Motorists using toll roads in the Republic could face a price increase of up to 21 per cent following a European ruling this week.
One of the European Court of Justice's advocates general, Mr Siegbert Alber, ruled that Ireland was in breach of a 1977 directive requiring the imposition of VAT on road-toll charges. He found that the money was due from 1994, leaving the Exchequer with a multi-million-pound bill.
The State's only toll roads are currently Dublin's East Link bridge and West Link bridge, both run by National Toll Roads. The former was opened in 1984, the latter in 1990.
The Republic and the UK were among EU member-states which had opposed the taxing of tolls. The Republic had argued that "the letting of immovable property" was exempt under the VAT directive.
Mr Alber's decision on the case will now go forward to the Court of Justice, which is expected to make its decision during the summer. In the past, in 80 per cent of cases the court's decision has been in accordance with that of its advocate general.
In the event that the court rules that the VAT must be imposed, the Exchequer would be left facing a multi-million-pound bill as a percentage of VAT revenue goes to the EU's central budget. Since the VAT could not be collected retrospectively from roadusers, the Exchequer would be left to foot the bill.
Such a ruling is also expected to result in the VAT charge being passed on to motorists. A National Toll Roads spokesman said the firm was carefully monitoring the situation, but noted that toll rates were decided by the National Roads Authority (for the West Link bridge) and Dublin Corporation (for the East Link bridge).
The number of toll roads is expected to increase in the coming years. The NRA has already agreed a public-private partnership (PPP) with National Toll Roads for the construction of a second toll bridge on the West Link on the M50.
It is also advancing proposals for further PPP involvement in the construction of the N25 bypass in Waterford and phase 2 of the N7 Limerick southern ring road. The suitability of the M4 Kilcock-Kinnegad motorway is also being examined for a PPP.