Poorer drivers penalised by car tax surcharges

Ireland’s car tax system is said to be “fleecing” hard-pressed motorists by placing surcharges on those who can only afford to pay on a quarterly or half-year basis.

New figures released under the Freedom of Information Act show that the large portion of drivers who choose not to pay the yearly amount on a one-off basis are punished for spreading the payments out.

More than half of tax transactions, or 2.65 million, were made on a quarterly basis last year while 13 per cent, or 68,365, were paid on a half-year basis, which also incurs an extra fee. About a third of all transactions, or 1,648,737, made in 2016 were through a one-off annual payment — the cheapest possible method.

Dermott Jewell, the policy and council adviser at the Consumers’ Association of Ireland, said that the extra charge was a penalty and it was discriminatory against lower-income earners.

“The motorists, it has to be acknowledged, pay such an enormous amount of tax as it is,” Mr Jewell said. “To find themselves penalised for the simple fact that they can only afford to pay the legally required tax quarterly is entirely anti-consumer at its most basic of levels.”

Motor tax is calculated based on engine size for vehicles registered before July 1, 2008, and on CO2 emission levels for any vehicle registered after that date. Tax for goods vehicles is calculated based on their weight. The cost of the tax fluctuates between models but an extra fee for paying it in four instalments remains throughout.

For an average 2-litre diesel Honda Accord registered before July 2008 the annual cost is €710. Paying the tax in four instalments throughout the year will cost the driver an extra €90. The owner of a pre-2008 1.4-litre petrol Volkswagen Golf will pay an extra €47 a year in order to pay its annual charge of €385 quarterly.

On newer cars the surcharge is not as high, as the overall tax is typically lower. On a 2010 2-litre diesel Skoda Octavia drivers pay €190 for the year but would spend an extra €22 to break it up — more than 10 per cent of the overall tax.

Robert Troy, the Fianna Fáil transport spokesman, said that he would submit a parliamentary question to ascertain the cost to the exchequer of abolishing the extra charge.

“It’s unfair on people who appear to be working on tighter budgets to be adversely affected,” Mr Troy said. “It’s those who can least afford it too. The reason why the majority of people are paying quarterly is because they can’t afford to pay it on an annual basis and if you can’t afford to pay it on an annual basis you’re working on a tighter budget.”

The annual tax on private cars registered after July 2008 can range from €120 to €2,350 a year. Cars on the road before that time can incur tax of between €199 and €1,809 a year.

The state collected €999.3 million from motor tax payments last year, a decline of €68.1 million, or 6.37 per cent, on 2015. The drop in the tax take, which is partly used to maintain the country’s road infrastructure, has been attributed to drivers opting for more diesel cars to qualify for cheaper tax premiums.

Under rules introduced in 2008 drivers were encouraged to buy diesel cars with low CO2 emissions that cost much less in tax. However, air pollution concerns over nitrogen oxide emissions has led to Shane Ross, the transport minister, asking Michael Noonan, the finance minister, to consider ways to make it less attractive for people to own diesel cars.

More motorists have bought electric and hybrid vehicles this year. The latest figures from the Society of the Irish Motor Industry showed that 230 electric cars were sold in the first two months of the year with a further 1,900 petrol-electric hybrids. This is more than the 175 electric cars and 894 petrol-electric cars sold in 2015. The Hyundai Tucson has been the bestselling model this year, shipping 2,457 units. The Nissan Qashqai and the Ford Focus were in second and third place.

The news comes after the country’s vehicle registration tax (VRT) regime, which is implemented on cars being imported into the country, was criticised by the European Court of Justice.

Maciej Szpunar, an ECJ advocate-general, issued an opinion earlier in the month against the Irish system, which demands payment of the full amount on cars imported into the Republic on a temporary basis. Mr Szpunar said that Ireland had breached EU law by refusing to pay interest on repaid VRT as well as charging an administrative fee for refunds.

Ireland currently charges the full rate on all imported vehicles even when they are used on a temporary basis, including rentals. Revenue then refunds a certain portion of the VRT when the vehicle leaves the Republic and charges an administration fee of €100, reduced recently from €500.