Budget Blues

Neil Briscoe

If you just look at the precise changes to motoring related taxes and charges made in Budget 2013, then you might be forgiven for thinking that we (and by we I mean those who sell, own and run cars) have partially dodged a bullet. The increases in Vehicle Registration Tax (VRT) and annual motor tax are, in some cases, significant, but in the overall scheme of things, they don’t seem too onerous. Nonetheless, rises are rises and any increase could be a barrier to people buying cars next year, at a time when the car trade in Ireland is still trying to recover from its Annus Horibilis in 2009.

“It is a shame that the motor business here in Ireland again appears to be seen as something of a cash cow and that the Government is again seeking to drain more revenue from the beleaguered motorist,” said Volkswagen Group Ireland Managing Director Simon Elliott. “While any increase in VRT and motor tax might worry consumers we must welcome the news that there will be a second registration plate in 2013 which is something that we in particular in Volkswagen Group Ireland lobbied hard to achieve. We also welcome the decision not to increase duty on petrol or diesel. I am also delighted that in terms of our retail offers that they are stronger than they have ever been which will give some comfort to those new car buyers for the New Year.”
OK, here’s the nitty gritty, and I’ll post the full VRT and motor tax changes at the ned of this blog so you can have a proper look. Let’s take VRT first. The top band, Band G, sees no increase at all, so anyone planning to buy a V8 Range Rover in 2013 can breathe a sigh of relief. The rest of the increases vary from 2-3% jumps. Obviously, at the higher price tag end of things, a 2% jump is a significant increase in price, but for Ireland’s best-selling car, the Ford Focus, the increase in price should be limited to around €450 – not exactly a small sum of cash, but you’ll probably be able to claw at least some of that back with some sharp negotiation tactics.

For a BMW 520d, the car that, publicly at least, did more than anything else to drive the change in the car tax regime, that figure amounts to around €960 (assuming you’re going for the 130g/km M-Sport spec) – again, hardly a deal-breaker when you’re already dropping €48k on the purchase price.

In terms of annual motor tax, the rate rises are somewhat sharper, especially at the lower end of the scale. There is a new 0g/km rate specific to electric cars, which costs €120 a year, representing a €40 decrease for electric car buyers. Not much of an incentive, perhaps, but something.

There are now four further Band A rates, numbered 1-4, and the cheapest band starts at 1g/km of Co2 and rises to 80g/km. At the moment, only one current production car with an internal combustion engine, the Toyota Yaris hybrid, which has quoted Co2 figures of 79g/km, slots into that band, and its buyers will pay an extra €10 a year over the old Band A cost of €160.

More significantly, anyone buying that most popular Focus model, the 117g/km 1.6 TDCI Edge, will have to fork out €190 a year for tax now, an extra €30. Again, not an overwhelming amount for most of us, but you could certainly see how those who specifically went out to buy low emission cars following the original tax changes in 2008, and did so specifically with environmental (as opposed to strictly monetary) benefits in mind, might be feeling a bit betrayed.

Indeed, speaking to former Green Party minister Eamon Ryan before the Budget, he was hoping that the Government would see sense in not increasing the motor tax rates, as that would be to fly in the face of encouraging people into greener cars:

“The first thing they should not do is unwind some of the huge success we’ve have in recent years in terms of making a switch to more efficient vehicles. We need to keep heading in that direction, because it’s a huge benefit to the economy.

“The balance of payments benefit to the economy of that efficiency leap in vehicles standards is bigger than any of the tax implications one way or the other. The economic crisis that occurred and is continuing, I think it was Martin Wolf in the Financial Times said that it was more than anything else a balance of payments crisis. And if you look at what the IMF is saying, based on the research they’ve been doing, the biggest threat to an economy like Ireland is if something like a major increase in the price of oil occurred, and the effect it has on the balance of payments. Because it has an immediate effect.

“Money spent on oil is just sucked straight out of the economy, so when you’re taking the economic effects, if you just look at the tax revenue effects and not at the balance of payments effects, you’re missing the bigger picture.”

The most significant motor tax increase now comes at the top of the new two-part Band B, for cars emitting between 131 and 140g/km of Co2. Buyers in that band are now going to have to pay an extra €55 a year for their motor tax, and seeing as that band contains many of the cheaper cars (including the new Dacia Duster) then it could be seen as hitting those who can least afford to pay it. (There are also large rises, as much as €92 a year in Bands C-G, but with 92% of new cars this year falling into Bands A 1-4 and B1-2, we can pretty much ignore them for now.)

That’s an accusation you could equally throw at the 7.5% increase in pre-2008 motor tax rates, for vehicles based on engine capacity. Prior to the Budget, those cars had been bringing in an average of €450 a year to the exchequer, and the word coming out of Government sources was that that figure was a healthy one, and it was the Co2-based bands that needed attention as the rush to lower emissions vehicles had damaged the overall tax take.

The rises here range from a relatively insignificant €14 a year extra for cars with an engine smaller than 1,000cc to a whopping €129 extra for anyone with an engine larger than 3,000cc. And well those V6 and V8 engined drivers can afford it, you might think, but look at the 1,701cc to 1800cc category – one which includes an awful lot of pretty average family cars, including the likes of the old Ford Mondeo, Renault Lagana, Opel Vectra, Mazda 6 and more. That goes up by €44 to €636 and crossing the €600 barrier is one that will be difficult at best for more than a few hard-pressed families, who are desperately trying to keep an older car going, just to stay mobile.

Given that we (that’s the motoring we again) avoided an increase in carbon duty or excise duty on the price of petrol and diesel (and indeed, hauliers are going to get something of a diesel rebate come July) you might think that was the end of the bad news. But it’s not. True, petrol won’t be going up as of midnight tonight but the price of oil is staying stubbornly high for anyone buying in devalued Euros and that means that the pump price is still on the wrong side of €1.50 a litre. And every increase in the wholesale price of fuel will bring in extra revenue for the Government. (Then again, seeing as the 48-53% exchequer take from each litre is significantly lower than most of our European neighbours, perhaps we should just keep our heads below the parapet on that one…)

Finally though, the biggest issue facing the motor trade in Ireland is not the rate of VRT or the shifting of the motor tax bands nor even the price of petrol. The bald fact is that sales of cars in this country, which directly and indirectly contribute many billions to the Government coffers and directly employes more than 35,000 people, are inextricably linked to financial prosperity.

Those families facing cuts in child benefit, having to fork out for the property tax, absorbing the changes to PRSI and the Universal Social Charge, are they seriously going to be considering a new car purchase next year? Will the change in the numberplate system, the set of new tax bands or a relatively mild increase in VRT be of any interest to them? Doubtful. This semi-fictional They, like the very real rest of us, will simply continue to struggle along as we have done, trying to work our way through the appalling fallout of the financial crisis that struck in 2008 and the legacy of which will afflict us for many years to come.

Simon Elliot from Volkswagen told me that “clearly any hand In the consumers pocket is a concern especially the PRSI and the local property tax. However at times like this we need to look for the positives; we have no increase in fuel duty and an interesting change to the number plate system.”

Interesting, yes. But of how much real use? Come back this time next year to find out.



Private Cars  CO2 emissions (+19.8% average)        
Band Emissions g CO2/km Existing Rate (2012) New Rate (2013) Difference Actual % Increase/ decrease
A0 0 €160 €120 -€40 -25.0%
A1 1-80 €160 €170 €10 6.3%
A2 81-100 €160 €180 €20 12.5%
A3 101-110 €160 €190 €30 18.8%
A4 111-120 €160 €200 €40 25.0%
B1 121-130 €225 €270 €45 20.0%
B2 131-140 €225 €280 €55 24.4%
C 141-155 €330 €390 €60 18.2%
D 156-170 €481 €570 €89 18.5%
E 171-190 €677 €750 €73 10.8%
F 191-225 €1,129 €1,200 €71 6.3%
G > 225 €2,258 €2,350 €92 4.1%