Car dealers lobby Government to delay motor tax reform

Move follows concerns that new emissions tests will push more cars into high tax bands

Irish car dealers are calling on the Government to delay any major reforms of the current motor tax regime for at least 12 months. The dealers, who have contacted local TDs across the State, warn that any changes which push up the prices of new cars will put jobs at risk and result in a significant drop in tax revenue.

The Government has indicated it plans to reform the tax regime in the October budget as part of moves to encourage the purchase of electric cars. However, Denis Murphy, chief executive of Blackwater Motors and one of the organisers of the campaign, has warned that neither the motor industry nor consumers are ready for major tax changes this October, particularly as it may coincide with a hard Brexit.

The campaigning group, which he says represents more than 50 per cent of the Republic’s new car dealers, is working in conjunction with the Society of the Irish Motor Industry (SIMI).

Concerns are growing in the motor trade that the new more stringent emissions testing regime – known as WLTP – will result in many new cars being rated with higher official emissions figures. As a result, they will fall into higher VRT tax bands.

Mr Murphy said the Government should look to widen the current VRT tax bands so that it doesn't push up new car prices. If there is no change to the tax bands, a recent report by economist Jim Power, on behalf of the SIMI, estimated it could push up the price of new cars by €2,500 and put 12,000 jobs in the Irish motor trade at risk.

“With the new WLTP changes that are coming, the EU Commission has stated that the consumer should not suffer as a result of the change in the testing regime,” said Mr Murphy. “Of course, our Government sees it as an opportunity to increase taxes, which will have the opposite effect to what they are trying to achieve. In fairness to the Government, they are openly trying to use it as a means to push people towards electric cars.”

Electric cars

He said the move to electric is going to happen “irrespective of what the Government is going to do because the European car industry has been working towards clean air regulations for many years now.”

He said the European car industry and the EU have an ongoing plan to ban internal combustion engines from 2040. The Irish Government, however, has set a 2030 timeline.

“Unfortunately the cheapest, most popular electric cars at the moment have a retail price of approximately €50,000. You get a €10,000 grant which brings them to €40,000. The average price of a new car that’s bought in the Republic is around €20,000 and the average price of a car in the Irish market, including imports and and used cars, is €15,000. So we are way off the affordability threshold for these cars as yet.

Mr Murphy said the high tax currently charged on new cars is already forcing many car buyers to opt for older, more polluting, used imports. “The Government fails to make the connection between high taxation and high [used] imports.

“If you don’t change the bands, Jim Power has warned that the new car market will collapse to 70,000 next year, but there is still the transportation need for 225,000 cars for the year, so the balance will be made up by used imports.

“What we are campaigning for is for the Government to recognise this economic fact and understand that no matter what they do there is still going to be a transportation need. They also need to make the connection between high VRT and VAT, and the effect that has on the balance between the sale of new cars and used imports. Finally, they can use that connection between tax and sales to be a bridge between new lower-emission cars, built to meet the stricter EU emissions targets, and 2028 when new electric cars become readily available and cheaper for the vast majority of the population. At this stage the range of these cars could be in the order of 700kms or more.”

Michael McAleer

Michael McAleer

Michael McAleer is Motoring Editor, Innovation Editor and an Assistant Business Editor at The Irish Times