Motorists are facing a whole new set of road charges to make up for the loss of revenue from taxes on petrol and diesel, as the gradual shift towards electric vehicles takes place.
However, the Government is being warned it could create another Irish Water-style disaster if it fails to handle the introduction of any new charging regime properly.
Among the options under consideration is distance pricing that would charge by the kilometre driven, as well as congestion charges for the busiest routes, each using number plate recognition technology or in-car units to track and record motorists as they drive.
Department of Finance officials are working on the plan as a medium-term objective, meaning that significant changes could begin to be rolled out in the next two to three years.
The plan is being devised amid Government fears over the gap in state finances if the more than €4bn paid by the motoring public in an average year through excise duties, carbon taxes, vehicle registration tax and motor tax on their petrol and diesel vehicles and fuels vanishes under a switch to electric.
Ireland has little choice but to embrace electric as the country struggles to contain carbon emissions with massive fines looming from Europe from 2020 on for failure to meet our climate change commitments.
Emissions from transport grew 3.7% last year and the Government is offering grants, minimal motor tax rates, VRT reliefs and free battery charging at public charge points to encourage motorists to adopt electric with a view to eradicating petrol and diesel from new cars entirely within 12 years.
However, while Climate Change Minister Denis Naughten is tasked with pushing electric, Finance Minister Paschal Donohue is determined to protect revenues, so many of the incentives to go electric could be short-lived.
“The Department of Finance is well aware of the threat to exchequer receipts posed by the potential large-scale adoption of electric vehicles as the vehicle of choice for private motorists,” Mr Donohue’s department said.
“Obviously, the reduction in excise receipts will impact negatively on exchequer receipts in the absence of complementary measures to address the reduction in this revenue stream.
“It is envisaged that a number of options will be adopted to replace excise duty as electric vehicles become the car of choice.
“Vehicle registration tax and annual motor tax could be increased to offset some of the loss. Further to this, the potential development of a system of road users charges and congestion charges will be among the options considered.”
Professor of economics at Trinity College Dublin, John Fitzgerald, who also chairs the climate change advisory council, warned that the Government needed to be upfront about its plans if the public is to support them.
“They need to signal well in advance what they intend to do because if people buy an electric car because there’s no tax on it and they can have free electricity, and then the State comes along and says we need the revenue so we’re putting duties on electric cars now and introducing congestion charges, people will be cranky as hell. You would be into a new water charges debacle,” he said.
“You need to tell people in advance how you’re going to transition from a regime of incentives to a regime where you pay taxes and charges.”
David McCabe of the Irish Electric Vehicle Owners Association said significant revenue loss to the State was probably at least five years away because the rate of switching to electric cars was slow. He said that was due to difficulties accessing public charging points and lack of clarity over who will own the charging network, what prices will apply when free charging ends, and what other taxes and charges may be imposed.
“There is a need to build confidence in electric and confidence is built by giving people a degree of certainty. That’s not there at the moment,” he said.
© Irish Examiner Ltd. All rights reserved