Dáil Éireann - Volume 673 - 05 February, 2009

Other Questions. - Motor Taxation.

Deputy P. J. Sheehan asked the Minister for the Environment, Heritage and Local Government his views on policy changes to motor taxation to help restore the motor market; and if he will make a statement on the matter. [3809/09]

Deputy Ulick Burke asked the Minister for the Environment, Heritage and Local Government his views regarding the collapsing motor trade here; the impact this will have on [712] local government and central Government finances; the measures he is considering to restore buoyant market conditions; and if he will make a statement on the matter. [3816/09]

  Deputy John Gormley: I propose to take Questions Nos. 12 and 15 together.

The changes I introduced last year to charge motor tax on new cars based on their CO 2 emissions, together with the linked changes to vehicle registration tax introduced by the Minister for Finance, provided significant financial incentives to purchase new low emission cars.

The two lowest CO 2 bands for motor tax — bands A and B — are significantly lower than the minimum annual car tax rate of €172 charged under the engine size cc system. The motor tax rate for cars in band C is on par with the average tax rate charged under the old system.

The VRT rate imposed on cars in these three bands is also lower than the previous minimum rate charged prior to July 2008. The lowest rate of VRT is now 14% compared to the old minimum of 22.5%. The system of vehicle registration tax is administered by the Revenue Commissioners and issues regarding it are a matter for the Minister for Finance.

The incentives provided by the Government have been successful in ensuring a dramatic shift towards the purchase of more environmentally friendly cars. A total of 85% of all cars registered under the new system are in the lower bands A, B and C and are subject to a very favourable tax regime. The introduction of emissions based VRT and motor tax had a dual objective of encouraging a move to lower emission vehicles while protecting central and local government revenues. It is my intention to keep these dual objectives under review, in conjunction with the motor industry, in the light of experience of the new system.

Global economic conditions have had a significant impact on the motor industry internationally, and Ireland is no different. The Society of the Irish Motor Industry, SIMI, has put forward a number of proposals to Government on the car market and my Department met a delegation yesterday to discuss issues relevant to my departmental brief. The core SIMI proposal related to a scrappage scheme, and that is a matter for the Minister for Finance.

Unlike VRT, motor tax receipts depend on the total taxed vehicle fleet, and the motor tax rates charged, rather than the purchase of new vehicles. The economic slowdown is likely to impact on the total vehicle fleet. In 2008, the increase in the fleet was in the order of 2.3% compared to an annual average increase of 5% since 2000, and little growth may be evident in the fleet in 2009. Forecast motor tax receipts for 2009 are of the order of €1.08 billion. All motor tax receipts are paid directly into the local government fund for local government purposes.

My Department will continue to keep the position regarding the motor tax receipts under review.

  Deputy Phil Hogan: There Minister will be aware there is a serious problem in the motor trade. Fine Gael advocates that the emissions bands should be backdated to 2001 — the Minister had the information available for new and second hand cars — to allow people make informed decisions regarding emissions. We support the new regime. People should have a choice of purchasing based on emissions.

Is there any new initiative, particularly in the Border counties, that can be introduced to stop dealers going across the Border and coming back with a car having paid VRT in the other jurisdiction and making a few euro in terms of sustaining the trade? There is a big increase in the number of imported vehicles at the expense of new cars being sold in this jurisdiction.

  Deputy John Gormley: The Leas-Cheann Comhairle will appreciate that question is not within my own brief. It is for the Minister for Finance.

[713]   An Leas-Cheann Comhairle: The Minister is answering broad questions. I hesitated to intervene.

  Deputy Charles Flanagan: I am sure the Minister has one prepared.

  Deputy John Gormley: The SIMI has been lobbying for the introduction of a scrappage scheme for cars over ten years, and that involves a reduction in vehicle registration tax. These are matters for the Minister for Finance.

While a scrappage scheme could reduce CO 2 emissions it should be noted that Ireland now has a relatively modern vehicle fleet. There are already incentives in place, and people are availing of those incentives. When they are purchasing a car they are moving towards the lower bands, and 85% of the new car purchases are in those lower bands.

We will have to examine what the SIMI is advocating but this problem is not unique to Ireland. We have had a global downturn and as we have seen, the motor industry in the United States is experiencing a serious problem, likewise in Britain and Germany where the car manufacturing industries are under real threat. It is a phenomenon whereby during an economic downturn people do not change their cars as often as they would in good times. That is the position, unfortunately.

Written Answers follow Adjournment Debate.