Motor tax regime reform urged by banker

Bank of Ireland’s head of motor sector lending has called for the Government to implement the recommendations of its tax strategy group in reforming the motor tax regime.

Stephen Healy, Bank of Ireland’s head of motor sector, said the bank is supportive of recent recommendations of the group. “Reforming VRT [vehicle registration tax] in line with the TSG recommendations is a better outcome for the sector, and incentivises consumers to purchase new vehicles with ultra-low/lower emissions. These recommendations, if adopted, would bring clarity to motor dealers and consumers who wish to order new vehicles for 2020,” he said.

The changes proposed in a new plan from senior Government officials involve an increase in the number of tax bands for VRT, changes to the grants and tax relief on hybrids and electric cars, and replacing the diesel surcharge.

A paper from the Department of Finance tax strategy group, drafted by senior officials laying out options for Minister for Finance Paschal Donohoe’s next budget, also proposes delaying until July 2020 the use of new tougher CO2 emissions figures when applying tax on new cars and used imports.

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VRT and motor tax

A new EU-wide testing regime introduced this year – known as WLTP – will result in higher emissions ratings on all new cars. As both VRT and motor tax is rated on a car’s emissions, this will have implications for Irish motorists and exchequer returns.

The strategy group report says: “In recognition of the lead-in time for dealerships ordering vehicles, it does not seem unreasonable that the commencement should be delayed until July 2020.”

The paper states that VRT is “a highly pro-cyclical tax, with car registrations linked to the economic climate”. It estimates this year’s VRT yield will be €942 million, based on 113,550 new car sales and 103,976 used car imports. That is up €57 million on last year.

The paper warns that the anti-diesel sentiment in the UK, due to a range of government measures introduced there, is feeding into the increase in diesel imports into the Republic.

WLTP tests

The comments from the senior bank official follow recent concerns expressed by a group of Irish car dealers. A campaign by a group claiming to represent over 50 per cent of the Republic’s new-car dealers has called on the Government to delay any major reforms for at least 12 months. Instead it suggests the current tax bands should simply be adjusted to accommodate the higher emissions figures on new cars as a result of WLTP tests.

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. However, the group does accept that changes have to be made to the tax regime due to the new tests.

If there is no change to the tax bands, a recent report by economist Jim Power, on behalf of the Society of the Irish Motor Industry, 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.