No-one likes car tax but at least it can be done fairly

The Government is making a relatively small change to the system of annual road tax. This is being done to correct an inherent unfairness in the way that car tax is treated if a car spends a portion of its time off the road.

This is fine as far as it goes but the government cannot point to one type of unfairness to justify its action while ignoring a far greater unfairness that it seems happy to tolerate.

Let’s look first at what they are planning to do. With effect from October 1 there are new rules to govern the tax liability for a car that is not in use. It has always been the case that if your car is not on the road then you don’t have to pay road tax.

The problem is that up until now it has been quite ridiculously easy to abuse that rule. You can let months go by without bothering to tax the car and when you do get round to it you can simply say that it has been off the road and hence not pay the back tax. No longer.

You will now have to declare that the car is off the road in advance. If you do not then you will have to pay any back taxes owed on it. The government reckons that this type of evasion was costing the State €50 million a year.

Plugging the loophole is reasonable and by and large motorists do not object. What a pity though that this new found desire for fairness does not extend to cars that are more than five years old.

As we have noted before the change to car tax rules in 2008 has become an unjust burden on the huge number of motorists who are in older vehicles. The changes meant that new cars are taxed based on tail-pipe emissions rather than on the size of the engine.

That made sense but the mistake was that the new system is blind to technological progress. Modern cars have become so environmentally friendly and produce so little CO2 that the vast majority now fall into the ‘low tax’ category as designed in 2008.

Consider someone lucky enough to be able to buy a brand new E-Class Mercedes for a whisker under €45,000. That car now pays €270 in annual road tax. Stack that up against a much more typical Irish motorist in an 8 year old Nissan Primera.

That car is only worth a tenth of the price of the new Merc but the road tax bill for its 2.2 litre engine is a whopping €951. To add insult to injury that tax rate was actually increased in last December’s budget.

Environment Minister Phil Hogan did say when he took office that the system of car tax needed to be reformed. He was right, and what’s more he had the chance to appear on the side of the angels because it was his predecessors who presided over the short-sighted and flawed changes made in 2008.

Sadly the lofty word ‘reform’ turned out to mean more tax increases. There was some tinkering around the edges but no attempt to address the basic problem of needless discrimination against perfectly serviceable older cars.

Irish people are still holding off on buying new ones in the ongoing economic uncertainty. The average age of cars is now 8.7 years old and rising by the year. There are a lot more motorists in the old Primera than the new Merc category.

The ageing fleet is causing other problems as well. Those cars break down more often and require more maintenance so running costs are higher. It really does financially stack the deck against those who have little choice but to try to keep an aging car on the road.

This year the budget comes early, on October 15. If the government is in any way serious about treating car owners fairly then this budget is their opportunity to prove it. They will need to make some sort of gesture to relieve the disproportionate burden on owners of older cars.


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