New Vehicle Carbon Tax Introduced

The Government has introduced a carbon purchase tax on high polluting vehicles, with a tax credit for the more virtuous who buy a car with low CO2 emissions. Those vehicles that emit more than 160g CO2/km will be penalised, whilst those emitting less than 130 CO2/km will receive a tax credit. Vehicles with an emission level between these two ranges with be excluded from either penalties or credits. Nearly half the new vehicles on the market are within this range. Although the Government has yet to announce full details of how the system of penalties and tax credits will apply, it seems the penalty will be imposed at the time the vehicle is registered, whilst the tax credit will be given in the form of a price reduction at the time of purchase. Lower polluting vehicles with emissions under 130 CO2/km will get a reduction in the price of the car of between €200 and €1000, depending on the level of emissions. Vehicles in this category account for around 30% of all new vehicles on the market. The maxium reduction will only be available to vehicles emitting less than 100g CO2/km; €700 will be available to those emitting between 101-120g CO2/km; €200 for those between 121 and 130g CO2/km. By way of example, a Citroen C1 or Renault Clio would earn a €700 credit, whilst a Citroen C4 or VW Polo, €200. Anyone buying a Citroen Xsara, Peugeot 307, or Ford Focus would get nothing. Owners buying a new car emitting less than 130 CO2/km will also be entitled to a tax credit of €300 if they simultaneously scrap a vehicle over 15 years old. This is in addition to any commercial payment that may be made by the vehicle manufacturer. A tax penalty will be imposed on those emitting more than 160C02/km, from €200 to up to €2600 for the highest polluters. The penalty will apply to around 25% of sales, including the Peugeot 607 and Opel Zafira (€200), the Megane II Estate, Golf 1.6 and BMW 3 Series (€750), the Nissan X Trail and Citroen C6 and 407(€1600), and the Citroen C6 and VW Touareg (€2600). Motor bikes are not included in this new bonus-malus system, as it has been called. Whilst the Government acknowledges that the impact of these proposals will be limited, they are proposing that the emissions limits be tightened every two years, with a view to encouraging car makers to produce more eco-friendly vehicles. Nevertheless, there is widespread feeling that the measures are a step back from proposals agreed at the recent Grennelle d’environment, when it was anticipated that the carbon purchase tax would be one that was imposed recurrently each year on ownership of the vehicle. Many also consider that the sums involved are simply not going to be significant enough to change buying habits. There is the equal risk that it will increase the number of diesels cars on the road, which, although low emitters of CO2, have an adverse impact on the air quality of the environment. Overall, the Government are claiming that the proposals are tax neutral, so that the tax credits will be paid from the penalties on higher polluting cars. If you are able to buy a car with a carbon emission of less than 60g/km, then you hit the jackpot, with a tax credit of €5000.