Mr. Gerry Kenny:

I am a principal officer with responsibility for indirect tax policy in the Department of Finance. I am joined this afternoon by my colleague, Mr. Niall O’Sullivan. The main focus of taxation in the transport sector is in respect of private passenger vehicles, which are subject to a once-off vehicle registration tax, VRT, and an annual motor tax. The tax policy in recent years has been geared towards incentivising a move towards lower CO2 emitting vehicles. Since 1 July 2008, both VRT and motor tax on private motor cars have been calculated on the basis of emissions, so that motor cars with higher emissions attracted a higher tax liability. From January 2013, a revised banding structure was introduced in recognition that more fuel-efficient cars were becoming available and allowing for the further differentiation of the environmental incentive. A zero-emissions band for electric vehicles was also introduced at that time. In addition, VRT reliefs are available for battery electric vehicles, plug-in hybrids and conventional hybrids up to a maximum of €5,000, €2,500 and €1,500, respectively, to support the transition to a cleaner national fleet for passenger cars. Members will be aware that the €1,500 relief for hybrids, which was due to expire at the end of 2019, has been extended for a further year. However, CO2 ceilings have been introduced to ensure that only low-emission vehicles are benefiting from this tax incentive. This is based on clear evidence that certain hybrid models emit average and even high levels of CO2. This relief will expire at the end of 2020.

Budget 2019 introduced a 1% VRT surcharge to diesel passenger cars registering for the first time in the State from 1 January 2019.

This measure was introduced in light of public health and environmental concerns about pollutants such as NOx, sulphur oxides and particulate matter which impact air quality, particularly in high population density urban areas. This surcharge will be replaced by a new NOx charge introduced in the recent budget and due to come into effect from 1 January 2020.

Tax incentives to get people out of cars and onto public transport and bicycles include the TaxSaver commuter ticket scheme to reduce traffic congestion by helping reduce the cost for workers using public transport, and the bike to work scheme to encourage employees to cycle to work.

There has been some discussion of late on the taxation of the aviation sector and, in particular, on the current tax exemptions for aviation fuels in the context of broader efforts to address climate change as well as to level the playing field with other forms of transport fuels that are subject to tax. In this regard, Ireland is subject to energy taxation rules set out in the EU energy taxation directive. Under this directive, member states are obliged to exempt certain fuels used for commercial aviation purposes from excise duty. A member state may waive this exemption where it has entered into a bilateral agreement with another member state to tax fuel for intra-community flights. With regard to fuel for international transport, the scope for a member state to take a unilateral approach to taxation is limited by international law and a range of bilateral and multilateral agreements that operate under the 1944 Convention on International Civil Aviation, known as the Chicago Convention. In recognition of the environmental and fiscal merits of the case being made for the application of aviation taxes, Ireland will engage with the EU Commission in regard to the possible revision of the energy taxation directive to take greater account of environmental concerns in the taxation of energy products. Finally, the committee will be aware that the Department presents a series of papers to the tax strategy group each summer setting out options across the various tax heads for consideration in the annual budget.