Vol. 498 No. 6
5 Mr. Deenihan asked the Minister for Finance if he will defer the imposition of the new rates of vehicle registration tax to April 1999; if he will extend the lower rate of vehicle registration tax to cars under 1.6 litres; and if he will make a statement on the matter. [28189/98]
As the Deputy is aware, the House approved a resolution on budget night to implement new rates of vehicle registration tax for certain cars with effect from 1 January 1999. Therefore, cars registered with effect from that date will be subject to the revised rates if above 1,400cc. I have no plans to introduce an amendment to the resolution in the Finance Bill.
The overall package of measures announced in my budget, particularly in relation to income tax and corporation tax, will help to stimulate growth in employment in all sectors, including the motor industry which has been experiencing considerable growth in car sales. VRT figures for 1998 to date show that 57 per cent of new car sales are in the up to 1,400cc bracket. These sales are not affected by the budget announcement. A further 39 per cent of new car sales are in the 1,401 to 2,000cc bracket. These face a price rise of 3.3 per cent. Only 4 per cent are in the 2001 plus cc bracket which face a price rise up to 10.7 per cent. Most manufacturers have models of 1,400cc, the exception being manufacturers of luxury and sports car marques. I have been informed by the Revenue Commissioners, who have responsibility for the administration of the vehicle registration tax, that the average increase in VRT in respect of 1,600 cc motor cars is in the region of £468 which, given the lower rates of interest for borrowers, could not be deemed excessive in the context of the overall price of a new motor car.
Delaying the coming into effect of the rate changes to 1 April 1999 and increasing the threshold from 1,400 ccs to 1,600 ccs, as suggested by the Deputy, would yield £18.7 million to the Exchequer, that is a net reduction of £24.3 million in the figure of £43 million announced in my Budget Statement which was to be financed by the VRT package.
In view of today's statement by the SIMI and its personal representation to the Taoiseach, would the Minister consider a deferral until the end of January? Would the Minister agree that many consumers had entered into contracts to buy new motor cars before the budget? These people rightly feel that they have been conned by this increase in the budget. Because of the contracts into which they have entered, would the Minister at least consider a deferral until the end of January?
I have no plans to defer the implementation of the resolution passed on budget night. It would be unfair to give any impression that anything like that is going to arise. There will be no change in the Financial Resolution as passed on budget night.
How can the Minister reconcile this increase in VRT with European tax harmonisation? As the Minister will be aware, the average European spends 25 per cent less on a motor car than his or her Irish counterpart. If the Minister wants cross-Community tax harmonisation, how can he justify this provision?
Ireland is not the only country to have a tax on vehicle registration. Although the base for charging tax in the eight other EU countries which have a registration tax varies, the highest rates are applied in Denmark, Finland, Greece and Portugal. It is true to say that Germany, Luxembourg, Sweden and the UK do not have a registration tax.
I outlined in my budget speech the reasons for increasing VRT. It was a reasonable imposition on a sector which has been doing extraordinarily well in recent years. I pointed out in my reply today, and in reply to written parliamentary questions last week and this week, that 57 per cent of cars will not be affected; 39 per cent of cars will be slightly affected; and only 4 per cent will be affected by the higher increase of 10.7 per cent. As I further pointed out in my reply, the average increase for a car in the middle bracket will be £468, which in the context of lower rates of interest for borrowers, is not an unreasonable imposition. I do not take on board much of the bleatings from some sectors of the motor industry, and neither does anybody else.
It is £9 per week.
Is the Minister aware that the Taoiseach addressed the SIMI a few weeks before the budget and gave no indication of an increase in VRT? In fact, he gave the opposite impression.
For those people who entered into bona fide contracts with a motor dealer, is there any way the Minister could give some allowance?
As the Deputy is probably aware, the Taoiseach or any other Minister, no matter when he or she would address any particular group, would not indicate that there would be a tax increase in any area. These matters are for the Minister for Finance and they are not announced beforehand for good and obvious reasons.
He hinted that the bookies might get something.
No. They were not told anything although they have been successfully lobbying some of the backbenchers in the Deputy's party who have been tabling many parliamentary questions to me on the matter over many months. There were people in the Public Gallery on budget night who thought there would be other changes in taxation which did not occur.
What about the question of contracts?
That depends on the contract with the individual garage. Most contracts would allow for price variations where there is a tax change but that depends on the contract entered into between the individual and the motor retailer. It is not a matter for the Minister for Finance.
What will be the effect on the CPI?
There is a later question on that matter; it is less than one tenth of 1 per cent.
