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Image: Mark Stedman/Photocall Ireland

Cheaper cars may be on the way to Ireland after ECJ ruling

The European Commission has formally told Ireland to change its motor tax rules for vehicles which are less than 3 months old.
Jan 27th 2012, 12:07 PM 8,512 8

IRISH MOTORISTS buying new cars are likely to see their tax bills fall at some point this year, after the European Commission formally told Ireland to change its vehicle registration tax laws.

The Commission yesterday said it had lodged a formal request with Ireland to change its laws and allow for the fact that new cars begin to lose some of their value as soon as they are purchased and brought into use.

That ruling, made in case law by the European Court of Justice, means that the amount of tax payable on a vehicle can’t be higher than the tax due on similar vehicles which are already registered in that country.

Under current Irish law, however, cars which are less than three months old – or which have less than 3,000 kilometres on their odometer – bear the same tax burden as ‘new’ vehicles.

The European Commission said this meant motorists buying cars younger than three months old were being discriminated against, as they were paying proportionately more for their motor tax then drivers of similar but older cars.

Rules contained in EU treaties prohibit member states from imposing higher taxes on products imported from the EU than are charged on domestic products.

In taxes which are only levied once – such as Ireland’s vehicle registration tax – the court said part of this tax remained “incorporated in the value of second-hand vehicles already registered on the national market”.

Because the ‘value’ of this tax falls in line with the value of the car, EU rules are breached if the tax on an imported second-hand car is higher than the ‘residual’ tax paid on similar second-hand cars which have already been registered in that country.

The ruling may provide another financial headache for the Irish government, however: last year the Irish state earned around €375 million in vehicle registration tax.

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Gavan Reilly

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