Hmmm, yes and no! The MPG is irrelevant in terms of tax... The stuff it chucks out of the rear is the relevant part! If It takes 1/4 or even 1/2 of the MPG to bring down the bad exhaust gases, then its doing its job...
A quick example for you... A 2010 Fiat 500 1.2 petrol = 69BHP & 111 g/km
A 2000 Fiat Punto with the same 1.2 petrol engine is 60BHP & 136 g/km
So, Fiat have developed the engine and its taken a further 14% power increase to power the emission controls, lowering the g/km by 19%... Same 1.2 engine but the older it gets the more power Fiat have to gain just to power the emission control systems as they get ever tighter each year... 
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