Vehicle Excise Duty could be scrapped and replaced with an up-front purchase tax, under plans drawn up by a Government advisor.
The purchase tax would still be based on a car's CO2 emissions, and would mean buyers of supercars and gas-guzzlers could see as much as £23,000 added to the list price of their vehicle.
But even small and medium sized cars could see sizeable lump sums added to their price, as a rate of £50 would be charged for every gram of CO2 a car produces over a pre-set point, which is proposed to be 94g/km.
The proposed scheme would still offer incentives for buyers to choose fuel efficient cars, though, as vehicles with emissions below a set point would actually get a discount on list price, thanks to Government subsidies.
Under the scheme, a £9,084 1.25-litre Ford Fiesta would see its list price increased to £10,734, while the price of a more efficient 1.6-litre diesel model would fall from £11,845 to £11,495.
The proposal has been drawn up by Tim Leunig of the Centre Forum think-tank, who has recently been appointed as a Government advisor.
Leunig argues that the new system would be more effective at persuading manufacturers to develop efficient cars than the VED system. He also claims the scheme would generate the same amount of revenue for the Treasury as the current regime, as the Government would be able to adjust the level of sales tax as the efficiency of new cars improves.
What do you think of the proposals? Would you be better off under the new scheme, or would it stop you from buying a new car? Tell us your views in the comments below...