- Excise Gap between Petrol and Diesel – Currently excise on petrol is 11.6 cents higher per litre than diesel. The lower excise on diesel was originally conceived as a support to businesses reliant on diesel as fuel, but the gap in taxes paid between petrol and diesel has also substantially increased the number of diesel cars on the road Of the 2,215,127 private passenger vehicles on the roads in 2020, diesel engines comprised 58%, petrol38% and the remaining 4% were electric/hybrid/petrol/bioethanol. Removing the gap between duty on diesel and petrol over a five or ten-year period is apparently still very much a ‘valid option’.
- Carbon Tax – The Finance Act 2020 committed to annual increases in the rate of carbon tax until 2030. The increase in 2022 will be €7.50 bringing the overall rate to €41 per tonne of carbon dioxide emission and will apply from 13th October 2021 for diesel and petrol and from 1st May 2022 for all other fuels to allow for the winter heating season. This will put an additional €1.28 on an average full tank of petrol and around €1.48 on a full tank of diesel.
1) Motor Tax – Motor tax was reformed last year with the introduction of a third Motor Tax table for cars registered from the 1st of January 2021 so it is unlikely that it will be altered in this budget but an emission-based motor tax for LGVs is one of the measures being considered.
2) VRT bands – In line with the polluter pays policy there is a suggestion to tweak the VRT bands so the next budget may include a +2% increase in bands 7-10, +3% in bands 11-14, and +5% thereafter, thus ending in a 42% VRT charge for cars emitting 191gCO2/km and above. It is estimated the impact of this would be that new car prices would increase by around €1,294 on average and for example the price of a new SEAT Tarraco would increase by €2,820.
3) VRT Relife for BEVs – The €5,000 relief was retained in full for all EVs with an open market selling price (OMSP) of up to €40,000 in the last budget but relief was reduced by 50% of the OMSP over €40,000 and is no longer available where the OMSP is €50,000 or more. Relief for hybrid electrics ended in 2020, in tandem with the revised VRT structure that reduced rates for lower-emitting vehicles. It is proposed to reduce the threshold again for the VRT relief on electric vehicles down to €30,000. This would result in increased VRT on over 70% of EVs currently for sale e.g according to VW Ireland, the ID.3, the most popular BEV in the country last month, would rise by €2,926.
4) BIK on electric vehicles(EVs) – Ireland currently has a 0% BIK relief for EVs that sell for up to €50,000, and this is due to cease at the end of 2022. A new company car benefit in kind regime based on a vehicle’s emissions will be implemented on 1 January 2023 with rates increasing from 30% to 37.5% for the highest polluting vehicles. An alternative to this would be the phased elimination of the electric vehicle BIK exemption by extending the exemption but reducing the €50,000 value threshold over successive tax years with an end date of 2026. At that point, Electric vehicles would be subject to the same car BIK rates as other vehicles.
6th October 2022