Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Recent Budgets have seen major changes to Motor Tax and VRT structures with the aim of incentivising the purchase of more efficient and 'greener' vehicles.

Budget 2021 saw the transition to the more accurate Worldwide Harmonized Light Vehicles Test Procedure (WLTP); and restructured the VRT and motor tax regimes with a view to strengthening their environmental rationale in line with Government commitments as set out in the Programme for Government and Climate Action Plan. The VRT rates were changed again in Budget 2022 to increase the fiscal gap between low emission vehicles and the rest, thus incentivising motorists in the market for a new car to make ‘greener choices’. The structure is based on the 'polluter pays' principles, with a reduced rate for battery electric vehicles (BEVs) of 7% of open-market selling price (OMSP), while vehicles falling into the highest emissions band are liable to a rate of 41%. Similarly, in motor tax, WLTP-tested vehicles are charged motor tax according to their emissions profile; the rate for BEVs is €120 and scales up to €2400 for the most pollutant vehicles.

Budget 2020 introduced a VRT surcharge on nitrogen oxide (NOx) emissions in recognition of the environmental health costs caused by pollutants emitted in particularly high quantities by diesel vehicles. Budget 2021 saw an adjustment to the NOx surcharge structure by increasing rates to incentivise the uptake of cleaner cars.

There are also a broad range of measures in support of Climate Action Plan commitments to increase the electrification of the fleet. This include a €5,000 VRT relief, SEAI purchase grant, low VRT and motor tax rates, and a €50,000 Benefit-in-Kind exemption for Battery Electric Vehicles.

I am satisfied that the current vehicle taxation regime is based on an environmental rationale which incentivises low emission vehicles and consequently provides strong disincentives for the most polluting ones. Officials from my Department keep vehicle taxes under review as part of the Tax Strategy Group process.