New Car 'Green' Tax Opposed by Environment Minister Cohen

Senator against planned new car tax


Plans for an extra tax on new cars is being strongly opposed by Environment Minister Freddie Cohen.

The Council of Ministers want to raise two million pounds through a vehicle emissions duty. The cash will be used to subsidise home insulation and other energy saving projects. It will also pay for more public transport and more recycling initiatives.

But Senator Cohen, who strongly supports those moves, believes funding should come from increasing cash limits. He says that with GST only introduced a few months ago it is not an appropriate time to introduce any new taxes.

Senator Cohen also believes the tax could lead to additional pollution as people would hang on to older, less efficient vehicles. He also points out that the public have already said that if an environmental tax is needed the most effective way would be a small increase on road fuel.

The Senator has put in amendments to the business plan for next year to halt the planned new tax. He gives the following reasons:

1. We have only just introduced GST and this is not an appropriate time to introduce any new taxation.

2. The recently introduced GST on new motor cars will raise approximately £2m per year which is coincidentally a similar sum to the proposed environmental initiatives expenditure. Thus it can be considered that the GST raised on the sale of new cars can notionally be regarded as funding the proposed environmental initiatives. An alternative could be to consider formally hypothecating the GST receipts on new cars for the purposes of funding environmental initiatives.

3. The introduction of the proposed new tax, in addition to the recently introduced GST, would effectively double tax the purchase of new cars.

4. Any well designed environmental tax must satisfy two criteria. The first being that it taxes a genuinely environmentally negative action. The second is that all the funds raised are applied to environmentally positive initiatives.

5. The purchase of a new car is not in itself an environmentally negative action. In fact it can be argued that increasing the price of new cars will encourage the retention of older less efficient motor cars.

6. The current proposal compounds the potentially negative environmental impact of the new tax by proposing that the tax will be discounted by up to 60% on the importation of second-hand cars. This will provide an incentive to import older less efficient motor cars likely to have a more damaging environmental impact.

7. During 2007 I consulted the public on the concept of introducing an annual Vehicle Emissions Duty. Respondents clearly sated that if an environmental tax was to be introduced they would prefer that it be raised by levying a small duty on road fuel.

8. The burning of fossil fuels constitutes the negative environmental impact of using a motor vehicle and therefore if an environmental tax were to be introduced at a future time the most logical for of taxation would be a small duty on motor fuel. In this way the tax paid would be directly related to the negative impact burning hydrocarbon fuel has on the environment.

9. Consideration of the implementation of a new environmental tax based on a small duty of road fuel could be considered later in 2009 and this could be used to fund the proposed and further environmental initiatives. This would depend on the economic circumstances and fuel prices prevailing at the time. At that time if it was felt that economic circumstances could allow this we should consult with the public on the concept of introducing a small fuel duty on the basis that the receipts were hypothecated for environmental initiatives.

10. The JEC have generously agreed to contribute £500,000 to start the environmental fund providing this is matched by the States. The Council of Ministers proposition is to raise £2m to be added to the JEC’s £500,000 one off grant, making a total fund of £2.5m for the year. The environmental initiatives are laudable and I am fully supportive of the expenditure however I believe they should be funded, at least initially, by increasing cash limits and regarding the £2m likely to be raised through GST as notionally funding the environmental initiatives, with formal hypothecation being an option for further consideration.

11. Funding these environmental benefits by raising cash limits without initially imposing new taxes will enable the public to see the environmental benefits being delivered and allow an informed public debate at a later time on whether or not to consider implementing a small environmental fuel duty.

The financial implications of this amendment are self-explanatory and as mentioned above involve increasing overall cash limits rather than funding this expenditure through additional tax revenues. The amendment does not change the manpower implications of the Council's amendment

The rate would range from £0 to £1250, depending on the emission rate of the car. A 2lt Ford Galaxy would pay £1,000 on registration, but a 1.8lt Ford Fiesta would pay only £40."

GD wrote:"

The rate would range from £0 to £1250, depending on the emission rate of the car. A 2lt Ford Galaxy would pay £1,000 on registration, but a 1.8lt Ford Fiesta would pay only £40."

There seems no logic to the rate at all, from what I beleive the Galaxy gives us less emmissons than the Fiesta.

One day they might get it right?

5. The purchase of a new car is not in itself an environmentally negative action. In fact it can be argued that increasing the price of new cars will encourage the retention of older less efficient motor cars.

st_ouennais wrote:
Put another way its probably far more environmentally damaging to buy a new low emission vehicle only to drive 2 miles to the shops and back once a week, than to use your well maintained 30 year old car for the same.

st_ouennais wrote:
Put another way its probably far more environmentally damaging to buy a new low emission vehicle only to drive 2 miles to the shops and back once a week, than to use your well maintained 30 year old car for the same.