What changes to motor tax can we expect from December’s budget, asks NEIL BRISCOE

WHILE THE Irish motor trade waits to see what changes will be made to the vehicle-registration-tax and motor-tax systems in December’s budget, a debate on the future of motor tax is emerging again.

Former Green Party minister Eamon Ryan believes that simply increasing or adjusting the current tax-band system is pointless, and is merely setting us up for another economic crisis to come.

“They should be going a hell of a lot further in incentivising more efficient vehicles. I think Leo Varadkar is in a really difficult situation right now, and partially to blame for his own difficulties. He has axed the big public-transport projects, or at least delayed them. If and when a recovery comes, the first sign is going to be increased traffic, and we’re going to reach gridlock, especially on the M50.

“In those circumstances, if you were to go to a tax system that’s more usage-based rather than an upfront cost, it makes more sense. If you’re driving from Ballsbridge to, let’s say, Leinster House on a wet Wednesday morning when the schools are on, then it costs X amount per kilometre. If you’re driving from Belmullet to Bangor Erris, then it’s a tiny fraction of that cost. And then you have a road system that works, that works for everyone, because those who have to use it can do so.”

Such a far-reaching change is unlikely to be on the table this year or in the immediate future, however. Any changes made in this year’s budget are more likely to be on the lines of simply increasing the takes from motor tax and VRT, both of which have fallen dramatically since 2008.

There are other dangers inherent in raising the rates on both systems, though, according to Eddie Murphy, managing director of Ford Ireland.

“We’re down this year on last, and with the VRT changes that have been bandied about, you’re looking at a 2-3 per cent increase. To what extent will that result in a deterioration in car sales? And then, of course, a lot of the dealers are small- to medium-sized businesses, so that feeds back into potential job losses or restructuring. Is it short-sighted, increasing the taxes without looking at the bigger picture? I hope someone is looking at the bigger picture, because if they’re not, it’s a sorry day’s work.”

While VRT increases will be a further drag on a new-car market that has already fallen by more than half since 2007, and by two-thirds from its peak in 2000, an increase in the rate of annual motor tax is something of a double-edged sword for the industry. Clearly, with about 1.5 million cars still on the old, pre-2008, motor-tax system that was based on engine size, any increase there could drive owners to trade in for newer cars that are on the current emissions-based system.

But Alan Nolan, chairman of the Society of the Irish Motor Industry denies that the Irish motor trade is anticipating such an eventuality.

“We have tried always to take a long view on these things. Consumers will return to the marketplace when they have the confidence and the disposable income to do so. People have been doing the responsible thing, buying more efficient cars with lower CO2 emissions. The average tax for every car on the road is around €400. For new cars being registered, it’s closer to €200.

So, going forward, the average car on the road is going to be paying €200. But increasing road tax on new cars has the potential to reduce new-car sales, which has an impact on both VRT and VAT. And if we’re not selling cars, then it’s very hard to employ people.”

Many are predicting that the Government will leave those on the old car-taxing system alone, and concentrate on the 330,000 or so cars being taxed under the current system. It’s expected that the bands and rates will be tweaked to bring that average €200 payment up to a notional €450, a significant increase. But Eamon Ryan warns that such a move would be counterproductive.

“The first thing they should not do is unwind some of the huge success we’ve had 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.”