The State will take in €260 million less in motor tax receipts by 2024 as a result of the decision to calculate the tax based on emissions rather than engine size according to a new report.
A study released by the Office of the Comptroller and Auditor General (C&AG) on Monday found that if current trends continue the value of motor tax will fall by €29 million every year between 2016 and 2024, leading to a sizeable hole in exchequer finances.
The lower takings are attributed to a decision taken by the former Fianna Fáil/Green Party administration to tax cars registered after July 2008 based on their carbon dioxide emissions, prior to which cars were taxed according to engine size.
The State took in €1.12 billion in motor tax during 2015, down from €1.16 billion the previous year following successive increases since 2011.
The international focus on carbon emissions over the last decade has led car firms to invest heavily on reducing emissions from their engines.
As a result there has been a dramatic reduction in emissions levels for new cars. For example a BMW 520d auto from 2008, when our motor tax regime was linked to CO2 emissions levels, put out 149g/km, meaning an annual tax bill at the moment of €390.
The latest 520d SE has an emissions level as low as 108g/km, incurring an annual motor tax bill of €190.
The report finds that while the number of taxed vehicles has actually increased over that time, “significantly lower tax is paid in respect of newer private cars taxed on the basis of engine emissions compared to those taxed on the basis of engine size”.
Whereas only 13 per cent of new vehicles were taxed in the lowest emission band in 2009 the proportion paying this level of tax rose to 72 per cent in 2015.
It is predicted that motor tax receipts will continue to dwindle further as engines become more efficient over future years.
The C&AG also raised concerns over possible attempts to evade payment of motor tax through frequent transfer of ownership of vehicles between connected parties.
Motor tax arrears are voided when a vehicle changes hands, and exemptions were handed out on 272,000 occasions in 2015 compared to 173,000 in 2011- a 57 per cent increase.
Around 660,000 vehicles changed ownership in a 15-month period up to March 2015, again a 50 per cent increase on figures from 2011/2012, and a sample study of 50 such transactions over the 2014/2015 period revealed many of the owners were known to each other or even related.
“The examination found evidence that in some cases vehicle ownership could have been transferred between connected parties to avoid the payment of motor tax arrears,” the report concluded.
Elsewhere, it was found that payments made in a motor tax office cost twice as much to process compared to online payments.
Around two-thirds of motor tax payments made in 2015 were done using the online facility, but there was a large geographical discrepancy when it came to payment methods with around 80 per cent of Dublin-based transactions done online compared to just over 40 per cent in Donegal.
Barriers to broadband access were cited by some local authorities as a reason for low online payment rates, and relevant Government departments say they will consider carrying out a survey of the reasons why customers still avoid the online method within the next nine months.
Officials from the C&AG noted that up-to-date figures on motor tax evasion have not been compiled since 2011 “due to data protection concerns”.
A database of evaders can be compiled by capturing images from toll points and traffic cameras according to an accounting officer from the Department of Local Government, who added that this course of action would “require concerns around data protection to be resolved”.
The C&AG report identifies that the use of number-plate recognition systems by gardaí would eliminate the need for paper tax discs, thereby reducing administrative costs.
However, this is followed by an admission that a similar course of action has led to increased tax evasion among motorists.