The position is that VAT deductibility is allowed in the case of motor vehicles that are classed as Category B or C for VRT purposes but not for Category A vehicles (cars). Category B vehicles would typically include what are commonly called "crew cabs" or commercial jeeps while Category C vehicles would include vans and lorries. VAT deductibility is allowed in the case of Category B or C vehicles as these are regarded as being designed and constructed for the transport of goods, plant, equipment, etc. Under EU VAT law, with which Irish VAT law must comply, there is no restriction of entitlement to VAT deductibility by reference to the fuel-efficiency, emissions or other environmental characteristics of any vehicle or class of vehicle.
As regards VRT, commercial vehicles are subject to a much lower rate of VRT than that which applies to private cars (Category A vehicles). Category B vehicles are subject to VRT amounting to 13.3% of the open market selling price while a flat rate of €50 applies to Category C vehicles.
The public consultation process announced in the Budget, with respect to future changes in VRT and motor tax to take account of emission levels, relates solely to private cars. I have not ruled out making future changes to VRT rates applying to Category B and Category C vehicles, however, we need to examine the competitiveness issues that arise from making any such changes. Increasing the costs associated with transporting goods, or the carrying of necessary tools and equipment required to undertake labour intensive services, essentially leads to higher prices for consumers. Notwithstanding this, if changes can be made that have clear environmental benefits without impacting greatly on costs, these will be given appropriate consideration.