The Irish Car Carbon Reduction Alliance (ICCRA) has called on the minister for finance to reduce the cost of Vehicle Registration Tax in the upcoming budget. That, according to ICCRA, would make new cars cheaper and would have the benefit of reducing carbon emissions from road transport.
Excessive taxation
It's important to note that ICCRA is a grouping of car dealers, so clearly has some skin in this game. The ICCRA's spokesperson, Denis Murphy, said: "Current levels of VRT do not make sense for the economy or the environment. Ireland has the second-highest new car taxation levels in the EU with excessive taxation moving the price of new cars beyond the affordability of most people. We are calling for an average €3,000 reduction in taxation on new cars. This would bring the average price of a new car close to the €30,000 level which caters to over 64 per cent of the Irish new car market.
"Since 2016, new car prices in the Irish market have increased by €5,354, some 19 per cent, to an average of €33,881 in 2020. During the same period, sales of new cars have fallen from 146,650 units to a predicted 85,000 units this year - a fall of 61,650 units (42 per cent decline). The market for cars costing €35,000 or less has been hit hardest, plunging by 33 per cent (40,397 units). New cars are becoming the privilege of the few."
It's worth pointing out that while cars have certainly become more expensive, the average selling price is not necessarily a reflection of an increase forced upon consumers. Indeed, some of the increase may well be attributable simply to consumers switching from cheaper hatchback and saloon models to more expensive SUVs and crossovers. For example, in 2016 in the top-ten best-sellers' list, there were only three crossovers or SUVs; four hatchbacks; two superminis; and one family saloon. By contrast, in 2020, there are five SUVs or crossovers; four hatchbacks; and a single, solitary supermini.
Forced into the UK market
Mr Murphy also claimed that the lack of new car sales in Ireland is effectively forcing Irish buyers to shop for second-hand cars in the UK. "The volume of new cars sold is also insufficient to create a proper second-hand car market to satisfy consumer demand for two- and three-year-old cars. This lack of supply is being met currently by used UK imports with poorer fuel efficiency than the equivalent new variant. We don't know what impact Brexit will have on the supply of used cars from the UK - whether they will still be available or at a minimum severely restricted. However, by reducing VRT, the Government can help to make the Irish market more self-sufficient and greener by stimulating new car demand and boosting the "home grown" used car market."
Again, that's not necessarily the case - the importing of used cars has fallen by 45 per cent so far this year compared to 2019, and much of the credit for that has been placed on the NOx levy, which makes the importing of older, more polluting diesel models much more expensive.
ICCRA contends that having an expensive tax, such as VRT, is worse for the environment as it means people tend to hold onto their cars for longer, keeping older, more polluting models on the road. The group says that while electric vehicles are undoubtedly the future, right now we need a more thoughtful taxation policy that encourages the uptake of newer internal combustion engined models with lower emissions, as well as hybrids and plug-in hybrids.
"We maintain that a steady growth in the new car market is essential with a blended approach which includes the sale of green ICE cars as a means to reduce our short term emissions. This is in line with other EU countries and the targets to which all the major car manufacturers are already aligned and committed to achieving. McKinseys, who advised the Government on their Climate Action Plan, also favour a blended approach and its backed too by EU legislation and economic analysis as a viable long-term solution to making our roads emissions free. To be successful reform of the VRT taxation system is an essential part of this roadmap. Significant reductions in VRT on new cars are required in October's budget."
Again, this is questionable. According to a study by the Organisation for Economic Co-Operation and Development (OECD) having lower taxes on cars and driving is actually worse for the environment, and pushes up carbon emissions, traffic congestion and air pollution.
Price rises for family cars
Mr Murphy went on to claim that changes to the motor tax and VRT systems proposed by the Tax Strategy Group - an interdepartmental group of senior civil servants - would see the average price of a new car increase by €1,000 and the cost of a 'family car' increase by €4,000.
It seems that the pleas are falling on deaf ears, though. The Tax Strategy Group (TSG) seems immune to the lobbying of the car trade in Ireland, and has said that the three central pillars of that lobbying - lower VRT, greater new car sales for environmental benefit, and a scrappage scheme - do not produce the desired outcomes for either the environment nor for the exchequer. Quite how that assertion blends with the desire to push motorists towards electric cars (which, effectively, have to be bought new) remains to be seen.
"The daily use of a car is a necessity not a luxury. The TSG proposals would push cars further beyond the affordability of the vast majority of people. The net effect of such a move would be to create a two tier country between those who have access to an efficient public transport and those who don't while isolating rural motorists even further. We already have enough two-tier systems in our country" said Mr Murphy.
The Tax Strategy Group has said that it wants changes to the VRT system to 'create a level playing field', and that 88 per cent of drivers would see no change in their current motor tax bill.