Sunday, August 16, 2009

Economics 16/08/2009: A tax too far?

Here is a nice one from the Sunday Papers. Sunday Times "In Gear" supplement is featuring tow different cars: a Devon Motorworks GTX, 8,354cc V10 650bhp super-car that goes 0-60 in 3.5 sec and costs £300K (pages 4-5) and Mazda MX-5 1,999cc 4-cylinders, 158bhp ordinary bloke/gal car, priced at estimated €37,000 pages 14-15. Guess why am I writing about them?

Well, Devon's in the UK road tax band M, which sets you back £405pa, or €470.06pa, Mazda is in Ireland's rod tax band E, which sets you back €630pa.

Assuming that
  • a 'sensible' consumer would tend to purchase a car for about 7-12% of their income;
  • hold it for 7-10 years;
  • sell at the end of the holding period of 50% or 20% of the value, then
the following table shows just how close our road tax policy comes to highway robbery:
Yes, you are reading it right -
  • a buyer of a small middle class car in Ireland will pay between 1.4 and 2.1 percent of their annual income per annum in road tax;
  • a buyer of a large super car in the UK will pay between 0.14 and 0.315 percent of their income in annual road tax.
And I know what you are going to say - the UK is closer to meeting its Kyoto Protocol commitments than we are, and it has better roads than we do.

Where is our National Consumer Agency in all of this? Oh, well, busy counting Government payoffs for staying quiet on the rip-off culture of our public policies...

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