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Change To Motor Tax Regime In Ireland

Change to Motor Tax Regime in Ireland

Government officials in the Department of Finance Tax Strategy team are proposing changes to the motor tax regime in Ireland. These changes are connected to new car performance tests as identified in Euro 6c which is already at work and scheduled to be fully effective in April 2020.

Outlined below is a Q & A which looks to explain in a simple format the proposed changes to the tax regime. There is also information on car performance measurement and testing that will determine potential changes to VRT and road tax payable.

In scope for this article are Petrol, Diesel, PHEV and EV cars.

Jargon Buster.

As in most industries today, there are a lot of acronyms that need to be understood in order to get the best value from any reading. With that in mind the table below explains some of the technical abbreviations and acronyms used in the Q & A.

g/km CO2 average amount of carbon dioxide produced for every kilometre that a car drives.
NOx NOx is a generic term for the nitrogen oxides most relevant for air pollution. These gases contribute to the formation of smog and acid rain, as well as affecting tropospheric ozone.
mg/km The milligrams of NOx emitted every kilometre.
CO2 Carbon dioxide.
Euro 6c Describes tests performed in lab conditions in order to officially type-approve a cars emission and performance levels etc.
NEDC New European Driving Cycle
WLTP Worldwide Harmonised Light Vehicle Test Procedure


Future Updates.

As some of the information contained in this article is likely to change based on Irish Government taxation decisions or EU Directives, it is our intention to update this Q & A whenever it is appropriate or if new relevant information is published by any interested parties.

If there is anything you would like to see included or if you have any queries, please let us know.

Sources used: Irish Wikipedia. ICCT. Air Quality News. Fleet Europe. Irish Times.


Q & A Starts Here.

Question 1. What Vehicle Registration Tax (VRT) changes are being proposed?
Answer Question 1. The new plan put forward by senior Government officials in the Department of Finance tax strategy group would see the number of VRT bands increase from 11 to 14. Emissions below 51g/km CO2 could avail of a new low rate of seven per cent. An additional band of eight per cent VRT would apply for vehicles between 51g/km CO2 and 80g/km CO2. A new 39 per cent tax rate would apply to all vehicles with emissions over 201g/km CO2.
Question 2. Is any change to tax relief on hybrids being considered?
Answer Question 2.Consideration is being given to the removal of the current €1,500 tax relief on conventional hybrids and €2,500 relief on plug-in hybrids. The proposed rationale is if these were reliefs were removed, these types of vehicle should still benefit from the lower VRT rate.
Question 3. Is there any change to tax relief on fully electric cars?
Answer Question 3.Consideration is being given to allowing €5,000 tax relief on fully-electric cars priced up to €40,000. Beyond that price, tax relief would reduce sharply with zero tax relief for vehicles costing €50,000 or more.
Question 4. Is any change to 1% diesel surcharge being considered?
Answer Question 4.Consideration is being given to replace the 1 per cent diesel surcharge with a new levy set against a vehicle’s Nitrogen Oxide (NOx) emissions and other pollutants.
Question 5. What are Nitrogen Oxide emissions (NOx)?
Answer Question 5.In atmospheric chemistry, NOx is a generic term for the nitrogen oxides most relevant for air pollution, namely nitric oxide (NO) and nitrogen dioxide (NO2). These gases contribute to the formation of smog and acid rain, as well as affecting tropospheric ozone.
Question 6. How are NOx gases produced?
Answer Question 6. NOx gases are usually produced from the reaction among nitrogen and oxygen during combustion of fuels, such as hydrocarbons, in air; especially at high temperatures, such as occur in car engines. In areas of high motor vehicle traffic, such as in large cities, the nitrogen oxides emitted can be a significant source of air pollution.
Question 7. What are the maximum NOx emissions allowed in cars?
Answer Question 7. Euro 6c standards state, the maximum level for NOx emissions in diesel cars is 80 mg/km. The maximum level for NOx emissions in petrol cars is 60mg/km.
Question 8. What are the potential road tax implications of measurement by mg/km NOx?
Answer Question 8. Consideration is that a charge of €5 per mg/km NOx would apply. On that basis the driver of an average new diesel car with a NOx level of 43 mg/km would pay €215. The driver of the average new petrol car with a NOx level of 23 mg/km would pay €115.
Question 9. What is the difference between Carbon Dioxide (CO2) and NOx?
Answer Question 9. CO2 contributes to global warming. NOx is detrimental to health rather than contributing to global warming. Its highest concentration is at roadsides and urban areas. Diesel engines produce around 20% less CO2 than their equivalent petrol counterparts. Diesel engines emit more NOx than petrol engines.
Question 10. What’s the connection between mpg and CO2?
Answer Question 10. Fuel economy figures and CO2 emissions (expressed in g/km) are directly related. For example, a diesel car emitting 95g/km of CO2 consumes fuel at a rate of 76.3 mpg.  A petrol car emitting the same 95k/gm of CO2 consumes fuel at a rate of 70.6mpg.
Question 11. How is mpg calculated for different makes of cars?
Answer Question 11. Until recently, every car’s official fuel economy figure was calculated in a laboratory test procedure called the New European Driving Cycle (NEDC). Cars were placed on a rolling road and went through exactly the same process, involving accelerating, maintaining a steady speed, braking, and stopping over 20 minutes.The standardised test originated in the 1970s and was designed for a different era of cars without the power or equipment of modern vehicles. There were also several loopholes that manufacturers could take advantage of to legally boost their cars’ mpg figures. It meant that drivers were increasingly complaining of huge disparities between the official figures and those that could be attained in real-world driving. Independent analysis often showed how misleading some of the test figures were that were presented to consumers.
Question 12. How is mpg calculated today?
Answer Question 12. Under conditions defined by EU law, the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) laboratory test is used to measure fuel consumption and CO2 emissions from passenger cars, as well as their pollutant emissions.The WLTP has been developed using real-driving data, gathered from around the world and should be a better representation of how people really drive rather than the NEDC test. It is still carried out in a laboratory to ensure standard conditions for every car, but the differences include:
A four part test with different average speeds: low, medium high and extra high. These represent urban, suburban, main road and motorway conditions.
More realistic ambient temperature that are common in European countries.
More acceleration and braking, with shorter stops
Testing cars with different equipment levels to show how optional extras can affect mpg.
Euro 6c WLTP took effect on September 1st, 2017 for new type approvals and is mandatory for all new cars from September 1st, 2018 onwards.
Question 13.How will more accurate car performance readings using WLTP affect motor tax?
Answer Question 13.As well as MPG, the NEDC and WLTP procedures provide official CO2 figures that affect the amount of tax that new car buyers pay, as well as company car tax rates. Until 2020, the results produced in the WLTP test will be converted to the old, less accurate NEDC CO2 standard, for tax purposes. But from April 2020, the WLTP figures will be used to calculate tax. As the WLTP test is tougher it is expected that official CO2 emissions will rise which will lead to higher tax on new cars or cars imported into Ireland and higher road tax.
Question 14.When will any changes in CO2 readings and tax be applied?
Answer Question 14. Manufacturers continue to quote WLTP and NEDC CO2 figures until April 2020. The NEDC calculations should be used for indications of how much car tax to pay until April 2020.  After that the new CO2 WLTP calculations apply.
Question 15. How do the new WLTP figures affect a car’s fuel economy?
Answer Question 15. It does not affect fuel economy. The new WLTP MPG figures should be closer to real-world driving figures than the old NEDC figures. However, they are calculated by testing in a lab, therefore there will more than likely be a negative difference between mpg achieved in a lab versus what a driver will find when driving under normal conditions.
Question 16. What effect will WLTP have on hybrid vehicles?
Answer Question 16. Plug-in hybrid vehicles (PHEVs) have returned highly impressive mpg and CO2 figures under the previous NEDC testing regime but in many cases, buyers have been less impressed by real-world driving performance.
It is believed the reason for this variance is because the test was highly complex and not as stringent as it should have been. The International Commission for Clean Transportation (ICCT) said “the NEDC test was not a demanding test cycle and hence not representative of real-world driving, which resulted in rather optimistic estimates of energy consumption as well as PHEV electric range.” The ICCT welcomed the new WLTP test but said: “Nevertheless, even under WLTP, official and real-world driving performance for PHEV’s, will continue to strongly deviate for some customers.”
ICCT has the same concern for real world driving performance and officially quoted driving ranges of electric vehicles (EVs), also calculated using the same testing procedure as for PHEV’s
This means that PHEVs and EVs carry the same caveats as petrol and diesel cars regarding their real-world driving performance. Buyers need to be aware that efficient driving habits will be required to see figures close to the official WLTP laboratory test figures.

Please note at time of writing every effort has been made to ensure the information contained in this article is current and accurate. However, there is no guarantee that the information may not be different from that available at time writing or at any time in the future. Therefore, we would politely request that if any decision or planning is to be based on the information contained in this Q & A it should first of all be checked and validated with an independent and expert source.

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