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Pre-budget briefing Diesel car sales in Ireland: a case for tax reform? Buswells hotel, 15 Sept 2016 James Nix, Director of Green Budget Europe director@green-budget.eu 1
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Data source: ACEA 2015 From 25% in 2007 to 70% in 2012 2007 to 2012: rapid dieselisation of Ireland’s car fleet 2
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2015: Ireland had the highest share of new diesel car sales (71%) in Western Europe, followed by Luxembourg (70.4%) and Portugal (68.1%) Source: ACEA 2015 3
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Other Member States with high diesel car sales are seeing faster falls Note: Dieselgate started in Sept 2015 6
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How does Ireland compare to the EU’s biggest markets? Europe’s biggest car markets are Germany and UK. Both see diesel sales of less than 50%. Germany, the largest maker of diesel cars, saw diesel make up 46.5% of new sales in Q1 2016. The figure in the UK is roughly the same, 47.1% in Q1 2016. Source: ACEA 2016 In short, it is countries with high diesel car purchases such as Ireland that bring the EU average up to 50.2% (Q1 2016). 7
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Health impacts of diesel pollution Diesel engines release particulates (PM) directly into the air and emit nitrogen oxides (NO x ) and sulfur oxides (SO 2 ). There is now clear evidence that air pollution from diesel fumes is linked to heart diseases and lung problems, including asthma. Children, older adults and people with existing heart or lung disease are most at risk (World Health Organisation 2012; Royal College of Physicians 2016). The dieselisation of Ireland’s car fleet has had a negative impact on air pollution and, as a result, public health. The European Environment Agency (2015) estimates that more than 14,000 years of life are lost every year in Ireland due to air pollution Diesel cars are the single largest cause 8
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What’s behind Ireland’s diesel addiction? Diesel in Ireland has always enjoyed a preferential tax regime, being currently taxed 22% less than petrol. Part of the reason lower tax rates were maintained was that diesel cars once produced lower CO 2 emissions. However, diesel cars emit significantly higher levels of other pollutants than petrol cars (including NO x ), and CO 2 emissions from diesel and petrol cars are now approximately equal. The OECD has therefore recommended at least an equalisation of petrol and diesel. The basis of this suggestion is the lower tax rate on diesel fails to account for its health and environmental externalities Source: AA *surveyed in August 2016 9
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The example of Belgium Its gap was double Ireland’s: 22c It will increase its diesel tax by 14 cent over 3 years, combining this with cuts in petrol tax The changes are as follows: 4c in 2016, 4c in 2017 and 6c in 2018 In each of the same three years petrol tax will be cut by 2.6c (c. 8c in total) 10
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What has been proposed in Ireland? In July 2016, an interdepartmental committee known as the Tax Strategy Group proposed a diesel tax increase by €2.18 cents per year, from 2017 to 2021, in order to equalise diesel and petrol taxes (approx 11 cents over 5 years) The proposal falls for decision in budget due on Oct 11 11
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Revenue to invest in sustainable transport The proposed diesel tax increase in Ireland would yield an additional €65.8m annually giving an estimated cumulative yield over the 5 year period of €327.9m, assuming no immediate change in behaviour. Source: Tax Strategy Group 2016 12
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Industry context: high hopes for electric cars... 10% of all cars on the road in 2020 to be electric (230,000 cars on the road) Purchase grant (up to €5,000) Zero rate of VRT or, for plug-in hybrids, a €2,500 VRT rebate 13
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The reality: Ireland in bottom half of the table for EVs Electric car sales in Ireland remain slow compared to other EU countries such as Sweden, the Netherlands and France. Source: EVvolumes 2016 14
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Thank you 15 And visit our website: www.green-budget.eu Follow us on Twitter @greenbudget_EU @greenbudget_EU
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Notes Wider context in Belgium: Under Belgium’s tax shift, labour taxes are to be cut by €7.2 bn, financed by: €2.7 bn of additional taxes with environment and health benefits (e.g. higher diesel taxes; sugary drink tax); €2.4 bn in capital taxes, and €2.1 bn coming from anti-fraud measures, federal administrative changes and other reforms. Belgium expects to unlock an additional €4 bn in purchasing power and a further €3 bn in enhanced competitiveness. The reform favours the lower paid. 16
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