The impact of the widely-expected changes to Vehicle Registration Tax (VRT) calculations on new cars, from engine size to CO2 emissions, is likely to see a strong sales swing to diesel cars. The Minister for Finance's plan anticipates that the measure will be budget-neutral, with overall VRT - worth €1.3 billion to the Exchequer last year - not expected to rise as a result of the change.

Under the current system, cars with an engine size of 1,400cc or lower face a 22.5% levy, while those between 1,401cc and 1,900cc attract the 25% rate. Owners of larger-engined vehicles, those above 1,901cc, pay 30%.

However, under the Department's proposals, a new band of VRT ranging from 14% to 36% will apply to new cars from July, depending on the amount of CO2 emitted per kilometre. For example, a car emitting up to 120g will pay 14%, those emitting up to 140g will pay 16%, with a top rate of 36% applying to cars emitting more than 225g per kilometre.

The changes are likely to produce some interesting purchasing patterns, and the overall impact is likely to see Ireland move closer to the European norm, where diesel-engined cars account for around half the private vehicle fleet.