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The new system will increase the current structure from three bands to seven. Ratings from A to G will apply. The Department of the Environment, Heritage and Local Government will issue a new CO2 Emissions Labelling System for cars, along the lines of the energy efficiency labels for white goods. These seven rates will range from a charge of 14% to 36% of the Open Market Selling Price (OMSP), depending on the CO2 emission level of the vehicle.
Hybrid electric and flexible fuel cars will be offered a relief up to €2,500 on the possible VRT payable. Since 1st January 2008, all electric cars and motorcycles have been exempted from VRT. The new bands are rated on the amount of grams of carbon dioxide that are emitted from the car per kilometre. This is based on the assumed use of the car, and not on the basis that the car may never be driven. Category A includes cars that emit 0 to 120 grams of CO2, and will be taxed at a rate of 14% of OMSP. Category B includes a rating of 121-140g, with a tax of 16%. Category C applies a 20% tax on vehicles emitting 141-155g, while Category D applies 24% tax on those emitting 156-170g. Cars that emit between 171-190g rest within Category E and are subject to a VRT of 28%, while those in Category F are taxed at 32% for emitting between 191-225g. Category G caters for all cars emitting 226 grams of CO2 or more, and is taxed at a rate of 36% of the OMSP. After consideration from submissions from the industry, a revised scheme of capital allowances and leasing expenses will also be introduced from 1 July 2008. Under the revised scheme, certain cars with lower CO2 emissions will benefit from higher capital allowances or higher deductions in respect of leasing expenses. Cars with higher CO2 emissions will receive reduced allowances and leasing expenses or none at all. The following Table sets out the CO2 emission bands, the new relevant VRT rate and, for reference only, the distribution by CO2 emission band of new cars that were purchased in 2006. Soucre www.budget.gov.ie How does this apply to me?This new system will affect all new cars bought in the Republic of Ireland from 1st July 2008. These cars will be registered for the first time with the Revenue Commissioners and therefore incur VRT. Dealerships and manufacturers will register each new car sold to Irish citizens, and therefore the VRT will be included in the price of the car on the lot. New and second-hand cars imported into the country from this date will also be affected by the new emissions-based system. The car owner should register these imports with the Revenue Commissioners, taking into account the CO2 rating of the car. Drop in salesAccording to statistics from the Society of the Irish Motor Industry (SIMI), car sales fell by 10% in February amid the uncertainty of the new regime. Surprisingly though, the sales figure for the first two months of 2008 has only seen a 1.12% drop on the same period in 2007. Those who do buy before the 1st July deadline can avail of the new road tax system, which is based on emissions too. This would further reduce the running cost of a vehicle that emits at a low CO2 rate. Consumer choiceIf car sales are not dramatically falling, are consumers taking account of the new VRT system? According to a survey from National Irish Bank, they are. As much as 42% of Irish consumers who plan to buy a car in 2008 have revealed that they will wait until after 1st July. And of that number, 72% will consider buying a diesel rather than petrol vehicle. This is a dramatic change in preference, as under the current market structure Irish consumers choose petrol engines 80% of the time. Could this be the signal of a new market emerging? According to Brendan O’Hora, Head of Communications at National Irish Bank, “the survey shows that consumers are conscious of the savings that can be made by shopping around for the best car loan deal, with over half of them planning to shop around for the best rate.”
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