Cantillon: VW emissions are taxing issue in Ireland

The announcement by Volkswagen Group that investigations show it didn’t maliciously doctor carbon dioxide (CO2) emission figures should lift the spirits of staff, dealers and customers of Ireland’s best-selling car brand.

The timing is important, given the majority of new car sales are done over the next three months. Volkswagen and its sister brands – Audi, Seat, Skoda, even Porsche – make up over a quarter of the Irish new car market.

And while the CO2 issue is just one of a series of scandals besetting the German car giant, it’s the most important one for Irish motorists as it’s directly linked to our tax regime.

So what is the state of play now after this week’s announcement? VW initially expected 800,000 cars were wrongly assigned lower CO2 figures. That number has dropped to 36,000 across nine model variants currently sold. Investigators reckon these errors are minor and not malicious. VW Ireland estimates it sold only 30 cars from the list.

You’d expect the champagne corks to be popping at VW dealers. Yet this week’s news doesn’t clean up the scandal. For a start there are still 11 million vehicles worldwide – 115,972 in Ireland – due for recall next year over the initial Nitrogen oxide (NOx) scandal, where the firm admitted to fitting software designed to cheat emissions tests. We still need to see whether the new software “fix” will affect the tax-sensitive CO2 figures.

We are also left in something of a limbo over the older cars initially listed by VW as having questionable emissions figures when it announced its CO2 mea culpa last month.

Now out of production, it’s hard to see how regulators can re-test these vehicles “as new” in the way it does with current production models.

If there is a boon from the VW scandal, it’s that test regimes are due to be overhauled while car firms will be more closely watched by regulators. The cosy relationship between the car giants and governments has also been exposed.

Promises of new “real-life” will mean our tax system will have to be adjusted to reflect a new reality. It’s about time we faced up to the reality of what comes out of our exhaust pipes.