Jimmy Deenihan
Question:16 Mr. Deenihan asked the Minister for Finance his views on the high level of taxation levied on motorists; and if he will make a statement on the matter. [22653/99]
Other Questions. - Vehicle Registration Tax.
I presume the Deputy is referring to vehicle registration tax and excise duty on motor fuels. Vehicle registration tax is a valuable source of funding, contributing approximately £463 million to the Exchequer in 1998. It was introduced on 1 January 1993 and replaced the previous motor vehicle excise duty which was abolished under the EU Single Market rules. Vehicle registration tax is payable on the first registration of a vehicle in the State and applies to both new cars purchased in the State and used cars brought in from abroad.
As the Deputy is aware, I restructured VRT rates on cars in last year's budget. The new structure favours smaller cars. As I said at the time, it is appropriate to seek to recoup revenue in this way from a sector experiencing record sales. I also said that the increases in VRT would yield a contribution from the motoring sector to meet the additional road use and environmental damage arising from the unprecedented growth in private car numbers and usage.
At that time many people claimed that the restructuring of VRT would be disastrous for the motor industry. However, car sales have continued to rise. Total net registrations for the first three quarters of the year are 20 per cent ahead of the same period last year and almost 10 per cent ahead of last year's full year total. Exchequer receipts from VRT to the end of September 1999 are up to £535.8 million. The increase in market share for cars up to 1,400 cc's – up from 57 per cent in 1998 to 64 per cent at the end of September 1999 – would seem to demonstrate that the VRT changes have had the desired effect.
With regard to excise duty on motor fuels, the rate in Great Britain and Northern Ireland is much higher than that currently obtaining in the State. For example, the pump price of a litre of unleaded petrol for a person resident in the State is around 63p whereas it is around 87p in Northern Ireland.
I am not worried about the dealer so much as the motorist. Is the Minister aware that of every £10 a motorist spends on petrol £6.50 comes back to the Exchequer in taxes and that the addition of tax to the pre-sale price of an average car is approximately 73 per cent? Taxation on the Irish motorist is now one of the highest in Europe. The motor trade has proposed that VRT be reduced on cars that meet the stringent EU requirements on air pollution and so on. Will the Minister consider reducing VRT on these cars in the Finance Bill, for environmental reasons?
I am aware of the pre-budget submission from the Irish motoring industry which refers to this matter. As usual, all such submissions will be taken into account in preparing the budget. The Deputy has made this case regarding taxation and the Irish motorist on previous occasions. He made it very forcefully when changes were made in VRT in last year's budget. At that time, despite prognostications from many people in the motor industry that the measure would be disastrous for the industry, I predicted that sales would rise, and so they have.
Deputy Deenihan refers to the high rate of VRT and the heavy excise duty on petrol. We must remember that money must be collected to run the State. We must provide hospital and other services, pay pensions and pay for policing and all the other requirements of a modern State. It is not possible to reduce taxation levels in all areas.
Does the Minister agree that only 10 per cent of the £2.5 million which is col lected in motor taxation is spent on roads? As a result, the overtaxed motorist must endure the worst road infrastructure in Europe and dreadful traffic congestion. How does the Minister account for this?
The Minister for the Environment and Local Government has produced a national greenhouse gas abatement strategy which recommends, among other things, that excise duty and general tax on fuels should be increased. Is the Minister actively considering acting on those recommendations?
I hope Deputy Deenihan will be pleasantly surprised by the figures in the national development plan which will address the needs of infrastructure.
More promises.
We need only wait until next Monday.
I will be the first to welcome them.
Deputy McDowell referred to the Minister for the Environment and Local Government's greenhouse abatement strategy which will be considered by me in the context of the budget.