CARBON TAX REACTION:A 5 cent per litre increase in the price of fuel proposed in the report has been criticised by motoring groups as a cynical revenue generating exercise .
However, the motor industry has welcomed the potential replacement of Vehicle Registration Tax (VRT) on new cars with a usage-based system as long overdue.
The report outlines several options for replacing the current VRT system, such as a sizeable increase in fuel taxes – up to 30 cent per litre – along with road pricing. It suggests a 10-year timeframe for the changeover.
It also proposes a new limited scrappage scheme be introduced with incentives available for buyers of new electric or low-emission cars.
The most immediate recommendations are a new carbon tax of 5 cent a litre on petrol and 5½ cent a litre on diesel over the next two years. According to the report, any carbon tax should “ensure that behavioural change aspects are maximised and it is not seen as ‘just another tax’ ”.
AA Ireland has described the proposal as a cynical revenue generation exercise. Conor Faughnan, its policy director, said: “The danger here is that the Government is set to use genuine environmental concerns as a flag of convenience to cover tax increases.”
Plans to replace the current VRT system on new and imported cars were more warmly welcomed by the motor industry.
In its report, the commission outlines possible options such as a 30 cent per litre increase in fuel to compensate for the removal of VRT, and possible charges per kilometre for road usage, including congestion charges.
The final proposal relating to the motor industry concerns the introduction of a scrappage scheme for cars of 10 years or older. Incentives would be offered to buyers who scrap these cars and purchase electric cars or low-emissions models. If accepted by Government as part of its December budget, such incentives are likely to be offered on new cars with CO2 emissions levels below 155g/kms.
A number of groups representing coach operators said that the blanket nature of petrol and diesel increases would discriminate against those providing public transport.
But Oisín Coghlan, director of Friends of the Earth in Ireland, said the carbon tax recommendation was welcome and hoped that the Government honoured the promise to make such a tax revenue neutral.
On the €20 a tonne floor price suggested, Mr Coghlan said: “It’s not high enough to make a difference. It’s only one piece of the jigsaw. We would say higher.”
Green Party leader John Gormley said the commission had understood the relevance of climate change and had looked at the carbon levy.
“That certainly will be built into the forthcoming budget,” he said.
Labour’s spokeswoman on the environment Joanne Tuffy said that the tax was a legitimate measure but would need to be introduced in a fair way, designed at changing people’s behaviour.
“I would be very concerned, despite claims that this tax will be revenue neutral, that these taxes will turn out to be merely revenue-raising,” she said.
Gerry Mullins, chief executive of the Coach Tourism Transport Council, said that levying the carbon tax on public transport providers made no sense.
“Private coach and bus operators will have no option but to pass along the additional costs to their passengers,” he said.
Jim Clery, a tax partner with KPMG, also expressed concern.
“The carbon tax initiative is simply an additional tax on the main fuel sources which will be borne by consumers . . . the concept of big polluters being taxed has been rejected. I am surprised by this,” he said.