A Taxing Question
03/10/07 23:18 Filed in: General
Nonsense
The Irish Times
Motoring supplement reported today that car dealers are up in arms
over reforms to the motor tax system in Ireland.
The government wants to move to an emissions-based
system, but have yet to publish details of how the
system will work. With the new-year car buying
season fast approaching, the motor industry is
fearful that it will be caught out by the new
systems.
If there was to be a case study done on how to collect tax as inefficiently as possible, then the Irish motor tax system would surely be a candidate for examination. At present it works like this. You pay tax based on the size of the engine in your car. The bigger the engine, the more tax you pay. You pay the tax to your local authority, who issue you with a tax disc to display on the windscreen of your car. The Gardai regularly check cars for tax compliance, and if your tax disc is out of date, you will be issued with an on the spot fine. If you fail to pay that fine, you will receive a court summons and your car could be impounded.
What a cumbersome, counter-intuitive, stupid-headed system! The end result is that those who use their cars infrequently are effectively subsidising those who use theirs a lot. Take a car-owner who has a 1.8 litre vehicle and travels 35,000 km per year. The road tax on that vehicle is €484, so that driver pays 1.38 cents per kilometre travelled in road tax. Another motorist has a 1.4 litre car and travels 15,000 km per year. Road tax on that vehicle is €292, and at that mileage the tax paid per km travelled is 1.95 cents. Hardly fair is it.
This is before we even get to the cost of administering the system, with all the local authority staff to be paid, printing, postage, etc. as well as the cost of enforcing compliance. A tax 'n' insurance checkpoint is normally staffed by several Gardai, paid for by you and me. And even with this level of enforcement, it's still possible to get away without paying road tax, if you're lucky enough not to get caught.
Wouldn't it be easier if motor tax was added to the cost of fuel? Then the motorists that were doing high mileage would be paying more (particularly if they were driving fuel-inefficient cars), and those that did less mileage (or had more fuel-efficient cars) would pay less. The tax would have to be a fixed sum per litre (somewhere around 20-25c), and not subject to VAT or have a retailer's margin applied to it, as is the case with excise duty. This could easily be collected electronically from all fuel retailers, and there would be no defaulters, and thus no need for an enforcement regime.
Going back to our two examples above. Let's say the 1.8 litre car returns an economy figure of 7.5l/100km. 35,000km is 350 chunks of 100km, so the total volume of fuel used would be 2,625 litres. Assume a road tax levy of 20c per litre, and this would realise a tax take of €525, or 1.5c per kilometre. The 1.4 litre might have an economy figure of 6.5l/100km. 150 chunks of 100km would give a total fuel consumption of 975 litres, which would bring in just €195, or 1.3c per km.
Surely this would be a more equitable way of administering road tax?
If there was to be a case study done on how to collect tax as inefficiently as possible, then the Irish motor tax system would surely be a candidate for examination. At present it works like this. You pay tax based on the size of the engine in your car. The bigger the engine, the more tax you pay. You pay the tax to your local authority, who issue you with a tax disc to display on the windscreen of your car. The Gardai regularly check cars for tax compliance, and if your tax disc is out of date, you will be issued with an on the spot fine. If you fail to pay that fine, you will receive a court summons and your car could be impounded.
What a cumbersome, counter-intuitive, stupid-headed system! The end result is that those who use their cars infrequently are effectively subsidising those who use theirs a lot. Take a car-owner who has a 1.8 litre vehicle and travels 35,000 km per year. The road tax on that vehicle is €484, so that driver pays 1.38 cents per kilometre travelled in road tax. Another motorist has a 1.4 litre car and travels 15,000 km per year. Road tax on that vehicle is €292, and at that mileage the tax paid per km travelled is 1.95 cents. Hardly fair is it.
This is before we even get to the cost of administering the system, with all the local authority staff to be paid, printing, postage, etc. as well as the cost of enforcing compliance. A tax 'n' insurance checkpoint is normally staffed by several Gardai, paid for by you and me. And even with this level of enforcement, it's still possible to get away without paying road tax, if you're lucky enough not to get caught.
Wouldn't it be easier if motor tax was added to the cost of fuel? Then the motorists that were doing high mileage would be paying more (particularly if they were driving fuel-inefficient cars), and those that did less mileage (or had more fuel-efficient cars) would pay less. The tax would have to be a fixed sum per litre (somewhere around 20-25c), and not subject to VAT or have a retailer's margin applied to it, as is the case with excise duty. This could easily be collected electronically from all fuel retailers, and there would be no defaulters, and thus no need for an enforcement regime.
Going back to our two examples above. Let's say the 1.8 litre car returns an economy figure of 7.5l/100km. 35,000km is 350 chunks of 100km, so the total volume of fuel used would be 2,625 litres. Assume a road tax levy of 20c per litre, and this would realise a tax take of €525, or 1.5c per kilometre. The 1.4 litre might have an economy figure of 6.5l/100km. 150 chunks of 100km would give a total fuel consumption of 975 litres, which would bring in just €195, or 1.3c per km.
Surely this would be a more equitable way of administering road tax?