The maximum commercial motor tax rate is to be cut dramatically from €5,195 to €900.

The move is part of a simplification of the commercial motor tax regime announced in Budget 2016, which will see the number of rates cut from 20 to five.

The new tax rates will range from €92 per year to €900 per year and Minister for Finance Michael Noonan said the changes would benefit over 28,500 commercial vehicles.

Heavy goods vehicles are likely to see the greatest benefit, however, as they would have tended to pay the highest rates of tax under the old regime.

Mr Noonan said the changes were necessary as Ireland’s system compared unfavourably with the one in Northern Ireland and Britain as a whole.

This was causing distortions in the industry and increasing costs in the economy, he said.

The changes were temporary, however, as he said the regime would eventually be replaced by one based on the gross design vehicle weight of the vehicle being taxed.