The changes mean that benefit-in-kind (Bik) tax is going to more than double for those who are given a vehicle by their employer because they have to travel for their jobs.
It comes at a time when petrol and diesel prices have soared, along with a surge in the cost of living.
There are around 150,000 company cars on Irish roads, according to industry experts.
Company car drivers and the Vehicle Leasing Association of Ireland have been pleading with the Government for months now to hold back on the changes that took effect this week.
But President of the Vehicle Leasing Association of Ireland Michele Hanlon said there has been no response from the Government to stall the changes.
“We got a deaf ear,” she said, when asked what response there was to calls for a delay in the Bik changes.
She said the changes were set to prove so expensive that company car drivers were giving up their vehicles.
“Our members have been inundated with requests to return company cars because the Bik is increasing substantially this January.”
And motorists in contact with this publication said the tax changes were set to prove to be punishing.
“Bik will cost me around €240 a month net, up from €140 in 2022, on a mid-range car that I will never own,” one commercial traveller said.
Ms Hanlon said the Bik on a Hyundai Tucson Diesel, a popular choice for those who have a company car, would go from around €98 a month last year to €294 a month this year. This is a 200pc increase.
The changes mean the Bik calculation is now based on a combination of mileage and CO2 emissions from this year onwards
She said companies want to return their cars early, while the drivers are also looking to buy the cars and avail of the company car allowance or take mileage expenses.
“They simply can’t afford the Bik. They are therefore gone from the company car fleet and in our experience, they won’t return and nor will they buy expensive EV’s until they become available on the second-hand market.
“The use of private cars for business means these cars will not be as new, as green, as safe or as clean as the company car they are currently driving.”
The changes mean the Bik calculation is now based on a combination of mileage and CO2 emissions from this year onwards.
And the Bik rate will be between 9pc and 37.5pc of the vehicle’s original market value.
Bik is a tax on benefits that an employee receives that cannot be converted into cash but have a cash value. An employee is liable to pay income, USC and PRSI on the value of the benefit, which is typically the provision of a car for work.
From this month CO2 is being factored in when calculating Bik, according to consumer tax manager at Taxback.com, Marian Ryan.
There are now five emissions bands from A, which is the lowest, to E, the highest.
The Bik regime has also changed for electric vehicles (EV).
Up to last year if the electric vehicle’s original market value (OMV) did not exceed €50,000, then the OMV was reduced by €50,000, effectively to zero.
The new regime provides for a reduction of €35,000 this year, €20,000 in 2024 and €10,000 in 2025.
The threshold will gradually reduce to zero by 2026, with a new Bik rate of up to 22.5pc being applied.
This is lower than the top 30pc Bik rate for internal combustion engine vehicles.
The rate for vans has gone up from 5pc to 8pc this year.
Ms Hanlon said those who drive for work are hugely affected by the changes and cannot afford them.