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An Oifig Buiséid Pharlaiminteach
Parliamentary Budget Office
An Overview of Electric Vehicles and
Their Impact on The Tax Base
Publication 36 of 2021
Séanadh Is í an Oifig Buiséid Pharlaiminteach (OBP) a d’ullmhaigh an doiciméad seo mar áis do Chomhaltaí Thithe an Oireachtais ina gcuid dualgas parlaiminteach. Ní bheartaítear é a bheith uileghabhálach ná críochnúil. Féadfaidh an OBP aon fhaisnéis atá ann a bhaint as nó a leasú aon tráth gan fógra roimh ré. Níl an OBP freagrach as aon tagairtí d’aon fhaisnéis atá á cothabháil ag tríú páirtithe nó naisc chuig aon fhaisnéis den sórt sin ná as ábhar aon fhaisnéise den sórt sin. Tá baill foirne an OBP ar fáil chun ábhar na bpáipéar seo a phlé le Comhaltaí agus lena gcuid foirne ach ní féidir leo dul i mbun plé leis an mórphobal nó le heagraíochtaí seachtracha. Disclaimer This document has been prepared by the Parliamentary Budget Office (PBO) for use by the Members of the Houses of the Oireachtas to aid them in their parliamentary duties. It is not intended to be either comprehensive or definitive. The PBO may remove, vary or amend any information contained therein at any time without prior notice. The PBO accepts no responsibility for any references or links to or the content of any information maintained by third parties. Staff of the PBO are available to discuss the contents of these papers with Members and their staff, but cannot enter into discussions with members of the general public or external organisations.
An Overview of Electric Vehicles and Their Impact on The Tax Base
Contents
1
Key Messages 2
Different Types of Electric Vehicles and Glossary of Terms 5
Introduction 6
Current Greenhouse Gas Emissions and Targets 7
Electric Vehicles 9
Exchequer Revenue Streams Vulnerable to ‘Electrification’ of the National Fleet 18
Assessment of Exchequer Impact from ‘Electrification’ of the National Fleet 30
An Overview of Electric Vehicles and Their Impact on The Tax Base
Conclusion 33
Appendix 34
An Overview of Electric Vehicles and Their Impact on The Tax Base
Key Messages
2
Transport accounts for approximately one-fifth or 20%1 of Ireland’s greenhouse gases. Road transport
is responsible for 96% of those greenhouse gas emissions2.
The Climate Action Plan 2021 outlines a national target of almost one million passenger electric vehicles (EVs)
on Irish roads by 2030. This target will be achieved through a combination of battery electric vehicles (BEVs)
and plug-in hybrid electric vehicles (PHEVs).
Previous electric vehicle targets have been missed. The target set in 2008 of having 230,000 electric vehicles
(equivalent to 10% of the national fleet) on Irish roads by 2020 was missed.3 At the end of 2020 there were
13,694 Battery Electric Vehicles and 12,490 Plug-in Hybrid Electric Vehicles on Irish roads4, a total of 26,184.
The Programme for Government commits to legislating to ban the registration of new fossil-fuelled cars and
light vehicles from 2030 onwards and to phase out diesel and petrol cars from Irish cities from 2030 onwards.
This means that even if the target for almost one million electric vehicles is not achieved by 2030 that there could
An Overview of Electric Vehicles and Their Impact on The Tax Base
be a significant increase in electric vehicles in the years post-2030.
Achieving the national target of almost one million electric vehicles will depend largely on the price
differential between internal combustion engine cars and electric vehicles falling and a significant change in
consumer behaviour.
A significant increase in electric vehicles on Irish roads will have a negative impact on several revenue sources for
the Irish Exchequer and represents a substantial risk to the stability and sustainability of the public finances.
The Irish Exchequer receives circa €4.5-€5 billion annually in tax receipts from motor, fuel, and carbon taxes
(prior to the pandemic). Full ‘electrification’ of the national fleet of vehicles will put a signification proportion
of these revenue streams at risk unless there are changes to the structures of these taxes. To put these figures
into context, these revenues are equivalent to approximately half of the entire estimated Education budget
(€9.3 billion5) for 2022.
The Motor Tax raises almost €1 billion for the Irish State annually. Between 2012 and 2017 the Irish
Exchequer received over €1 billion in receipts from the Motor Tax6, and received €981 million, €964 million,
and €940 million in 2018, 2019 and 2020 respectively.
1 Excluding international aviation.
2 Government of Ireland (2021), Climate Action Plan 2021: Securing Our Future.
3 Parliamentary Budget Office (2019), An Analysis of the Sustainability of Vehicle Registration and Motor Tax.
4 Department of Transport (2021), Irish Bulletin of Vehicle and Driver Statistics 2020.
5 Parliamentary Budget Office (2021), Preliminary PBO Review of Budget 2022.
6 Department of Transport (2019), Gross Motor Tax Receipts 2012-2016.
An Overview of Electric Vehicles and Their Impact on The Tax Base
Vehicle Registration Tax (VRT) is another revenue stream that the Irish Exchequer relies on for tax receipts.
Revenues raised from VRT are vulnerable to an increase in low emitting vehicles. VRT raised €841 million
in 2017, €885 million in 2018 and €942 million in 20197. Receipts from VRT fell to €751 million in 2020 due
to the Covid-19 pandemic, highlighting the volatility of this revenue source. Greater adoption of electric
vehicles poses a substantial risk to these revenues.
3
The Irish Exchequer collects circa €2 billion in tax receipts from fuel excises every year. Excise duties on fuel
have contributed more than €2 billion in tax revenues every year from 2005 to 2019, predominantly from auto
diesel and petrol consumption8.
Tax revenues from excise duties on auto diesel make up a significant proportion of the circa €2 billion
collected annually from fuel excises. In 2020, tax receipts from auto diesel made up 74% of the €1.8 billion
collected from excise on fuels. In 2019, of the €2,164 million collected from excise duties on fuel, auto diesel
contributed 72% while in 2018, 70% of the €2,163 million raised in tax receipts from fuel excises were from
auto diesel9.
The annual amount collected from excise duties on auto diesel have effectively doubled since 2003 reflecting
an increase in the popularity of diesel cars over petrol. The Irish Exchequer collected €1,390 million from excise
on auto diesel in 2020, compared to €731 million collected in 2003. Receipts from excise duties on auto diesel
An Overview of Electric Vehicles and Their Impact on The Tax Base
have increased from a little over €1 billion per annum from 2006-2012 to just over €1.5 billion in 2019 and 2018.
Receipts from excise duties on auto diesel contributed €1,550 million to the Exchequer in 2019 and
€1,520 million in 201810.
Excise Duty on auto diesel now raises circa €1.5 billion for the Irish Exchequer annually.
Excise duties collected from ‘light oils’ such as petroleum have been decreasing over time. There was a policy
change in 2008 whereby the tax rates for cars registered after 1st July 2008 were changed to be based on carbon
emissions rather than the size of the engine. This encouraged consumers to switch to cars that used diesel rather
than petrol. In 2012, the State collected €904 million in tax receipts from Excise Duty on ‘light oils’ but this had
fallen to €800 million in 2014, €721 million in 2016, €598 million in 2018 and €568 million in 201911.
The change in composition of fuel excises over time (with tax receipts from diesel rising and petrol tax
receipts falling) indicates that policy changes can have a profound impact on the tax base. Tax changes made
to incentivise behavioural changes in consumption of diesel over petrol have eroded part of the tax base.
Incentives to support further adoption of electric vehicles may also erode tax revenues over the long-term.
In 2012, of the €2 billion collected from fuel excises ‘light oils’ such as petrol made up 45% of this revenue while
‘heavy oils’ (including diesel) made up 55% of this revenue. By 2020 (when fuel excises raised €1.8 billion for
the Irish Exchequer), tax from light oils only made up 23% of this revenue while heavy oils constituted 77% of
those tax receipts12.
7 The Revenue Commissioners, Excise Receipts by Commodity.
8 Ibid.
9 Ibid.
10 Ibid.
11 Ibid.
12 Parliamentary Budget Office (2019), An Analysis of the Sustainability of Vehicle Registration and Motor Tax.
An Overview of Electric Vehicles and Their Impact on The Tax Base
In 2020, the Irish Exchequer collected €494 million from the Carbon Tax. A little over half of this revenue
(€259 million or 52.4%), came from carbon taxes on petrol and diesel. This includes receipts from auto diesel
of €213 million, while carbon taxes on petrol raised €46 million. In 2019, carbon taxes on auto diesel contributed
€193 million to Irish Exchequer while carbon taxes on petrol raised €48 million13. Electrification of the vehicle
stock in Ireland poses a risk to these revenues14.
4
In addition to fuel excises and carbon taxes, diesel and petrol are also subject to Value-Added Tax (VAT).
Prior to the pandemic, VAT from auto diesel and petrol contributed over half a billion euros in annual tax
receipts to the Irish Exchequer. VAT from auto diesel and petrol raised €549 million in 2017, €563 million
in 2018 and €576 million in 201915. This fell to €386 million in 2020.
If by 2050 full electrification of the national vehicle fleet is achieved as part of efforts for Ireland to be
‘net zero’ on emissions, the Irish Exchequer will incur significant revenue losses. The Parliamentary
Budget Office estimates that circa 8% of total Exchequer revenues are vulnerable to full electrification
of the national fleet.
An Overview of Electric Vehicles and Their Impact on The Tax Base
13 The Revenue Commissioners, Excise Receipts by Commodity.
14 Parliamentary Budget Office (2019), An Analysis of the Sustainability of Vehicle Registration and Motor Tax.
15 Provisional data provided to the Parliamentary Budget Office for the Revenue Commissioners. Please see Table 11 for explanatory note on this data.
An Overview of Electric Vehicles and Their Impact on The Tax Base
Different Types of Electric Vehicles
and Glossary of Terms
5
EV – An electric vehicle. An electric vehicle can be a battery electric vehicle or a hybrid. In this paper the terms ‘EV’
and ‘electric vehicle’ will be used interchangeably and will refer to both battery electric vehicles (BEVs) and plug-in
hybrid electric vehicles (PHEVs). The term ‘EV’ or ‘electric vehicle’ in this paper will not include non-plug hybrids
unless otherwise stated.
BEV – A battery electric vehicle or ‘BEV’ is a vehicle that uses a battery as the sole means of energy storage
for the propulsion of the vehicle. A BEV does not have a fossil fuel engine or generator. It is driven by purely
an electric motor with battery energy storage.
HEV – A hybrid Electric vehicle or ‘HEVs’ use a combination of electric power and petrol or diesel to propel the vehicle.
They can be ‘plug-in’ or ‘non plug-in.’
An Overview of Electric Vehicles and Their Impact on The Tax Base
HEVs are vehicles that have both an internal combustion engine (ICE) and an electric motor. The electric battery
however is only charged by the internal combustion engine, the motion of the wheels or a combination of both.
There is no charging connector.
PHEV – A plug-in hybrid electric vehicle or ‘PHEV’ is like the hybrid electric vehicle in that plug-in electric hybrid vehicles
use both an internal combustion engine and electric motor. You can charge PHEVs from an electricity source, and access
cheaper and cleaner electric power. The battery’s energy is recharged by the internal combustion engine, wheel motion,
or by plugging into a charge point.
REEV – A range extender electric vehicle or ‘REEV’ is an additional type of plug-in electric hybrid vehicle. A REEV has
a small petrol-powered generator to recharge the battery and allow extended range when the battery is low. This is a
more efficient way of propelling the vehicle rather than using the same fuel in a traditional engine.
FCEV – A fuel cell electric vehicle or a ‘FCEV’ is an electric vehicle that uses a fuel cell, in combination with a battery
or supercapacitor.
SEAI – ‘SEAI’ refers to the Sustainable Energy Authority of Ireland.
LEVTI – ‘LEVTI’ refers to the Low Emissions Vehicle Toll Incentive.
MGO – Marked oil gas or ‘MGO’ is a type of diesel which is commonly referred to as ‘green diesel.’
VAT – Value Added Tax.
VRT – Vehicle Registration Tax.
An Overview of Electric Vehicles and Their Impact on The Tax Base
Introduction
6
The primary objective of this paper is to provide an impact assessment of Irish Exchequer revenues in the context
of policy objectives to achieve electrification of the Irish transport sector, most notably, the ambitious goals of having
almost one million electric private passenger vehicles on Irish roads by 2030 and full decarbonisation of the Irish
economy by 2050. The Irish Exchequer relies on the purchase and usage of ICE vehicles (vehicles with an internal
combustion engine) for tax receipts, including motor tax, vehicle registration tax, and excise duties on fuel
consumption such as petrol and diesel, carbon tax and VAT. The tax projections are based on no policy changes.
This paper is laid out as follows: The Introduction provides an historical overview of Irish emissions and targets
(pages 7 to 8); the Electric Vehicles section provides an overview of both the personal and business incentives,
factors that influence adoption of electric vehicles, and the level of take-up to date (pages 9 to 17); while the next
section provides an overview of the revenue streams which would be affected by an increase in electric vehicles
(pages 18 to 32). The document ends with the Conclusion (page 33) and the Appendix (pages 34-38).
An Overview of Electric Vehicles and Their Impact on The Tax BaseAn Overview of Electric Vehicles and Their Impact on The Tax Base
Current Greenhouse Gas Emissions and Targets
7
Climate change represents a threat to every country and a challenge for policymakers globally to mitigate this risk.
For this reason, Ireland was one of 196 Parties to sign up to the Paris Agreement, a legally binding international treaty
on climate change. It was adopted by the parties at COP21 (COP stands for ‘Conference of the Parties’), a climate summit
and the 21st meeting of the Parties in Paris on the 12th December 2015 and entered into force on the 4th November 201616.
The goal of the Paris Agreement is to limit global warming to well below 2 degrees Celsius, but preferably to 1.5 degrees
Celsius, compared to pre-industrial levels, this century. To achieve this long-term temperature goal, countries are aiming
to achieve a climate neutral world by mid-century.
In response to this, Ireland has committed to a 51% reduction in greenhouse gases from 2021 to 2030 (equivalent to
an average annual reduction of 7% and based on 2005 level emissions) and to achieve full carbon neutrality by 205017.
The 51% target applies to emissions attributable to industrial, agricultural, energy, land use and other greenhouse
emitting activities but will not apply to international aviation and shipping18.
An Overview of Electric Vehicles and Their Impact on The Tax Base
This goal of achieving the 2030 targets and net zero emissions by 2050 will require a green transition in transportation
and an increase in the use of electric vehicles. Transportation falls under the energy category and the Climate Change
Advisory Council’s first Carbon Budget outlines the “need to maximise the electrification of cars and vans with an
associated requirement for expansion of charging infrastructure.”
Ireland’s national greenhouse gas (GHG) emissions from the transportation sector has increased substantially
since the early 1990’s. In 1990, the transportation sector was responsible for 9.5% of national emissions, but by 2018
transport accounted for 20.1% of Ireland’s GHG emissions, equivalent to circa 12.24 million tonnes of carbon dioxide
(CO2)19. This increased further in 2019 when transportation was responsible for 20.35% of Ireland’s national GHG
emissions in that year.
At present, transport accounts for approximately 20% of Ireland’s GHG emissions20. Road transport is responsible
for 96% of those emissions21 highlighting the importance of achieving Electric Vehicle (EV) targets if Ireland is to play
its part in reducing emissions and meeting the targets set out by the Paris Agreement.
In addition, the transport sector is one of the largest contributors to nitrogen oxide (NOx) emissions. There are
significant human health impacts arising from NOx emissions which include cardiovascular disease, lung disease
and heart attacks22.
16 United Nations, The Paris Agreement.
17 Irish Government (2020), Programme for Government: Our Shared Future.
18 Climate Change Advisory Council (October 2021) Carbon Budget Technical Report.
19 CSO, Environmental Indicators Ireland 2020.
20 Government of Ireland (2021), Climate Action Plan 2021: Securing Our Future.
21 Ibid.
22 Kevany, L. (2019), Spending Review 2019: Incentives for Personal Electric Purchase, Climate Change Unit, Department of Public Expenditure & Reform.An Overview of Electric Vehicles and Their Impact on The Tax Base
Figure 1: Ireland’s Road Transport Greenhouse Gas Emissions 1990-2020 (million tonnes) *
16
14
12
8
10
8
6
4
2
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: Environmental Protection Agency, Transport Emissions.
* Note: Excludes other forms of transportation such as railways and domestic aviation.
An Overview of Electric Vehicles and Their Impact on The Tax BaseAn Overview of Electric Vehicles and Their Impact on The Tax Base
Electric Vehicles
9
The Climate Action Plan 2021 provides an update on Ireland’s targets for electric vehicles and mentions a “national
target of one million electric vehicles by 2030.” This action plan outlines some new aspirational targets and updates
previously outlined targets such as an increase to 845,000 passenger electric vehicles (compared to 840,000 in Climate
Action Plan 2019), 95,000 low emission vans (with a stronger focus on battery electric vehicles or BEVs) and, for the first
time a target of 3,500 low emission HGVs is outlined. In addition, the plan commits to an additional 500,000 public
transport journeys per day, 1,500 EV buses and expanding electrified rail services.
To achieve these targets, tax reliefs and grants exist to encourage the take up of electric vehicles, particularly battery
electric vehicles (BEVs). Battery electric vehicles which rely solely on battery power by design, produce lower emissions
than both plug-in and non-plug-in hybrid electric vehicles. At present, there are several personal and business incentives
for the purchase of battery electric vehicles (BEVs) and plug-in hybrid vehicles (PHEVs) to encourage both consumers
and businesses to switch to electric vehicles. Personal incentives to purchase electric vehicles include a grant of up to
An Overview of Electric Vehicles and Their Impact on The Tax Base
€5,000 for battery electric vehicles, a home charger grant of up to €600, reductions in road tolls under the ‘Low
Emissions Vehicle Toll Incentive’, VRT relief for battery electric vehicles and lower motor tax for electric vehicles over
higher-emitting and traditional motor vehicles which rely solely on fossil fuels to power their internal combustion engine
(ICE). In addition to these reliefs, there are also several business specific incentives such as the Accelerated Capital
Allowance (ACA) Scheme, the 0% rate of Benefit-In-Kind (subject to caps) and the Electric SPSV Grant Scheme.
Table 1: Incentives for Electric Vehicle Purchase
Measure Description
Electric Vehicle A grant of between €2,000 and a maximum of €5,000 for BEVs; and
Grant from the
Sustainable A grant of between €1,000 and a maximum of €2,500 for PHEVs until the end of 2021 for PHEVs.
Energy Authority
of Ireland (SEAI)
Home Charger A grant of up to €600 to support the purchase and installation of a home charger unit
Grant (SEAI) for owners of new and second-hand EVs.
Accelerated Can be claimed by companies, unincorporated businesses, sole traders, and farmers for electric
Capital Allowance and alternative fuel vehicles until the end of 2024. The Scheme includes gas vehicles and
(ACA) refuelling equipment. In Budget 2022, this scheme was extended to include hydrogen powered
vehicles and refuelling equipment.
Low Emissions Under the LEVTI, BEVs and PHEVs qualify for 50% and 25% toll reductions respectively up to a
Vehicle Toll maximum annual threshold of €500 for private vehicles and €1,000 for goods or commercial
Incentive (LEVTI) vehicles. A higher incentive rate of 75% and 50% applies for BEVs and PHEVs respectively for
off-peak travel on the M5023.
23 eflow, Low Emissions Vehicle Toll Incentive, and Dáil Eireann Debate, 15 September 2020.An Overview of Electric Vehicles and Their Impact on The Tax Base
Measure Description
VRT Relief VRT relief of up to €5,000 for new BEVs until the end of 2023.
VRT relief for hybrids and plug-in hybrids expired on 31st December 2020.
Low Motor Tax Electric vehicles qualify for the lowest available motor tax band.
10
Fuel Excise/ Fuel excises which apply to petrol and diesel via the Mineral Oil Tax do not apply to consumption
Carbon Tax of electricity. Excise duties on fuel combined with the carbon tax component constitute a
significant proportion of petrol and diesel prices at present24.
0% Benefit-In- A 0% rate of benefit-in-kind applies to electric vehicles powered by battery (battery electric
Kind (BIK) vehicles, hybrids do not qualify for this scheme) provided by an employer to an employee until the
end of 2025. Note: This support is being tapered, please see Appendix for additional information.
The Electric SPSV The Electric SPSV Grant Scheme offers grants of up to €25,000 to support the uptake of BEVs in
Grant Scheme the Small Public Service Vehicles (SPSVs) sector (taxis, hackneys, and limousines)25.
Please see appendix for additional information on the incentives for electric vehicles.
An Overview of Electric Vehicles and Their Impact on The Tax Base
Increasing focus on battery electric vehicles
Going forward and in respect of the ambitious goal of almost one million private passenger vehicles on Irish roads by
2030, Government policy favours the take-up of fully electric vehicles over hybrid electric vehicles due to environmental,
climate change and human health reasons. This is because battery electric vehicles have no tail pipe emissions while
plug-in hybrid electric vehicles are estimated to, on average, have CO2 emissions of circa 60g/km26.
The Climate Action Plan 2021 which outlines aspirational or “potential metrics” of 845,000 passenger cars and 95,000
low emission vans to achieve the almost one million electric vehicles indicates a “focus on BEVs” for the passenger car
target and a “stronger focus on BEVs” for low emission vans.
The shift in prioritising fully electric vehicles over both hybrid and plug-in hybrid vehicles is evidenced by recent annual
Budget announcements. Financial supports for plug-in electric hybrid vehicles have either been phased out or are in the
process of being phased. These include:
The Electric Vehicle Grant of up to €2,500 for PHEVs from the SEAI which is ending on the 31st of December 2021;
and
VRT for both hybrids and plug-in hybrids which expired on 31st December 2020.
In addition, and as mentioned above, even for those schemes in which both battery electric and hybrid electric vehicles
are eligible, it is often the case that greater financial incentive is provided to battery electric or fully electric vehicles over
both hybrids and plug-in hybrid vehicles. For example, the Accelerated Capital Allowance Incentive provides financial
support of up to €3,800 for battery electric vehicles but a lesser amount of €2,500 for plug-in hybrid electric vehicles.
The Low Emissions Vehicle Toll Incentive in which electric vehicles are eligible for reductions in toll charges also provides
greater relief to battery electric vehicles over plug-in hybrid electric vehicles.
24 Revenue Commissioners, Mineral Oil Tax.
25 Government of Ireland (2021), Launch of Electric SPSV Grant Scheme 2021.
26 The Sustainable Energy Authority of Ireland.An Overview of Electric Vehicles and Their Impact on The Tax Base
Government schemes and incentives which provide for greater support for fully electric vehicles is important in the
context of the sustainability and resilience of motor, fuel, and carbon taxation as these revenues over the longer-term
will be affected by the future trajectory of the adoption of electric vehicles and the composition of that adoption between
fully electric and hybrid. While it is desirable from the perspective of reducing carbon emissions to encourage greater
take up of fully electric vehicles which have no tail pipe emissions over hybrids which do have emissions, there are
greater revenue losses associated with fully electric vehicles, particularly in the context of revenue raised from fuel 11
excises and carbon taxation. Excise duties from fuels raise circa €2 billion for the Irish Exchequer on an annual basis,
with excise duties from auto diesel contributing most of this revenue.
In essence, the magnitude of the impact on the public finances and revenue losses associated with significant adoption
of electric vehicles will depend largely on the level and composition of up-take of fully electric vehicles and this in turn
will depend on numerous factors including Government policy. In this context, financial incentives and schemes are
important as they can act as incentives for consumers to change their behaviour. That said, despite the ambitious
targets which have been set for the role of the transport sector to play in reducing carbon emissions, historical targets
have been missed and the level of electric vehicle adoption has been behind what would be expected given the level
of taxpayer support provided so far.
An Overview of Electric Vehicles and Their Impact on The Tax Base
Other Policies to support take up of Electric Vehicles
Apart from financial incentives there are other policies that are important for the national target of almost one million
electric vehicles in Ireland by 2030. The Climate Action Plan 2021 contains several actions to be implemented as part
of a suite of measures intended to further encourage adoption of electric vehicles by Irish consumers and achieve
electrification of the national car fleet. This includes establishing an “Office for Low Emitting Vehicles” which will have
responsibility for co-ordinating the implementation of existing and future electric vehicle support measures and
measures relating to the charging infrastructure. There is also a targeted commitment to support greater adoption
of electric vehicles in Gaeltacht communities through investment in electric vehicle charger infrastructure as well as
a commitment to develop and launch a communication and engagement campaign to improve household, business
and public sector understanding of electric vehicles.
The 2021 Climate Action Plan also contains an ambitious goal on greener public procurement to “mandate the purchase
of zero-emission electric vehicles where available and operationally feasible by [the] end [of ] 2022.”
In addition to the incentives for electric vehicles and policies contained in the Climate Action Plan mentioned above; the
Programme for Government commits to legislating to ban the registration of new fossil-fuelled cars and light vehicles
from 2030 onwards and to phase out diesel and petrol cars from Irish cities from 2030 onwards27. This means that even
if the target for almost one million electric vehicles is not achieved by 2030 that there could be a significant increase in
electric vehicles in the years post-2030.
According to a previous analysis by the Climate Change Unit in the Department of Public Expenditure and Reform,
achieving the 2030 electric vehicle targets is estimated to result in the exchequer collecting approximately €1.5 billion
less revenue from motor tax, VAT, and excise between 2019 and 2030 and potentially reaching €500 million in annual
27 Government of Ireland (2020), Programme for Government: Our Shared Future.An Overview of Electric Vehicles and Their Impact on The Tax Base
loses by 203028. That said, there is the potential for the impact of lost revenues to the exchequer to occur more quickly
than anticipated if there is a significant scale-up in electric vehicles on Irish roads should technological progress,
economies of scale in production and consumer demand be more favourable than planned. It should be noted that the
Department of Transport’s Working Group Report states “A significant acceleration of EV sales post-2025, as the market
and technology are further developed, is needed as well as an early quickening of the pace of transition.”
12
In 2020, vehicle types in Ireland were predominantly higher emitting vehicles rather than lower emitting vehicles. Almost
two thirds of vehicle types in Ireland were comprised of diesel engines (64.6%) and almost one third coming from petrol
vehicle types (32%)29. Low emitting vehicles made up a very small proportion of the vehicle types and were comprised of
petrol/electric vehicles (2.16%), electric vehicles (0.48%) and petrol and diesel/plug-in hybrid electric (0.44%). As can
be seen in the table below, at the end of 2020 exclusively diesel and petrol vehicles comprised 96.57% of the total
vehicle stock in Ireland.
Table 2: Number of Vehicles by Fuel Type (31st December 2020)
Vehicle Type Total Number Percentage of Total (%)
Diesel 1,847,904 64.58%
An Overview of Electric Vehicles and Their Impact on The Tax Base
Petrol 915,321 31.99%
Petrol & Electric 61,756 2.16%
Electric (Battery electric) 13,694 0.48%
Petrol & Diesel/Plug-in Hybrid 12,490 0.44%
Petrol & Ethanol 7,882 0.27%
Others 1,937 0.07%
Total 2,860,984 100.00%
Source: DTTAS – Department of Transport, Tourism and Sport (2021), Irish Bulletin of Vehicle and Driver Statistics, 2020.
At present, the number of battery electric vehicles and hybrid electric vehicles in Ireland is quite small and makes up a
tiny proportion of the total vehicle stock in Ireland. At the end of 2020, there were 26,184 electric vehicles on Irish roads
(comprising of 13,694 battery electric vehicles and 12,490 plug-in hybrid electric vehicles) representing less than 1% of the
total stock of vehicles in Ireland. Fully electric vehicles only comprised 0.48% of the total vehicle stock at the end of 2020.
That said, while the number of electric and plug-in hybrid vehicles on Irish roads is quite small relative to the total
private stock of vehicles, the number has increased significantly in recent years. In fact, during the 2015-2019 period and
prior to the Covid-19 global pandemic, the number of battery electric vehicles on Irish roads was growing exponentially
year-on-year growing 45.6% from 2015 to 2016, 59.6% from 2016 to 2017, 65.6% from 2017 to 2018 and 89% from 2018
to 2019. Despite the disruption caused to Irish society and the Irish economy with the start of the pandemic in March
2020, the number of battery electric vehicles on Irish roads increased from 9,120 at year-end 2019 to 13,694 at year-end
2020, an annual increase of 50.15% or 4,574 vehicles.
28 Kevany, L. (2019), Spending Review 2019: Incentives for Personal Electric Purchase, Climate Change Unit, Department of Public Expenditure & Reform.
29 Department of Transport (2020), Irish Bulletin of Vehicle and Driver Statistics 2020.An Overview of Electric Vehicles and Their Impact on The Tax Base
Figure 2: Total Number of Battery Electric Vehicles (BEVs) 2015-2020
14000 0.60%
12000 0.50%
10000 13
0.40%
8000
0.30%
6000
0.20%
4000
2000 0.10%
0 0.00%
2015 2016 2017 2018 2019 2020
Number % of total
Source: DTTAS – Department of Transport, Tourism and Sport (2016-2021), Irish Bulletin of Vehicle and Driver Statistics,
2015-2018, Irish Bulletin of Vehicle and Driver Statistics 2019, and Irish Bulletin of Vehicle and Driver Statistics 2020.
An Overview of Electric Vehicles and Their Impact on The Tax Base
The number of plug-in hybrid electric vehicles on Irish roads has increased from 2,789 at the end of 2018 to 6,427
at the end of 2019, representing year-on-year growth of 230.4%. The number increased to 12,490 at year-end 2020,
an annual increase of 194.3%.
Figure 3: Total Number of EVs (BEVs & PHEVs) 2018-2020
30,000 1.00%
0.90%
25,000
0.80%
0.70%
20,000
0.60%
15,000 0.50%
0.40%
10,000
0.30%
0.20%
5,000
0.10%
0 0.00%
2018 2019 2020
Electric Hybrid % of total
Source: Ibid.An Overview of Electric Vehicles and Their Impact on The Tax Base
As can be seen from the graph above, the total number of battery electric vehicles and plug-in hybrid electric vehicles
in Ireland has increased from 7,614 at the end of 2018, to 15,547 in 2019 and to 26,184 in 2020.
At the end of 2020, battery electric vehicle and plug-in hybrid electric vehicles combined, comprised less than 1% of the
total vehicle stock in Ireland. In essence, the Irish State has a long way to go to achieve the 2030 targets of almost one
14 million electric vehicles.
It should be noted that previous targets for the number of electric vehicles on Irish roads have been missed historically.
In 2008, an ambitious target was set to have 230,000 electric vehicles (or 10% of the national fleet being electric)
by 2020 but this target has been missed and shows the challenge in ramping up the number of electric vehicles30.
That target was missed by about 200,000 vehicles.
The Climate Action Plan of 2021 sets out aspirational targets or “potential metrics” for the continued adoption of
electric vehicles for the year 2025. This includes circa 175,000 electric cars, 20,000 low emission vans and 700 HGVs.
The take-up of fully electric vehicles has been increasing year-on-year, but this level of adoption will need to accelerate
significantly for Ireland to meet the 2030 targets for electric vehicles as set out in the Climate Action Plan.
As noted above, Ireland has historically missed targets for electric vehicles. At end 2020, Ireland only had 13,694 fully
An Overview of Electric Vehicles and Their Impact on The Tax Base
electric vehicles on Irish roads. This figure rises to 26,184 when both battery electric and plug-in hybrid electric vehicles
are considered, but this is well short of the 2025 target of 175,000 electric cars and the 2030 target of 845,000
passenger electric vehicles. Achievement of the ambitious national electric vehicles targets is going to require an
immediate and significant increase in the uptake of electric vehicles in the Irish State.
The number of private cars licenced in Ireland from 2016 to 2019 was, on average, a little over 200,000 annually; with
212,069 licenced in 2016, 219,553 licenced in 2017, 220,613 licenced in 2018 and 222,200 licenced in 201931. For Ireland
to achieve a national target of almost one million electric vehicles on Irish roads by 2030, over 50% of private cars
licenced going forward would need to be electric, on average, each year between now and 2030. Should the proportion
of EV sales fall significantly below this target in the short to medium-term, in the years prior to 2030 every new vehicle
licenced would need to be electric for this target to be met and there would need to be a 2nd hand market for electric
vehicles. For the first half of 2021, battery electric vehicles and plug-in hybrid electric vehicles constituted 13.6% of all
new cars licenced for the first time, compared to 6.0% in the first half of 202032. While this amount more than doubled
year-over-year it is still short of the required amount for the longer-term targets to be met, albeit progress is being made.
Action 79 of the Climate Action Plan 2019 committed to developing a roadmap on the optimum mix of regulatory,
taxation and subsidy policies to drive significant ramp-up in the adoption of both passenger electric vehicles and electric
vans from the early part of the 2020s33. In response to this commitment, the Electric Vehicle Policy Pathway Working
Group was established “to consider the policies available to Government to develop this roadmap and significantly
accelerate electric vehicle sales”34.
30 ESRI (2010), The Impact of Climate Policy on Private Car Ownership in Ireland.
31 Central Statistics Office (CSO), Ireland’s Top Motors.
32 Central Statistics Office (CSO), Vehicles Licenced for the First Time June 2021.
33 The Government of Ireland (2019), Climate Action Plan 2019.
34 Department of Transport (2021), Electric Vehicle Policy Pathway Working Group Report – 2021.An Overview of Electric Vehicles and Their Impact on The Tax Base
This report has called for the establishment of an Office of Low Emissions Vehicles to “co-ordinate the implementation of
existing and future EV measures and infrastructure.” The report has also recommended that this new office develop and
launch an extensive communications campaign. Such policies and efforts will need to be cognisant of factors that will
influence consumer behaviour such as the price of electric vehicles, addressing “range anxiety” to ensure consumers
are confident in the reliability of electric vehicles (particularly for longer journeys), tax considerations, the charging
infrastructure and the willingness of citizens to adjust their own behaviour to meet the challenges posed by climate 15
change and global warming.
Awareness of consumer surveys will better feed into this policy mix, such as a 2019 CSO survey which indicates
consumers are concerned about the environment but are also concerned about the purchase price of vehicles and the
cost to run such vehicles. Greater consumption adoption of electric vehicles will depend largely on price. The CSO’s
National Travel Survey 2019 provides some interesting insights into factors consumer consider when buying a car.
Survey participants were asked the factors that would influence them when considering purchasing a car (please note
that respondents could select more than one option). The most common influencing factor was price (65.7%) which was
double the next most influencing factor which was reliability (35.7%). The next three most common influencing factors
were tax (24.6%), engine efficiency (22.9%), and insurance (also 22.9%).
An Overview of Electric Vehicles and Their Impact on The Tax Base
Figure 4: Influencing factors when considering a vehicle purchase 2019
70%
60%
50%
40%
30%
20%
10%
0%
Fuel
Emissions
Insurance
Other
Size
Resale
Value
Payment
Plan Available
How It
Looks
Purchase
Price
Reliability
Tax
Engine
Efficiency
Highest
Engine Power
Source: CSO, National Travel Survey 2019.
The three most common influencing factors of purchase price, reliability and tax will likely determine consumer
behaviour going forward and ergo, the probability of Ireland achieving one million electric vehicles by 2030.An Overview of Electric Vehicles and Their Impact on The Tax Base
In addition to asking consumers what factors would influence them when thinking about a future vehicle purchase,
the CSO also conducted a survey of people who had already purchased an electric vehicle. Amongst EV owners,
“better affordability to run” was the most common influencing factor at 77.8%, followed by “making more of a
contribution to a better environment” at 71.8%. The third most influencing factor was “improved health from use”
at 41.9% while the fourth most influencing factor people considered when purchasing their electric vehicle was “more
16 availability of overnight charging at low cost”. Interestingly, “toll discounts” was mentioned as an influencing factor
considered by 1.6% of survey respondents, which means the existence and awareness of the Low Emissions Vehicle
Toll Incentive (LEVTI) Scheme positively influenced some citizens to purchase an electric vehicle.
This CSO survey provides great insight into what consumers considered when buying an electric vehicle and allows
for a greater understanding of their concerns which can then be addressed through climate policy. It also allows for
the development of evidence-based policies.
Figure 5: Influencing factors considered when purchasing an Electric Vehicle
90%
80%
An Overview of Electric Vehicles and Their Impact on The Tax Base
70%
60%
50%
40%
30%
20%
10%
0%
Reduced noise
pollution
Better
affordability
to run
Other
Toll discounts
More availability of
overnight charging
at low cost
Improved
health from use
Making more
of a contribution
to a better
environment
Source: CSO, National Travel Survey 2019.
The future trajectory of electric vehicle adoption will depend on several factors, including but not limited to; financial
incentives, the provision of adequate charging infrastructure at national level, Government policies, EU policies and
legislation, the affordability of electric vehicles and increases in the production of electric vehicles by manufacturers.
Greater consumer awareness and familiarity of electric vehicles will also be important and addressing consumer
concerns about ‘range anxiety.’An Overview of Electric Vehicles and Their Impact on The Tax Base
Achieving significant ‘electrification’ of the Irish vehicle fleet however will largely depend on the price differential
between ICE vehicles and electric vehicles falling. The narrowing of this gap can be achieved through higher taxation
on vehicles that rely on an internal combustion engine, continued financial government support such as VRT relief
and technological improvements and economies of scale.
Going forward, Irish Government policy and incentives favours the use of battery electric vehicles over plug-in hybrid 17
vehicles. The Climate Action Plan 2021 targets for 845,000 passenger electric cars has a focus on BEVs as does the
target of 95,000 low emissions vans. In addition, the Electric Vehicle Grant administered by SEAI will cease to support
plug-in hybrid electric vehicles (PHEVs) at the end of 2021 while this financial support will continue for battery electric
vehicles (BEVs).
An Overview of Electric Vehicles and Their Impact on The Tax BaseAn Overview of Electric Vehicles and Their Impact on The Tax Base
Exchequer Revenue Streams Vulnerable
to ‘Electrification’ of the National Fleet
18
The Irish Exchequer will incur significant revenue losses if there is an increase in electric vehicle adoption rates at scale.
Obtaining the national target of almost one million electric vehicles by 2030 and full carbon neutrality by 2050 will
represent a substantial risk to revenues from motor, fuel, and carbon taxes. An analysis by the Climate Change Unit in
the Department of Public Expenditure and Reform in 2019 estimated that achieving the targets set out in the 2019
Climate Action Plan would result in annual revenue losses of €500 million by 2030 due to less revenue from motor
tax, VAT, and fuel excises35.
However, when the additional revenue received from carbon taxes from auto diesel and petrol are considered in
conjunction with recent policy changes in the VRT regime (see below), annual revenue losses may exceed €500 million
by 2030 should the target be met. When assessing the probability and likelihood of the national target being met it
should be noted that this will depend largely on a reduction in the price differential between battery electric vehicles
and regular internal combustion engine vehicles. As noted in the CSO 2019 survey, consumers are sensitive to price
An Overview of Electric Vehicles and Their Impact on The Tax Base
and Government supports for electric vehicles are becoming increasingly expensive and may not be sustainable in
the long-run due to increasing costs.
Previous targets for electric vehicle adoption have also previously been missed, as mentioned above. That said, even if
the target goal by 2030 is not met, revenue losses post 2030 may accelerate should mass ‘electrification’ of the national
vehicle fleet occur. Assuming shortages in semiconductors are resolved, mass production of electric vehicles leads to
economies of scale and falling costs, and European Governments ban the sale of higher emitting vehicles from 2030
onwards (which they have committed to do) increasing affordability and wide-scale adoption of electric vehicles will
pose a substantial and significant risk to the stability of the public finances and various sources of revenue for the Irish
Exchequer. Revenue streams at risk of ‘electrification’ of the national fleet include VRT, Motor Tax, fuel excises (Mineral
Oil Tax), and revenue from both VAT and carbon taxes on auto diesel and petrol.
VRT
Vehicle Registration Tax (VRT) is a once-off tax when vehicles are first registered in the state and is levied as a
percentage of the open market selling price (OMSP) of the vehicle. Since 1st July 2008, VRT has been calculated based on
CO2 emissions, so that cars with higher emissions attract a higher tax liability. VRT for cars fall into Category A, which is
based on the level of CO2 emissions from the car and, since 1st January 2020, the car’s nitrogen oxide (NOx) emissions.
Budget 2022 saw the introduction of a revised VRT table. The 20-band table will remain with a 1% increase for vehicles
that fall between bands 9-12, a 2% increase for vehicles that fall between bands 13-15 and a 4% increase for vehicles
that fall between bands 16-2036.
35 Kevany, L. (2019), Spending Review 2019: Incentives for Personal Electric Purchase, Climate Change Unit, Department of Public Expenditure & Reform.
36 Department of Finance (2021), Budget 2022: Tax Policy Changes.An Overview of Electric Vehicles and Their Impact on The Tax Base
Table 3: VRT Rates Effective 1st January 2022
CO2 Range g/km OMSP x
Band Range Rate
1 0-50 7.00%
19
2 51-80 9.00%
3 81-85 9.75%
4 86-90 10.50%
5 91-95 11.25%
6 96-100 12.00%
7 101-105 12.75%
8 106-110 13.50%
9 111-115 15.25%
10 116-120 16.00%
An Overview of Electric Vehicles and Their Impact on The Tax Base
11 121-125 16.75%
12 126-130 17.50%
13 131-135 19.25%
14 136-140 20.00%
15 141-145 21.50%
16 146-150 25.00%
17 151-155 27.50%
18 156-170 30.00%
19 171-190 35.00%
20 191+ 41.00%
Source: Department of Finance, Budget 2022: Tax Policy Changes.
Battery electric vehicles are powered by battery and do not produce any tailpipe emissions. For this reason, fully
electric vehicles fall into the first band and incur the lowest possible VRT rate compared to other cars. Plug-in hybrid
electric vehicles can be driven in ‘electric mode’ which is powered by the battery but can also be driven outside of this
mode which relies on the internal combustion engine which is powered by fuel.
Plug-in hybrid electric vehicles do produce tailpipe emissions which can vary depending on how often they are driven in
‘electric mode’ however some research suggests they produce circa 60 CO2 g/km. As the proportion of electric vehicles
of the national fleet increases, the average yield from VRT per car will decline, in the absence of policy changes to the
VRT regime. This will require alternative sources of revenue to be found as the national vehicle fleet approaches full
carbon neutrality by 2050 due to the significant impact of lost revenue on the Exchequer.An Overview of Electric Vehicles and Their Impact on The Tax Base
Table 4: Tax Receipts from VRT 2012-2020
Year Yield Annual Change New Car Used Car Total Car
(%) Yield Registrations Registrations Registrations
2008 €1,120.7m -20.3% 146,637 55,819 202,456
20 2009 €375.4m -66.5% 54,055 45,055 99,110
2010 €383.5m +2.2% 85,264 37,125 122,389
2011 €388.4m +1.3% 87,086 38,214 125,300
2012 €379.4m -2.3% 76,237 37,902 114,139
2013 €437.3m +15.3% 71,317 48,146 119,463
2014 €542.1m +24.0% 92,613 32,806 125,419
2015 €649.6m +19.8% 125,221 48,398 173,619
2016 €814.2m +25.3% 146,806 72,718 219,524
2017 €840.6m +3.2% 131,683 94,456 226,139
2018 +5.3% 121,092 98,415 219,507
An Overview of Electric Vehicles and Their Impact on The Tax Base
€885.3m
2019 €942.0m +6.3% 112,998 112,147 225,135
2020 €751.3m -20.3% – – –
Sources: Revenue Commissioners, Excise Receipts by Commodity, Tax Strategy Group (2018), Energy and Environmental
Taxes, 18/07 & Tax Strategy Group (2020), Climate Action and Tax, 20/06.
As noted above, Vehicle Registration Tax or ‘VRT’ is a tax chargeable on the registration of vehicles in the Irish State
and is levied as a percentage of the OMSP of the vehicle.
In 2020, VRT raised €751 million for the Irish Exchequer, equivalent to 1.3% of tax receipts in that year37. Prior to the
Covid-19 pandemic, VRT contributed €942 million and €885 million in 2019 and 2018 respectively to the Exchequer.
VRT has historically been a less stable source of revenue than other tax streams. As noted by the 2018 Tax Strategy
Group, “VRT is a highly pro-cyclical tax based on a one-off transaction in a commodity whose sales volumes tends to
track the economic cycle.”
In 2018, most of the revenue raised from VRT (almost 94%) was from private cars. The Tax Strategy Group further noted
that “VRT is, by virtue of the nature of the Irish motor car market, a highly pro-cyclical tax.”
The highly cyclical nature of VRT as a revenue source is evident in the historical volatility of this tax stream. Since 2008,
there have been seven years where the tax fluctuation (decrease/increase) year-on-year has exceeded 10%. At the peak
of the Celtic Tiger in 2007, the Irish Exchequer collected €1,406 million in tax receipts from VRT (just over €1.4 billion)
but due to the economic shock caused by the Global Financial Crisis and the Great Recession, this had fallen to €1,121
million in 2008 and just €375 million in 2007, representing year-on-year declines of €285 million and €745 million
respectively. In effect, the amount of tax revenue contributed to the Exchequer from VRT fell by just over €1 billion in just
two years from 2007 to 2009 highlighting the highly volatile and cyclical nature of this revenue stream.
37 Office of the Revenue Commissioners, Excise Receipts by Commodity.An Overview of Electric Vehicles and Their Impact on The Tax Base
In addition, the VRT tax system provides an additional incentive for consumers to purchase low-emitting vehicles. The
new 20-band table will provide greater economic incentive for consumers to purchase lower emitting vehicles which,
although desirable from an environmental perspective, will reduce revenues as an increase in lower emitting vehicles
purchased will result in less average revenue from VRT per car.
21
Motor Tax
Motor Tax is an annual tax levied on motor vehicles based on their CO2 emissions. There was a change in the assessment
regime in 2008, with vehicles being assessed based on their CO2 emissions instead of their engine size, for cars
registered after 1st July 200838. Cars under the pre-July 2008 regime continued to be taxed on engine size rather
than on an emissions-based system.
Table 5: Current Motor Tax Rates
Cars registered from July 2008 to end 2020 Cars registered from 1st January 2021
CO2g/km CO2g/km
Range Rate Range Rate
An Overview of Electric Vehicles and Their Impact on The Tax Base
0-0 €120 0-0 €120
1-80 €170 1-50 €140
81-100 €180 51-80 €150
101-110 €190 81-90 €160
111-120 €200 91-100 €170
121-130 €270 101-110 €180
131-140 €280 111-120 €190
141-155 €400 121-130 €200
156-170 €600 131-140 €210
171-190 €790 141-150 €270
191-225 €1,250 151-160 €280
Greater than 225 €2,400 161-170 €420
171-190 €600
191-200 €790
201-225 €1,250
Greater than 225 €2,400
Source: Tax Strategy Group (2021), Climate Action and Tax, 21/09.
38 Parliamentary Budget Office (2021), An Assessment of the Resilience, Sustainability and Vulnerabilities of the Irish Tax Base.An Overview of Electric Vehicles and Their Impact on The Tax Base
Table 6: Annual Motor Tax Receipts 2012-2020 (€m)
Year Yield
2012 €1,055
2013 €1,137
22
2014 €1,159
2015 €1,124
2016 €1,052
2017 €1,021
2018 €981
2019 €964
2020* €940
Sources: Department of Transport, Gross Motor Tax Receipts 2012-2016 & CSO (2021) Environment Taxes. Note:
2012-2016 figures from the Department of Transport, 2017-2020 figures from the CSO.
An Overview of Electric Vehicles and Their Impact on The Tax Base
*Provisional data
As can be seen from the table above, annual receipts from Motor Tax exceed €1 billion per annum between 2012
and 2017. Motor Tax contributed €981 million to the Irish Exchequer in 2018, €964 million in 2019 and €940 million in
2020. Motor Tax contributed a significant amount of revenue to the Irish Exchequer annually and is an important source
of revenue.
While the Motor Tax is an annual tax which applies to all motor vehicles in the Irish State (HGVs, LCVs, motorcycles,
tractors, etc.), private passenger cars constitute the largest volume of motor vehicles registered in the State
(2.175 million vehicles or circa 78% at end 2019).39
Table 7: Annual Motor Tax Revenues from Motor Cars Only 2014-2020 (€m)
Year Yield No. Cars (000’s) Average Rate per car
2014 €905 1,944 €466
2015 €880 1,985 €443
2016 €847 2,027 €417
2017 €816 2,066 €395
2018 €772 2,106 €367
2019 €753 2,175 €346
2020* €707 2,180 €324
Source: Tax Strategy Group (2020), Climate Action and Tax.
* Provisional data
39 Tax Strategy Group (2021), Climate Action and Tax, 21/09.An Overview of Electric Vehicles and Their Impact on The Tax Base
As can be seen from the table above, both total and average revenues per car have been falling each year since 2014.
This can largely be explained by the July 2008 changes made to the Motor Tax regime. Commenting on this trend, the Tax
Strategy Group (2020) noted “In large part this structural deficit is as a result of the fact that pre-2008 cars typically pay
significantly more in motor tax than cars under the current CO2 regime (by around €200) and as pre-2008 cars are
replaced in the national fleet by newly registered cars the average motor tax per car reduces.”
23
The Tax Strategy Group further noted, “As of end 2019, approximately 27% of passenger cars are taxed on an engine size
basis, down from 59% at end 2015.”
As noted in a previous PBO publication, the Office of the Comptroller and Auditor General (C&AG) also previously raised
concerns about falling revenues from Motor Tax since the July 2008 change. In 2017, they projected that this revenue
would decline by €29 million each year between 2015 and 2024.40
Like VRT, an increase in low emitting vehicles on Irish roads, particularly battery electric vehicles and plug-in electric
hybrid vehicles, will, all else equal, lead to further reductions in the average tax yield from motor vehicles, thus reducing
the expected tax yield from Motor Tax.
An Overview of Electric Vehicles and Their Impact on The Tax Base
Fuel Excises
In addition to VRT and Motor Tax, the Irish Exchequer also receives tax revenues from excise duties on fuel. Fuel excises
can be categorised into excises on light oils (primarily petrol and gasoline for aviation) and heavy oils (mainly diesel but
this also includes ‘green diesel’, kerosene, marked gas oil and fuel oil)41. In essence, these fuel taxes generate receipts
primarily from transportation activities (primarily road transportation) and the heating of buildings.
In 2020, excise duties on fuel raised €1.815 billion in tax receipts for the Irish Exchequer, constituting circa 3.18% of total
tax revenues collected for that year. This was below the €2.164 billion collected via excise duties on fuel in 2019,
representing a year-on-year decrease of €349 million or 16.1%. This can be explained by the impact caused of the
implementation of public health measures (such as social distancing and working from home where possible) in
response to the Covid-19 global pandemic with lockdowns affecting transport mobility within Ireland. Excise duties on
fuel generate tax receipts based on the volume of road transportation and thus, fuel purchases. While the pandemic did
have a material impact on fuel excises raised for the Exchequer in 2020, fuel excises have consistently raised at least €2
billion per annum for the Irish State since 200542. For comparative purposes, fuel excises raised €2.168 billion in 2016,
€2.061 billion in 2017 and €2.163 billion in 2018.
However as previously noted by the PBO43, while the total amount of tax revenues collected via fuel excises has been
relatively stable for the 2012 to 2019 period (i.e., prior to the Covid-19 pandemic), the tax receipts collected from excise
on ‘light oils’ (consisting primarily of petrol) over the same period has fallen dramatically as indicated in the table below.
40 Parliamentary Budget Office (2019), An Analysis of the Sustainability of Vehicle Registration and Motor Tax.
41 Ibid.
42 Office of the Revenue Commissioners, Excise Receipts by Commodity.
43 PBO – Parliamentary Budget Office (2021), An Assessment of the Resilience, Sustainability and Vulnerabilities of the Irish Tax Base.You can also read
