Dáil Éireann debate -
Thursday, 12 Dec 1996

Vol. 472 No. 8

Written Answers. - Traffic Management.

Trevor Sargent

Question:

31 Mr. Sargent asked the Minister for Finance if he has considered the chaos in traffic terms caused by the increase in new car sales; and, if so, if he will consider ceasing the car scrappage scheme at this point and, as an alternative, offer incentives to the car maintenance sector, such as a zero VAT rate on spare parts and car repair work. [24174/96]

Minister for Finance (Mr. Quinn)

I am well aware of the increasing volumes of traffic in our cities and towns. However, traffic management is not the direct responsibility of my Department.

The number of new cars sold in the year up to the end of November was in the region of 114,000 of which approximately 18,000 were purchased under the terms of the £1,000 car scrappage scheme. The overall increase in new car sales, particularly in 1996, has been influenced by current interest rates, the level of inflation, increasing income and, indeed, the competitive deals offered by finance companies. I should point out that the scrappage scheme has not resulted in any net increase in overall car numbers since the new car that is purchased, under the terms of the scheme, only replaces a car ten years or older which has been scrapped.

The Government recently announced the continuation of the scheme for one final year until 31 December 1997. The scheme was continued because it helped to remove older more polluting and potentially more dangerous cars from our roads. As the Deputy is aware, the Government recently announced the introduction of compulsory car testing from 1998 and the continuation of the car scrappage scheme will also dovetail with this change in the law.

In relation to VAT, I must advise the Deputy, that under the EU Sixth VAT directive, with which Irish VAT law must comply, it is forbidden to introduce new zero rates. However, car repair and maintenance services have the benefit of the reduced rate of 12.5 per cent. In additon, spare parts supplied in the course of a car repair and maintenance service are taxed at the reduced rate provided the cost of the goods, exclusive of tax, supplied in carrying out the work does not exceed two-thirds of the total charge, exclusive of VAT.