Dáil Éireann debate -
Wednesday, 27 Feb 1980

Vol. 318 No. 4

Financial Resolution No. 8. - Excise—Motor Vehicles.

Minister for Finance (Mr. O'Kennedy)

I move:

(1) That the duty of excise imposed by paragraph 4 (1) of the Imposition of Duties (No. 236) (Excise Duties on Motor Vehicles, Televisions and Gramophone Records) Order, 1979 (S.I. No. 57 of 1979), on category A motor vehicles, within the meaning of paragraph 3 (a) of the said Order, shall be charged, levied and paid, as on and from the 28th day of February, 1980, at the rate of an amount equal to 40 per cent. of the chargeable value, in lieu of the rate specified in subparagraph 4 (3) (a) of the said Order.

(2) It is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).

Mr. M.P. Murphy

Would the Minister tell us the present rate of duty on motor vehicles? It seems to be 35 per cent being increased to 40 per cent.

Mr. O'Kennedy

That is right.

Mr. M.P. Murphy

I had a question down in the Dáil some months ago relative to the rates of duty on different types of motor vehicles and I was told that you could not get a statement relative to each make of car but that on an average the general rate was only 29 per cent. How then did I get that reply if the general rate is 35 per cent? That is only a few months back and there has not been any increase in the meantime. Now it transpires that the rate was 35 per cent, so that the answer I received then was incorrect. In any case, we are to assume from this resolution that the Minister is getting an additional £50 per £1,000 on motor vehicles and that the total he is now expecting from the buying public is £400 per £1,000. Is that correct?

Mr. O'Kennedy

The total excise duty is 40 per cent.

Mr. M.P. Murphy

This kind of rate does not obtain in any other country in the Community and cars are much dearer here in Ireland than in any other of the eight countries of the EEC. Here, too, there is little justification for extracting an additional £200, say, on a £4,000 car. What is the VAT on cars?

Mr. O'Kennedy

It is 10 per cent.

Mr. M.P. Murphy

So the VAT rate will not be moved.

Mr. O'Kennedy

No.

Mr. M.P. Murphy

Am I to assume that VAT is in addition to the excise duty?

Mr. O'Kennedy

It is.

Mr. M.P. Murphy

Therefore, the Minister is getting 50 per cent total duty on cars. Here we have a situation obtaining in Ireland where, as has been pointed out——

Mr. O'Kennedy

I do not want to interrupt the Deputy but I was answering the questions he asked. He is wrong when he says that the duty on cars represents 50 per cent of the total price. It does not.

Mr. M.P. Murphy

What is the figure? The Minister mentioned that there is VAT of 10 per cent and that is paid separately from the 40 per cent excise duty.

Mr. O'Kennedy

This duty is chargeable on delivery from the wholesaler to the retailer. Therefore, that explains why it does not come to 40 per cent plus 10 per cent of the price as he sees it.

Mr. M.P. Murphy

Is the 10 per cent on the sale to the wholesaler by the manufacturer?

Mr. O'Kennedy

Yes.

Mr. M.P. Murphy

When the wholesaler sells to the retailer is it then that the 40 per cent is taken or is it when the retailer sells to the buyer?

Mr. O'Kennedy

When the wholesaler sells to the retailer.

Mr. M.P. Murphy

The 40 per cent?

Mr. O'Kennedy

Yes.

Mr. M.P. Murphy

So there is the 10 per cent VAT on the manufacturer's price and the 40 per cent VAT on the wholesaler's price. The two together make a sizeable figure. I would like it to be known by the general public—apparently many of them do not know—that cars are subject to this exorbitant rate of duty in this country, the smallest in the Community. As with previous resolutions, I see no justification for this exorbitant extraction from the general public. As mentioned earlier, many families require a car now and the State is raking in money. It was not made too public at the time car tax was abolished in 1977 that the total duty on cars would be 10 per cent on the manufacturer's price and 40 per cent on the wholesaler's price. I oppose this Resolution No. 8.

Mr. Hegarty

Is the definition of motor vehicle merely motor car or does it include commercial vans?

Mr. O'Kennedy

No, it does not.

Mr. Hegarty

Is it merely private motor cars?

Mr. O'Kennedy

Yes.

Mr. Hegarty

Even on that alone, it is adding substantially to the cost of living and to motoring costs. It is especially reprehensible when the motorist is being mulcted on petrol. The unkindest cut of all is in not having something done about the roads. The Minister for Finance in his budget speech appealed for restraint. We would all like to see restraint in the PAYE, farming and industrial sectors, but the Government are starting immediately to pave the way for another inflationery round. The Minister will not get much sympathy or restraint.

Mr. E. Collins

Can the Minister give comparable rates of duty on motor vehicles in the other member states of the EEC? It seems to me when I read about the cost of a motor car here as opposed to England that we are talking about anything between 25 per cent and 33? per cent dearer than motor cars in England. The cause of it is that we have such a high duty on motor vehicles. Could the Minister give any indication of duties applicable in other member countries?

Mr. O'Kennedy

I cannot.

Mr. E. Collins

That is unfortunate. It is obvious to anybody reading the Sunday papers that Irish citizens are being substantially discriminated against in the price of private motor vehicles. It is one of the main reasons why the standard of living in Ireland is lower than comparable standards in England. I know there is some EEC agreement to protect our motor industry up to 1984, but this resolution will make it even more difficult for the ordinary worker to buy or to replace a car. People employed in the motor repair industry will also feel the pinch because there may be a reduction in the number of cars being purchased. The 40 per cent level is excessive and discriminates against people who can only afford small cars. A more justifiable approach would have been to increase the duty on private motor vehicles in excess of 16 horse power. That would at least protect the ordinary working man. It is an unfortunate aspect of the resolution and this duty is being imposed on the small car owner and buyer as well as on the large car purchaser. A more discriminating approach favouring the small car owner would have been more appropriate and a more socially just way forward.

Mr. Boland

The Minister to some extent managed to evade answering a question put to him by Deputy Murphy. Could the Minister say, when one aggregates the 40 per cent and 10 per cent, what percentage of the retail price of a car is now going to the State through excise and VAT in a combined way? This is a very simple question which the Minister should have been able to answer.

Mr. O'Kennedy

The answer is roughly about 42 per cent. Deputy Murphy raised some queries during the course of his speech. When talking in terms of 40 per cent excise duty and 10 per cent VAT, Deputy Murphy deduced that 50 per cent of the total price accounted for excise and VAT. That is not the case. The total would be about 42 per cent of the retail price. A car costing about £4,000 was mentioned. At the moment the duty on that would be about £1,300 and now as a consequence of this, the duty will now be £1,428, that is an increase of £128. The increase is not on the retail price; the duty is payable at the level between the wholesaler and retailer. In relation to small cars, mentioned by Deputy Collins, the fact is that this is an ad valorem duty. One pays in accordance with the price of the car at the wholesale stage. If one buys a smaller car one would pay proportionately less which seems to be the case Deputy Collins is making.

Mr. E. Collins

The point I am making is that no duty should be imposed on cars of under 16 horse power.

Mr. Boland

One may pay less in gross terms but one does not pay proportionately less.

Mr. O'Kennedy

One pays in proportion to the value of the car at the wholesale stage, not less proportionately but less in gross terms.

Mr. Boland

Does this apply to all cars, including cars owned by State bodies and local authorities and will cars bought to be used as service vehicles, such as taxis, have to pay this additional cost or will taximen be given a special exemption?

Mr. O'Kennedy

That has been long since defined in the regulations and it applies to all cars including taxis. It is rather late for Deputy Collins to suggest that small horse power cars should not be liable for excise duty; he should have made that case some time ago.

Mr. Boland

This may will affect taxi fares.

Mr. O'Kennedy

It may.

Mr. T.J. Fitzpatrick

(Cavan-Monaghan): If I am in order I would like to make a short contribution. I understand the Minister has not replied.

Mr. O'Kennedy

I thought I did.

Mr. T.J. Fitzpatrick

(Cavan-Monaghan): In the course of his speech today the Minister indicated that it would no longer be possible for the public sector to be the main jobs creator and that the private sector would have to play its part in creating jobs in the foreseeable future. One of the principal employers in many towns is the garage industry. That holds for my town in a fairly big way. It is common knowledge that for the last year or so the garage business has not been doing well; they are finding it hard to make ends meet and to maintain present standards of employment. The increase in the price of petrol and the tax on cars will make motoring very expensive and it will drive people into doing without cars or into holding on to old cars longer than usual. I have no doubt that the end result of this operation will be unemployment in the garage industry. As a result of this men will be let go in the garages throughout the country. If we are to accept the Minister's word that the State can no longer provide the jobs that were promised in the manifesto and that these will have to be provided by the private sector, various ingredients in this budget, particularly this tax will make it more difficult for the private sector to continue to provide the rate of employment they have provided up to the present. There will be more scope on the general resolution to elaborate on this sort of thing. There are many inconsistencies in this budget.

An Ceann Comhairle

The Deputy will please talk in general terms.

Mr. T.J. Fitzpatrick

(Cavan-Monaghan): I have already pointed out some of them but the tax we are now dealing with illustrates the type of inconsistencies I have been speaking about all along. We ask the private sector to create more jobs but at the same time——

An Ceann Comhairle

It is nearly 11.30 and there are six more resolutions. The Chair must have regard to the fact that time is running out. Possibly at the end resolutions will go through without any time for debate.

Mr. Boland

Better not refer to that too much or the Minister will put a tax on time.

Mr. T.J. Fitzpatrick

(Cavan-Monaghan): I have made the point in the interests of garages throughout the country which are giving good employment.

Mr. Griffin

I am concerned about the impact on employment, particularly in rural garages. I am also worried about the road safety aspect. It has been long established that the roadworthiness of a car is a big factor in road accidents. This imposition will encourage people to hold on to cars longer than they should and discourage them from having repairs carried out. Motorists will be putting lives in jeopardy by driving cars that are not roadworthy.

The poor condition of roads is another important factor, although I know it is not covered in the financial resolution. We cannot have cars without roads. The motorist has received quite a bashing today and that, together with the poor state of roads, will make motoring expensive, unpleasant and dangerous.

Mr. Crotty

I agree with the previous speaker in regard to the effect of this tax on the roadworthiness of vehicles. In recent times sales of new cars have been very slow and in future there will be more second-hand cars and "bangers" on the roads. Does the Minister consider that a car is a luxury? In my area 50 per cent of people in employment must travel to work and in many cases considerable distances are involved. Has the Minister taken this into consideration and will he allow travelling expenses to be claimed against income tax? We are trying to encourage people to take up employment and to stay in their own locality. The result of this policy is that people must travel to their places of employment. The increase in petrol prices together with the increase in the rate of duty on cars will mean a considerable increase in weekly expenses amounting in some cases to £10 per week and reducing to £5 per week. Driving is a necessity of life. We could see a situation where revenue from the sale of cars would reduce, thus defeating the Minister's proposals. Some people may not be inclined to travel to work and may decide to become unemployed, with consequent loss to the State.

The impact of this duty is illresearched and I would ask the Minister to give it careful consideration before putting it into operation. Alternatively, he should give special consideration to the working man who must use his car every day and allow him to claim travelling expenses against income tax.

Mr. O'Kennedy

I have provision in the budget for what I call a special PAYE employee allowance to take account of the fact that allowances in respect of that sector are not seen as being as generous as allowances to other sectors. Certainly that was included in my thinking in providing this allowance and also the cost of getting to work.

Mr. T.J. Fitzpatrick

(Cavan-Monaghan): The PAYE system covers some very well-off people. There is no use in pretending that PAYE taxpayers are all on low incomes. The highest public salary in the country is on PAYE.

Mr. Boland

The effect of that to the PAYE man is £100 at best and the increase in motoring costs is £200 at least. It cannot be said that one compensates the other.

Mr. O'Kennedy

If we get to Financial Resolution No. 13 I will be able to explain in detail.

Question put and agreed to.