Proposals to increase vehicle registration tax for electric vehicles are “regressive” and will “greatly hamper Ireland’s ability to reach its climate change targets”, the Society of Irish Motor Industry (SIMI) have said.
IMI said the move will also hinder any efforts to decarbonise the nation’s entire car fleet and will mean that consumers will have to pay more tax next year, “to make better environmental choices”.
SIMI claims the proposed tax changes would see an increase in price of the “vast majority” of new electric vehicles and lower emitting new cars, while also encouraging people to keep their older more polluting cars for longer.
This would maintain and “possibly even add” to the current number of 900,000 cars over 10 years old already on Irish roads, SIMI have claimed.
The proposals, which would see a 2-5pc increase in VRT for most electric vehicles, would also see a tapering of the tax relief for electric vehicles, starting at €30,000. This tapering currently begins at €40,000, meaning a majority of electric vehicle owners would see a reduction or removal of any tax relief they receive when purchasing a new electric vehicle.
The relief is a tax break of up to €5,000, which is capped at vehicles worth €50,000 or less. This upper limit would also be reduced to €40,000 under new plans.
Brian Cooke, the Director General of the Society of Irish Motor Industry, said the recent proposals from the Tax Strategy Group (TSG) are “retrograde, regressive and run counter to efforts to materially reduce transport emissions”.
“At a time when the Government wants people to move into electric vehicles, the TSG’s proposed recommendations include an increase in Vehicle Registration Tax on EVs by an average of €1,500, with some of the more popular family models receiving a price hike as a result of up to €2,800.
“Other new cars, even those with much lower emissions than cars currently on the road, would also suffer an average tax increase of over €1,300, despite already being targeted in last year’s Budget. The proposals to reduce the threshold for the VRT relief on electric vehicles would result in increased VRT on over 70pc of EVs currently for sale. This would mean that consumers will have to pay more tax next year to make a better environmental choice,” Mr Cooke said.
The TSG’s paper also points out that fuel prices are already set to increase for petrol and diesel cars in October at roughly two cent a litre.
The proposals should not be considered by Government, if it is serious about encouraging a switch to electric vehicles and reducing emissions, SIMI said. The increase in tax bills would slow down progress on the creation of a used electric vehicle market, “a market that will make EVs affordable for a greater number of motorists”.
“It is entirely unconscionable that the retrograde step of effectively increasing VRT on Electric Vehicles and low emitting cars is under consideration when we are at such a critical juncture in driving down emissions from transport,” Mr Cooke said.
Sales figures show there has been more than 120pc growth in Electric Vehicle sales in 2021 and a tenfold increase in since 2017.
“This level of achievement would not have been attainable without the Government supports currently in place. To reduce the EV supports now, or to increase VRT on cars already burdened by last year’s substantial tax increases, only serves to add tax to consumers who want to make better environmental choices. It also adds to customer confusion as to whether an Electric Vehicle is the right decision for them, at a time when there is more and more choice out there,” Mr Cooke said.