Phil Hogan (Carlow-Kilkenny, Fine Gael) | Oireachtas source

I thank the Deputies who contributed to this debate. I have noted what they had to say. As I stated earlier, any increase in taxation is unwelcome, in particular when it is the second increase in a few short years. It is an unavoidable fact that the new CO2 based system introduced in July 2008 by my predecessor resulted over time in a decline in motor tax receipts. As rightly pointed out by Deputy Healy, the manner in which this was implemented did not help the motor trade. While the stated intention was that the switch would be revenue neutral and provide an environmental incentive towards more fuel efficient cars, the tax was structured in such a way that in the absence of budget increases the effect by the time the switch to CO2 tax was completed over the next decade and a half would have been a shrinking of the tax base by 50%. Where do we get the money to fund local services if that fund shrinks by 50%? This will be exacerbated as technologies improve and, as mandated through the EU, a greater proportion of cars are ever more efficient in the future. As I stated, the majority of new registrations are in the lowest tax band. This year, for the first time, this is apparent. Without restructuring the lower CO2 bands, progressively more cars would be in the lowest taxation classes and differentiated rates of tax and a mechanism to drive further environmental improvements would no longer be available.

The changes we have made with an 80g/km floor for the A1 band will continue to provide an incentive to the trade and consumer to buy the lowest emission cars. A car at 80g/km represents a 33% increase in fuel efficiency and the same decrease in CO2 emissions compared with a 120g/km car. We are refreshing the signal to the market that maximum ambition in reduction in emissions continues to be the aim. Despite the negative impact on the public finances, the net result of the introduction of the CO2-based system is that the average car entering the national fleet is 22% more energy efficient than was the case prior to rebalancing vehicle taxation in 2008. This is welcome and will continue to be an essential objective of motor taxation, but maintenance of the revenue base is also essential in current circumstances.

Some purchasers of cars taxed on the basis of CO2 emissions may describe themselves as feeling cheated. It should be borne in mind that despite this being the second increase in two years, the vast majority of cars taxed on the basis of CO2 emissions still have tax rates which remain below the tax that would have been paid under the old system based on engine capacity. In restructuring the carbon banding we have also maintained the basic structure of the tax and improved the relative benefits of those who have bought or will buy the most efficient cars available in the market. For the budget increases to generate the necessary revenue as part of our approach to expenditure savings and tax increases, it has not been possible either to exempt from increases those older cars based on engine capacity which still make up three quarters of the private car fleet or to exempt commercial vehicles. However, it should be noted the rate of increase for these categories is less than the average for the CO2 fleet.

Deputy Cowen and others raised the issue of climate change, and these matters will be dealt with in the near future. We will bring forward a secretariat report as part of our publication of the heads of the Bill, which we hope will be next week. Deputy Cowen also raised the issue of fuel prices. The budget for 2013 did not include an increase in the price of petrol or diesel, nor was there an increase in VAT or a carbon tax on transport fuels which would also affect the price at the pumps.

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