Dáil Éireann Debate, Thursday - 23 November 2023
85. Deputy Brian Leddin asked the Minister for Finance if he will request that his Department undertake a vehicle taxation report considering the introduction of weight and size-based taxes on private vehicles in Ireland to incentivise a switch to smaller and lighter vehicles, similar to the weight tax in other jurisdictions; and if he will make a statement on the matter. [51579/23]
View answerOfficials from my Department continue to monitor developments in the vehicle taxation area. New proposals are considered and current vehicle tax policies are kept under review as part of the Tax Strategy Group and Budgetary cycle. Going forward, it is possible that vehicle taxes may shift to a weight-based approach in order to protect the vehicle tax base.
Recently, other European countries such as Norway, Belgium and the France have introduced a form of weight based vehicle tax. However, it should be noted that the existing vehicle tax structures in the State currently have a very strong environmental rationale, with the more pollutant vehicles paying higher rates of tax. Additionally, as many heavier vehicles currently on the market are more pollutant – with the exception of large Electric Vehicles - those heavier vehicles incur higher rates of tax, between Motor Tax, Vehicle Registration Tax and the Nitrogen Oxide Charge. Vehicle weight generally correlates with vehicle emissions, therefore within the existing vehicle tax system the heaviest internal combustion engine cars are already subject to higher rates of tax whereas lighter, more efficient cars are subject to lower rates of tax.
Vehicle Registration Tax is an emissions-based tax and is calculated based on the Open Market Selling Price and tailpipe emissions of the vehicle. The rates were changed in Budget 2022 to further incentivise motorists in the market for a new car to make ‘greener choices’. The changes to the rates table increases Vehicle Registration Tax rates progressively from band 9 so that high emission vehicles pay more. This reflects the environmental rationale of the tax and underpins Government commitments to decarbonise road transport.
In recognition of the environmental health costs caused by pollutants emitted in particularly high quantities by diesel vehicles, Budget 2019 saw an introduction of a 1% surcharge on all diesel vehicles. Budget 2020 replaced the 1% surcharge with a surcharge tied to nitrogen oxide emissions levels based on the “polluter-pays” principle, where the greater the level of nitrogen oxide a car emits, the higher the surcharge. Budget 2021 saw an adjustment to the surcharge structure so as to underpin its environmental rationale and incentivise the uptake of cleaner cars.
The policy of changing the profile of vehicles registering in this country is working. Following the changes introduced in recent years, significant increases in EV registrations have been mirrored by decreases in the number of high emission vehicles. The middle emissions bands (where most of the volume lies) have also experienced a shift towards lower emission vehicles. The average emissions figure for all vehicles (new and used) in 2020 was 135.6 gCO2/km (band 14). This has fallen to 103.4 gCO2/km (band 7) for 2023 so far. This is clear evidence that vehicle taxation reform is leading to lower emission cars on our roads.
That said, the Budget 2024 Tax strategy Group paper made reference to future exploratory work around adding a weight component to VRT. This scoping work is looking at the possibility of taxation based on weight both in light of an additional way of discouraging larger and heavy vehicles (as the Deputy is referring to), and protecting the tax base as electrification of cars continues. In this regard work is ongoing as part of the TSG process and will be advanced within this policy assessment framework. Therefore I do not believe there is a need for a report.
Question No. 89 answered with Question No. 84.
