Petrol duty, road tax and parking spaces targeted

Minister for Finance Brian Lenihan has announced an excise hike of eight cent per litre on petrol, increases in car tax and a €200 levy on city employees' car parking spaces  in his Budget 2009 speech.

The excise increase, which brings the total tax on petrol to 52 cent per litre, will come into effect from midnight tonight.

It is estimated this increase will yield an extra €22 million in revenue this year and €166 million in 2009. There will be no tax increase for diesel. Biofuels were not mentioned.

The new increased motor tax rates will come into effect from January 1st, 2009. Tax will rise by 4 per cent for cars below the old 2.5 litre threshold or in the new CO2 bands A to D. For cars over 2.5 litres and in CO2 bands E,F and G, motor tax will rise by 5 per cent.

Tax for goods and all other vehicles will also increase by 4 per cent, as will the cost of trade plate licences.

There will be no increase in the cost for electric vehicles.

These new rates are expected to raise an extra €40 million per year. There will be no increase in VRT rates.

Mr Lenihan said he would also introduce a flat rate levy of €200 per year on workers in major urban areas who are provided with car parking spaces by their employers. This will raise €5 million in 2009 and €10 million in a full year, Mr Lenihan predicted.

The Minister also announced the introduction of a tax incentive to promote cycling to work. This allows employees to avail of a tax-free benefit in kind incentive of up to €1,000 to buy a bicycle and safety equipment. Employees can only avail of this scheme once every five years. The scheme is projected to cost up to €400,000 per year.

These measures were designed "to promote greater use of public transport", Mr Lenihan told the Dáil.

Mr Lenihan said the benefit-in-kind charge on company cars will be related to the cars' level of CO2 emissions  in the future. The current rate is  charged at 30 per cent of the value of the car - with reductions depending on annual mileage.

Full details of the BIK changes will be contained in the Finance Bill, which will be published in the next few months.

On the subject of a carbon levy, Mr Lenihan said he is awaiting an expert report from the Commission on Taxation. This report, he said, would be considered when formulating a carbon tax to be contained in Budget 2010. The Minister for the Environment John Gormley is to present his Carbon Budget to the Dáil tomorrow.

AA Ireland public affairs manager Conor Faughnan said the petrol price increases will hurt ordinary motorsists. "Car use in not a luxury, it is a basic necessity for those who want to live and work in Ireland, especially in rural areas where there are no public transport alternatives," he said.

He said a poll of 200 motorists taken by the AA showed 79 per cent said the Budget was bad for motorists. A further 70 per cent disapproved of the rise in petrol duty and 79 per cent were against motor tax increases.

Ford Ireland chairman Eddie Murphy said there was “nothing in the Budget that “provides optimism” for the motor trade.