Budget 2012: Fuel tax increases 'will affect almost all households and businesses'

AA Roadwatch warns that fuel tax increases are going to take a toll on both business and families, particularly in rural areas.

AA ROADWATCH has criticised tax increases on fuel, saying they will cut disposable incomes for families around the country and add to business costs.

Petrol and diesel prices are set to price by €0.014 cent and €0.016 cent a litre respectively from midnight after the government announced changes to carbon tax today. Meanwhile, the 2 per cent VAT increase will kick in from 1 January 2012, meaning about a €0.04 increase a litre on motor fuel prices overall.

In his Budget address this afternoon, Minister for Finance Michael Noonan proposed to increase the carbon tax on fossil fuels from the equivalent of €15 per tonne to €20 per tonne.

The tax will not apply solid fuels such as peat or coal, and the increase will not be applied to fuels other than petrol and diesel until May 2012 in view of the costs of home heating over the winter months.

The tax increase means a €6 addition to fuel costs each month for a modest family car, according to AA Roadwatch, while it will be a much higher increase for most drivers, particularly those living in rural areas.

AA chief Conor Faughnan said the government were following in the footsteps of the previous administration in increasing fuel costs, adding that families who spend extra money on fuel “will not be able to spend that money elsewhere in the economy”.

“Fuel sales are down by more than 6 per cent this year. The result [of this increase] is likely to be the same – reduced fuel sales, reduced commercial activity and less money in circulation,” Faughnan said.

Faughnan also criticised car tax increases, saying: “This is going to feel like the worst sort of bad faith for drivers who bought new cars in the last three years and made the choice to buy clean and green.” Says Faughnan. “It will affect new car sales and it will also make people less inclined to believe future promises in this area.”

Minister for the Environment Phil Hogan outlined an average motor tax increase of 7.5 per cent as part of the government’s efforts to “incentivise people to drive low-emission cars that make less impact on our environment”. The increase breaks down across the bands A, B and C as follows:

Band A (up to 120g CO2 per km) increases from €104 to €160, Band B (more than 120g to140g CO2 per km) goes from €156 to €225 and Band C (more than 140g to 155g CO2 per km) from €302 to €330.

The government took in €1.024bn in motor taxes last year and is forecasting the generation of €998m in motor tax receipts for 2011.

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