Budget tax increase implications for diesel cars

According to the Director General of SIMI, Alan Nolan, the budget "was a poorly considered measure that appears to have been included to give the perception of an environmental focus in the Budget.

Consumers are increasingly concerned about the effects on air quality by diesel. City-based car buyers are already moving away from buying new diesel cars, with the Dublin diesel share reducing from 70% in 2014 to 51% this year.

The demise of diesel will have a more acute effect on rural or business buyers as it is seen as more economical. It is felt that the measures introduced in the budget may have an impact and cause some car buyers to postpone their car change. This could potentially reduce the number of new cars into the National Fleet.

There is an increasingly strong global transition away from diesel fuel and the Irish government is very aware of this. This move is seen by some in the Irish automotive industry as a negative provision by the government. They need to be seen to do something about the environmental effects of diesel so they have introduced the changes. This is also in keeping with not increasing carbon taxes. Mr Nolan said:

"The real disappointment for businesses and jobs in our sector is that we were already facing an increase in VRT in January, only on the price of a new car, in the region of €450, due to the new EU emissions test (WLTP).”

The budget announced an additional 1% surcharge which is likely to add a further €400 on average to a new diesel car starting from from January 2019. There is also the current low value of Sterling which is having the effect of driving up the number of older cars being imported into Ireland.

In a recent survey of franchise dealers, 73% said they were already anticipating an even worse year in 2019 because of Brexit and that's before the VRT increase. It is believed that the worst market sector to be impacted to date by Brexit is the automotive car sales sector, with a 14% fall in new car sales and likely to accelerate even further next year.

"This increase is more likely to encourage those who may want a diesel car to opt for an older imported used diesel. Given that older diesels can be up to 30 times worse on emissions than a new car; this would hardly pass for environmental progress.

"From a revenue point of view, if even only 5,000 new cars are replaced by imports as a result of this VRT increase, the State would face a net reduction of €20 Million in tax receipts rather than the Department’s projected increase of €25 Million.

"The industry had been seeking some consideration in respect of the impact of the new emissions test on VRT in January. In this context, the additional imposition of this Budget VRT increase in the full knowledge of how Brexit is currently impacting shows a total lack of concern for businesses in our sector.”

Budget implications for the Motor Industry

1% VRT surcharge across all VRT Bands for diesel cars, new and used imports
Extension of VRT Reliefs for Plug-In and Conventional Hybrids until the end of 2019
No increase in carbon taxes
No increase in fuel duties
LPG commercial vehicles relief - A new accelerated capital allowances scheme for gas-propelled vehicles and refuelling equipment
Buses – no diesel-only buses for the urban public service obligation (PSO) bus fleets after July 2019.
The 0% Benefit-in-kind rate for electric vehicles is being extended for a period of 3 years, with a cap of €50,000 on the Original Market Value of the vehicle

Author

Justin Kavanagh
Justin Kavanagh is a recognised leader in automotive intelligence and vehicle data supply to the entire motor industry. He has almost 20 years experience in building systems from the ground up. As the Managing Director of Vehicle Management System, he understands the need and importance of trustworthy and reliable vehicle history and advice to both the trade and the public.
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