the year to beat the price rises.
Conversely, the buoyancy that is normally experienced in January, when new registrations come on stream, is likely to be diminished. A few weeks ago, most motor industry observers were predicting new car sales next year of around 140,000 - approximately the same as this year. Last night, those predictions had fallen to around 115,000, or less.
Mr Conor Faughnan, public relations manager for the Automobile Association, said the new three-tier Vehicle Registration Tax (VRT) system announced in the Budget was "a money-grabbing measure that is insulting to the motoring public". He said it was "a pretence and a sham" to suggest it was motivated by environmental concerns.
The Society of the Irish Motor Industry (SIMI), through its chief executive Mr Cyril McHugh, issued a terse three-sentence statement headed: "Family Car Price Shock". The Budget, he said, was totally unacceptable and the increases would be opposed vigorously.
Mr Dave Shannon, managing director of Toyota Ireland, estimated that a 1.6 litre Avensis, currently retailing at £16,350 ex works would go up to £16,925. "This is crazy. Where's the logic of these increases when we are supposed to have tax harmonisation? This makes no sense with us going into the euro currency. I hope we can do something in Brussels about it."
Mr Arnold O'Byrne, managing director of Opel Ireland, confirmed that a 1.6 litre version of the Vectra at £16,575 would probably go up by at least £550.
Mr Eddie Nolan, chairman and managing director of Ford Ireland, saw the Budget as "deeply disappointing". He pointed out that cars like the 1.6 litre Mondeo were also used in many company fleets. "That £550 to £600 increase will also have a serious impact on the cost of doing business here. It will have to be passed on.
"When VRT was introduced in 1993 we were told that there would be a genuine effort made to harmonise car prices with those in Europe. Today's Budget totally flies in the face of that promise."
For the SIMI, Mr McHugh said he thought the Budget was "disastrous". He contradicted the Minister's environmental concerns by saying that the environment had not been helped by a flood of second-hand imports "with many of questionable quality".
He denied the Minister's assertion that the VRT changes would raise £43 million. "We reckon there will be a loss of £100 million to the Exchequer."
New cars in the 2,000-2,500cc band have suffered the biggest increases in tax - VRT on them goes up from 22.5 per cent to 30 per cent. Models also affected include the BMW323i and Saab 9-3 2.3 litre.
Ironically, cars over 2.5 litres which are in the luxury category, like Jaguar and Lexus, escape with the lightest increase in tax; it goes up by just two percentage points, from the current 28 per cent to 30 per cent. The Minister's decision to apply the higher rate of VRT to cars over 2000cc is a turnaround. Until six years ago, higher tax applied from 2.0 litres upwards but this was changed to 2.5 litres upwards.
There was further bad news in the Budget for many people who drive to work. The Minister announced that people with car-parking spaces provided by their employers may be required to pay benefit-in-kind (BIK) tax as a result of a review he has ordered. He said he had asked the Department of Finance and the Revenue Commissioners to undertake a review in order to produce a "fair and workable system" of applying BIK to parking spaces provided by employers.