There is talk of new taxes on motorists. The influential Tax Strategy Group (TSG) of civil servants who advise ministers on budget options made mention of this last month in relation to climate change policy.The issue is exchequer losses due to the changeover to electric vehicles.
According to the group, as car buyers heed Government calls to opt for electric cars, the exchequer is estimated to lose around ¤1.5 billion worth of revenue annually from motor tax, VAT, fuel excise on regular petrol and diesel vehicles. Additionally, as EV uptake increases, the financial sustainability of supports for such purchases – via grants and tax incentives – will have to be reconsidered.
Mention is made of new medium-term options such as road user charging or congestion charges to fill the tax gap. However, it is several paragraphs on a potential weight-based taxation of cars that is causing a stir in the motor industry. A weight-based tax is seen by some as a way to raise revenue while also tackling the SUV craze.
Clearly the public are fond of their faux off-roaders. They feature heavily in the list of best-selling models. They are the focus of some public opprobrium. And SUVs also have their detractors within the auto industry. One renowned car designer recently bemoaned how their popularity has led the industry into a design cul-de-sac.
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History has proven how successful tax policy can be in changing the new car market. The CO2 emissions-based tax regime flipped Ireland from a petrol market to a diesel one, for good or ill.
Weight-based tax regimes already exist in other European countries and the tax group offers a recently-introduced French model as an example. There, the tax applies to vehicles weighing more than 1,800kgs, at a rate of ¤10 for every additional kilogramme. Fully-electric cars are currently exempt in France from this weight-based charge. That’s important, as EVs are heavier than their petrol or diesel equivalents, due to the battery packs which often weigh 500kgs or more.
What would such a tax mean for the Irish new car buyer? The current best-selling car on the market is Hyundai’s Tucson, followed by the Kia Sportage. Both are SUV-styled crossovers. While their regular petrol and diesel versions would avoid such a new tax – based on the French weight limit – the plug-in hybrid versions would incur an extra charge.
Politically, it might be difficult to introduce a new motoring tax with an election coming into view, but the fact that the idea is being aired by the tax strategy group may indicate the thinking within Government. Officials are very aware that the more the EV strategy succeeds, the more damage is done to the current tax regime. One way or another, that is not going to be allowed to continue for much longer.
