Drivers who paid motor tax in instalments spent €35 million more last year, a committee heard.
This morning's Oireachtas Public Accounts Committee heard the Motor Tax Fund took in a total of €929m in 2024.
It comes after Sinn Féin brought a motion to the Dáil yesterday calling for an end to financial penalties for paying motor tax in instalments.
The party said the cost of driving is "skyrocketing".
Sinn Féin TD Cathy Bennett said it is "unfair" that people are being charged "because they can’t afford to pay on a yearly basis".
"People are under financial strain, and you're actually charging them more," she said.
Keith Walsh from the Department of Transport said there is a higher surcharge if you pay twice a year, or four times a year, compared to annually.
The Assistant Secretary said this surcharge is in place for a "number of different reasons".
He said it reflects the fact that it incurs a higher cost to the department or the motor tax offices.
He said there is an administrative cost to processing every motor tax payment and to send out motor tax discs to drivers.
"There is more work involved," he said.
Last year, the department spent around €5.8m on the printing and distribution of motor tax discs.
Mr Walsh said the department is planning to scrap the requirement for drivers to display a paper motor tax disc on vehicle windscreens.
The National Vehicle and Driver File Bill 2025 contains provisions for this.
"That will take out a big chunk of the department's costs," he said.
However, he said there will still be administrative costs involved.
He said the Department of Finance sets the tax rates, including this level of surcharge.
"When we go paperless, it opens up opportunities to have a look at this," said Mr Walsh.
