Mondeo class diesels hit hard by Budget
5 December 2002: A Ford Mondeo LX diesel goes up by more than E1,800 following the minister for finance's realigning of the Vehicle Registration Tax bands yesterday. It is a move that has been described as 'myopic and misguided' by the chairman of Ford of Ireland.
That example carries through to any car manufacturer who has cars with engines greater than 1900cc capacity, but it particularly hits diesel car buyers who are usually buying for economy reasons.
The move also penalises most Japanese car brands here, because their diesels are usually 2000cc capacity in the D segment. Fiat, Ford and the Peugeot-Citroen PSA Group are losers, while Renault and the Volkswagen Group brands of VW, Audi, Skoda and SEAT win because their 1.9-litre diesels come in under 1900cc.
The surprise move comes at a bad time for distributors such as Toyota Ireland, who will have ordered their cars for early 2003 already and could be left some unexpectedly expensive cars in their mix. The biggest-selling car in the D segement here is the Toyota Avensis (above), which also has a very high proportion of diesels in its sales mix.
In other reaction to the transport elements of the budget, Jim Quinn of the Irish Road Hauliers Association said that the imposition of 3 cents a litre on diesel fuel tax will cost an average operator an extra E2,000 in a year per vehicle.
Ford Ireland's Eddie Murphy said this morning that 'The extension of the penal 30 per cent VRT rate to embrace cars of 1900cc is a myopic and misguided manoeuvre on the Minister's part'. "It flies in the face of both EU policy on tax harmonisation and sound environmental practice," he said. "The majority of cars affected by this move will be diesel. In jurisdictions such as Britain, diesel cars are actively encouraged on the basis of low CO2 emissions through preferential BIK treatment. That Minister McCreevy chooses to do the opposite is baffling'.
He said the move is not an 'executive' tax on the better off, but a tax on everyday business use that will prove harmful to the environment. Its affect will be compounded by the hike in duty on diesel fuel.
Up to now cars from 1401cc to 2000cc were subject to VRT at 25 per cent while cars from 2001cc and over were subject to VRT at 30 per cent. From 1 January 2003 cars from 1900cc and over will be taxed at the 30 per cent rate.
This measure is estimated to yield E30 million in 2003.
A refund of 50 per cent of the amount of VRT due at the appropriate cc rate is provided to purchasers of 'hybrid' motor vehicles. This scheme of refund of VRT, which was due to expire on 31 December 2002, will be extended for a further two years until 31 December 2004.
The cost of continuing this measure is estimated at E0.05 million in a full year.
The 'mineral oil' tax on auto diesel was increased by 3 cent per litre (including VAT) with effect from midnight on 4 December 2002.
This measure is estimated to yield E3 million in 2002 and E52.5 million in 2003.
An additional E209 million will be provided for National Roads construction. This will bring the Department of Transport's capital allocation for roads to E1.25 billion in 2003. The roads allocation for 2004 and 2005 will be maintained at this level.
This will cost E209 million in 2003, E153 million in 2004 and E113 million in 2005.
The minister noted that Ireland has international obligations under the Kyoto Protocol to reduce greenhouse gas emissions and he said the Government has asked the relevant Departments to advance the plans for a general carbon energy tax, with a view to introducing this from the end of 2004," he said.
"Given the many implications of such a tax, both environmental and economic, there will be full consultations with interested parties on the design of the tax and a reasonable period is being allowed for its effective introduction."
Ford Ireland's Eddie Murphy - minister is 'myopic'