Budget 2022 and the Irish motor industry

An increase in the price of petrol and diesel, along with changes in vehicle registration tax bands are just some of the motoring specific measures that were announced in today’s government Budget 2022.

The Minister for Finance Paschal Donohoe and Minister for Public Expenditure and Reform Michael McGrath announced that there will be a €7.50 increase on the current rate of Carbon Tax applied per tonne of carbon dioxide emission. This will bring the rate up to €41 per tonne. Carbon tax will increase by the same amount in every budget until 2029.

The increase will be applied to petrol and diesel from midnight (October 13) and all other fuels on May 1, 2022. The price of a 60 litre fill of petrol increases by €1.28, while the same fill for diesel rises €1.48.

From January 2022 a revised vehicle registration tax (VRT) table is being introduced. The 20 band table will remain with an uplift in rates beginning with a one per cent increase for vehicles that fall between bands 9-12; two per cent for bands 13-15; and then a four per cent increase for bands 16-20.

The €5,000 relief for battery electric vehicles is being extended to the end of 2023, “to continue to incentivise the uptake of electric vehicles,” Mr Donohoe said.

The BIK exemption for battery electric vehicles will be extended out to 2025 with a tapering effect on the vehicle value. This measure will take effect from 2023. For BIK purposes, the original market value of an electric vehicle will be reduced by €35,000 for 2023; €20,000 for 2024; and €10,000 for 2025.

Meanwhile the Accelerated Capital Allowance scheme is being extended and amended to include hydrogen fuel vehicles and refuelling equipment.

Mr Donohoe said: “As a transport fuel, renewable hydrogen offers significantly higher carbon savings when compared to fossil fuels. I am also extending the scheme to include hydrogen powered vehicles and refuelling equipment.”

The Society of the Irish Motor Industry (SIMI) has said that Budget 2022 is a “mixed bag” and that its motoring related measures are “hugely disappointing”.

SIMI director general Brian Cooke said: “Budget 2022 is a mixed bag for the motor industry and the motorist. The increases in VRT on the back of Covid, Brexit, increased fuel taxes and the dramatic VRT changes in last year’s Budget are hugely disappointing.

“These increases only add to the already heavy tax burden on new cars, and will serve to slow down the renewal of the fleet, acting as a barrier to reducing emissions.”

Mr Cooke added: “The SIMI welcomes the continuation of VRT relief for electric vehicles out to 2023. This brings a degree of certainty to both consumers and the industry on the vital Electric Vehicle Project and will help increase EV sales over the next two years.

“The zero per cent Benefit-In-Kind (BIK) has proved a real success in encouraging EV sales, and while its extension is positive, the tapering of this relief is too early, and should not commence until after 2025.”

AA Ireland has also had its say on Budget 2022, saying it hits “lower-income motorists” hardest, which may force them to stay in older, higher-emission vehicles for longer.

“We were aware that there would be increased taxation in this Budget and it does appear that there are steps in the right direction in terms of keeping EV grants in place, but there is a worry that this is being paid by lower-income motorists being forced to stay in older cars,” said AA Ireland head of communications, Paddy Comyn.

“Increases in the price of petrol and diesel were expected – but this is on the back of what is a 25 per cent increase in prices of petrol and diesel over the past 12 months.

“Irish motorists are already paying around 60 per cent in tax at the pumps for their fuel. For some motorists, moving into an EV is as yet too far a stretch, and they have no choice but to now pay more to get around, as the public transport network remains imperfect, especially outside of the capital.”

With regards public transport, Mr McGrath said over €1.4 billion will be provided for further develop Ireland’s public transport networks. This will include funding to progress major investments such as BusConnects, MetroLink and the DART+ programme.

“In order to promote modal shift in the transport sector, I am providing €25 million for the introduction of a Youth Travel Card,” he said. “This card will be available to any person between the ages of 19 and 23 and will allow them to avail of a 50 per cent discount on fares across the transport network.”

Funding of €360 million will be forthcoming for active travel and greenways, while a €60 million allocation for aviation provides for a number of capital and operational grant schemes, Minster McGrath added.

The AA welcomed the promised investment in public transport with investment in areas such as BusConnects, MetroLink and the Dart+ Programme but asserts that there shouldn’t have been further increases in petrol and diesel prices until these alternatives were in place.

“It is crazy to assume that any motorist would prefer to sit in traffic daily, but many of them quite simply do not have an alternative option to their car yet,” Mr Comyn added.

Elsewhere, Mr Donohoe announced 800 Gardaí will be recruited in 2022, while the national minimum wage is to be increased by 30c to €10.50.