EXCLUSIVE: Big VRT and motor tax increase on the way

New 2013 plate designations will be 131 in January and 132 in July

The Auto Trade Journal has learned that the Government is about to announce expected new higher Vehicle Registration Tax (VRT) rates and consequent road tax rises. We have further learned that from next January the industry will get a new bi-annual number plate system that it has lobbied for in recent years, writes Padraic Deane.

After information received from a government source, which we have since confirmed by an industry source, the Auto Trade Journal can report that the Government is expected to announce new higher VRT rates, which will remain CO2 emissions based.

This exclusive story was revealed for the first time by the Auto Trade Journal (AutoTrade.ie) yesterday, featured this morning on the front page of the Irish Independent broadsheet edition (page five of the tabloid) and on RTE’s Morning Ireland programme, with our managing editor, Padraic Deane.

It is understood that the current emissions (CO2g/km) based VRT rate of 14 per cent (of the Open Market Selling Price as determined by Revenue Commissioners) will remain in place.

However, this currently applies to all passenger cars with a CO2g/km of between ‘Zero and 120g/km’.

In the new system, Band A will be split into four sub-categories with higher rates applying. These are: A1: 0-80g/km (14 per cent rate), A2: 81-100g/km (15 per cent rate), A3: 101-110g/km (16 per cent rate), and A4: 111-120 g/km (17 per cent rate).

Our information is that there after, each grade from B upwards will have similar VRT band widths to those that exist today, but with a one per cent rate increase at each grade.

The overall restructuring means that practically all new cars sold in the Republic of Ireland will have higher VRT applied putting up the new cars up considerably.

This is most unfortunate, given that some of the highest taxes in Europe already apply to new cars in this country meaning that Ireland has amongst the least expensive pre-taxed new cars in the EU.

It had been thought that the Government might go with a more complex but more equitable hybrid system, where cubic capacity/brake horsepower would in addition to CO2 emissions, play a role in the calculation of VRT. We have been told that this is not the case and the sub division of Band A is designed to partially deal with this issue.

The Government had previously not honoured a promise to announce the VRT changes last June, so that the industry would be in a position to order cars based on their expected forecast for the early 2013 new car market.

It is understood that the Department of Finance is ready to announce the new changes but the Government has been delaying to find a good time to break this bad news for motorists and consumers.

We believe that the Society of the Irish Motor Industry (SIMI) has grave concerns and continues to lobby on behalf of the industry. Our information is that the SIMI held a high level meeting today to discus the issues.

The rapid rise in petrol/diesel prices in recent weeks along with the Government’s point blank refusal to reduce duty rates on auto fuels along the lines of the French Government has added to the delay.

These are very fragile times for the Irish motor industry and while they believed that some degree of bad news was imminent, they did not expect such high increases in current VRT in the major A and B Band segments.

There is a genuine and palpable fear that these increases will cause a further fall in new car sales, which could sadly result in many more dealerships closing and previously sustainable jobs lost.

The Auto Trade Journal contacted Alan Nolan, Director General of SIMI fin elation to our information. He said: “I could not comment on the issue as the consultation process on the VRT and Road Tax restructuring has not yet been finalised. Clearly while the State is seeking to recoup some of the fall in revenues SIMI and the Industry would be very concerned at the impact of any increases in the current market environment.

He added, “Similarly SIMI has been pressing the case for an improved registration plate system which we believe will be vital for our sector next year and into the future. These issues are all part of Budget 2013 and no doubt the Ministers will confirm their proposals in this regard when they are finalised. We cannot make any comment on these issues until then, other than to underline that the Industry has welcomed the Government’s willingness to engage in an early consultation process.

Residual values set to increase
One good upside for motorists is that the higher VRT rates applying to new cars will also add to the residual values of used cars. This should also help negate the cost of buying a new car, where a trade-in is involved.

Increased Road Tax rates
The increase in VRT rates will also mean an increase in road tax rates. Currently we have two types of rating structures that apply. One is for cars older than 2008, which is engine size based. This ranges from €185 (for under 1,000cc) to €1,683 (for 3,001cc or more). The second is CO2 based, and it runs from 2008 to the current day with a charges ranging from €160 (Zero to 120g) to €2,258 (225g upwards).

It is unlikely, that we will see a third charge structure, so we expect to see all cars from 2008 to see their road tax rise. If this is the case, it will see the advantage that newer and lower emission cars currently have over the pre-2008 models eroded, effectively removing any ‘green’ incentives.

New bi-annual number plate system for 2013
The Auto Trade Journal has also learned that a new bi-annual number plate system will be introduced next year. From January the designation ’131′ will replace the potentially damaging (economically) ’13′ plate, and in July next year, there will be a second plate change introduced. It will be designated ’132′.

The Government has obviously accepted the auto motor industry lobbying that a twice yearly number plate adjustment will provide more stability for the trade, protect jobs and that it will ultimately have a positive effect on exchequer revenues.

The industry also seen the serious worry that it has about a ’13′ number plate damaging new car sales next year removed.

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