MOTORISTS LOSS WILL AFFECT ALL HOUSEHOLDS AND BUSINESSES
The loss of disposable income from increased motor taxes will affect almost all households and businesses according to the AA. This is because it is a rise in a basic cost of living taxed as if it were a luxury.
The increase in Carbon Tax means that petrol and diesel become 1.4c and 1.6c cent respectively more expensive from midnight tonight. Prices for both will also increase by a further 2.44cent from January 1st 2012 equating to roughly a 4c increase overall when the new 23% VAT rate is introduced. That alone will add €6 per month in fuel costs for a modest family car and much more for many people. The impact will be greatest in rural Ireland where mileages are higher and alternatives fewer. It also comes on top of a year of rising prices that has seen petrol and especially diesel become much more expensive month on month.
“Fuel is a basic price component in almost every good and service in the Irish economy.” Says Faughnan. “This adds to business costs and cuts disposable income. Families will be unable to spend that money elsewhere in the economy.”
“This is basically a continuation of what the last government did. They hit fuel three times for a total of 17 cent per litre, now this latest budget adds another four cents on top. Fuel sales are down by more than 6% this year. The result is likely to be the same – reduced fuel sales, reduced commercial activity and less money in circulation.
“It is also a tactical mistake. We used to be much cheaper than Northern Ireland and our exchequer was boosted with cross-border sales. The UK was traditionally much more expensive than us but they have deferred their duty increases while we pile ours on to the point where we have lost that advantage. In all this fuel increase could wind up costing the government money.”
The annual rate of car tax is to increase. The lower emission cars in band A and band B will face the highest increases of €56 and €69 respectively. In part this is because 70% of new car sales are now in band A and band B reflecting both consumer choice and improvements in car design. Essentially all new cars are now so efficient that all would have been classified as ‘ultra low emission’ even five years ago.
“This is going to feel like the worst sort of bad faith for drivers who bought new cars in the last 3 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.”
Note to Editors:
1. Carbon Tax:
Carbon Tax is just another name for just another excise duty (it has nothing to do with Carbon). The only difference is that it is calculated by the tonne. It is currently €15 per tonne and it is going to €20, ie a 33% increase.
As of now, carbon tax adds 4.2 c for petrol and 4.9 cent for diesel. The increase moves that to 5.586 cent and 6.517 cent respectively.
The Vat increase will add 2.4 cent per litre to petrol and diesel (the exact same for both because coincidentally they are at the same price right now).
Current fuel prices*:
Petrol 147.9 cent per litre
Diesel 147.9 cent per litre
Vat increase: 2.44 cent for petrol, 2.44 cent for diesel
Carbon increase: 1.386 petrol, 1.617 diesel
Total increase: 3.826 cent petrol, 4.057 for diesel.
*Coincidentally, petrol and diesel are at approximately the same price nationally at the moment. 147.9 per litre is estimated; the AA publishes an index of fuel prices monthly.
Prebudget breakdown of taxes per litre of petrol & diesel:
Petrol : Pump price €1.479 (estimated pre AA survey)
Excise including carbon 57.662c
Total taxes: 85.362c
Pre-tax price 64.678c
Tax as % 57.7%
Diesel Pump price €1.479 (estimated pre AA survey)
Excise including carbon 46.570c
Total taxes 74.27c
Pre tax price 73.63c
Tax as % 49.8%
AA Blog on budget from last week (Monday 28/11): www.theaa.ie/blog/budget-hits-on-the-way
The AA’s monthly index of fuel prices is available here: http://www.theaa.ie/AA/Motoring-advice/Petrol-Prices.aspx