Vehicle Excise Duty could be abolished and replaced with a new purchase tax under plans drawn up by a government adviser and supported by a Cabinet minister.
The new tax could see buyers of thirsty performance cars paying up to £23,000 on top of the list price for their new car.
However, even some more modest vehicles could see their prices rising by more than £1,500 if the proposed new legislation is passed.
Under the new system, drivers would pay an extra £50 for every gram of CO2 their new car produced over a set limit, which is suggested to be 94g/km.
A Ford Focus Studio 1.6-litre petrol, for example, emits 136g/km and would therefore see a price hike of £2100, raising its list price from £13,995 to £16,095.
Under the current VED system, the same car would be subject to annual road tax of £120. This means that the buyer would have to keep the car for more than seventeen years to benefit under the proposed scheme.
However, buyers of more fuel efficient vehicles would benefit financially under the scheme.
The proposals come as the Treasury considers the best way to tax cars. Under the current system, which taxes cars annually based on their CO2 emissions, the government is losing money due to the increased efficiency of modern vehicles.
The proposed scheme is the brainchild of Tim Leunig of the Centre Forum think-tank, and has been backed by the energy secretary Ed Davey.
Second-hand buyers are likely to benefit under the new scheme; however, the increased list price of some new cars may mean increased prices on the used car market.
So, what are your views on the proposed new system? Would you welcome a new method of taxation to replace the ageing VED, or is this another case of the Government trying to extort money from Britain's beleaguered motorists?
Leave your comments below.
