Motor Vehicles (Duties and Licences) Bill 2012: Second Stage

Minister for the Environment, Community and Local Government (Deputy Phil Hogan)

I move: "That the Bill be now read a Second Time."

I am pleased to open the debate in the Dáil on the Motor Vehicles (Duties and Licences) Bill 2012. The primary purpose of the Bill is to give legislative effect to the increases in motor tax rates and trade plate licences contained in the financial resolution on motor tax passed by the Dáil on budget day, 6 December 2011.

The new rates apply to motor tax discs and trade licences taken out for periods beginning on or after 1 January 2012. The Bill provides for the same increases in motor tax as contained in the financial resolution, namely an increase of 7.5% applied across most categories of vehicle and to trade licences. As set out in the financial resolution, there was an exception for private vehicles in the lower CO2 bands A to C with higher flat rate increases. Band A rises from €104 to €160, Band B rises from €156 to €225 and Band C rises from €302 to €330. It is anticipated that the proposed increases in motor tax rates will raise some €46.5 million extra in respect of 2012.

As announced in the budget, broader or longer-term changes to the motor taxation system are to be considered as part of the review of the carbon banding of VRT and motor tax currently under way. This review is being carried out jointly by the Minister for Finance and by myself as Minister for the Environment, Community and Local Government. It is my intention that the twin priorities of ensuring the protection of the tax base and revenues under both headings and the positive environmental impact of the existing basis of taxation will be carried through to the future. A consultation paper is available on the Department of Finance website and the closing date for submissions is 1 March next.

While the levels of increase announced for the lower CO2 bands are higher in percentage terms than the rest of the fleet, they must be viewed against a structure that left the bottom rates very low. It is also important to note that the underlying structure of the banding system has not been changed, and there remains a positive incentive to purchase low CO2 cars.

It also must be remembered that, while the introduction of the CO2 bands was designed to encourage a switch to lower emission vehicles, the changes were introduced on a second principle of revenue neutrality. It has always been the intention that the motor taxation system is kept under review to ensure that it meets these twin objectives over the years. The reality is that there has been a significant loss of motor tax income over recent years as the number of vehicles taxed on the basis of CO2 emissions has increased by about 5% year on year. At the end of January 2012, the CO2 fleet of cars comprised 18.8% of all cars on the road. Of these, more than 315,000, representing 89% of the CO2 fleet, are taxed at the three lowest bands. While this is very welcome from an environmental perspective, it has represented an increasing loss to the local government fund.

Receipts have been reduced from €1.06 billion in 2008 to €1.01 billion last year. Following the budget, the average motor tax payment for vehicles in the CO2 system is €274. For those taxed on engine capacity, the average payment is €478. Once the older cars are all replaced by cars taxed on the basis of CO2 over the next 15 years or so, it is estimated that total motor tax from cars will fall by more than 40%. In the current economic circumstances and given the need to maintain a diversified and stable taxation system, this loss of income represents an opportunity cost that must be rectified.

Deputies will be aware of the significant role that the local government fund has played in the financing of local government since it was established in 1999. The fund has hitherto been financed from a combination of an Exchequer contribution and the full proceeds of motor taxation. However, in this instance, the increase in income from the proposed rate increases will be transferred to the Exchequer. This is a necessary measure towards the reduction of the national debt. The wording of an amendment to the Local Government Act 1998 to allow for the legislative underpinning of such a transfer is close to finalisation and I will introduce an additional section to the Bill on Committee Stage.

Exchequer funding of local authorities' day-to-day activities cannot be immune as part of the effort to close the gap between income and expenditure in the public finances, and the Members will already be aware that the 2012 Exchequer allocation to local government has been reduced by €164 million compared with 2011. However, I stress that the Government is committed to supporting the local government fund and it will retain the income from the existing rates of motor tax. The establishment of the local government fund and its funding, in part, from motor tax receipts has created an important link between the amount of tax paid by motorists and the visible and concrete service they get for that tax in terms of better roads. An amount of €404.7 million has been allocated to the Department of Transport from the local government fund for 2012 for roads and public transport infrastructure.

Turning to the provisions of the Bill, it contains six sections and a Schedule. Section 1 and section 6 are procedural. Section 2 sets out that the rates apply to licences taken out for periods commencing on or after 1 January 2012. Section 3 provides for the Schedule to the Bill, which contains the new rates, to replace the existing Schedule in motor tax legislation. Section 4 provides for the increase to apply to vintage or veteran vehicles. It also contains a minor amendment to the definition of "CO2 emissions". Section 5 provides for the increases that apply to trade plates and replacement trade plates. The Schedule sets out the new annual motor tax rates for all other vehicles.

I would like to highlight to the House what the new tax rates means in real cash terms in regard to private cars and goods vehicles which make up over 91% of the national fleet. For private cars taxed on the basis of engine size, the extra cost will be between €13 and €35 a year for vehicles up to 1,700 cc. This relates to 68% of all cars taxed on engine capacity. For cars up to 2.5 litres the annual increases will be from €41 to €70 and from 2.5 litres upwards, which account for 2.5% of the engine capacity fleet, an additional €84 to €117 per year. For vehicles taxed on the basis of CO2, the D to G bands increase by between €34 and €158 per year. For cars in Band A, which account for 26.1% of the CO2 car fleet, the annual rate increase is €56, from €104 to €160. For cars in band B, which account for 45.7% of the CO2 car fleet, the annual rate increase is €69, from €156 to €225. For cars in band C, which account for 16.9% of the CO2 car fleet, the annual rate increase is €28, from €302 to €330. Again, I must stress that these increases apply to rates that were set at very low levels.

For goods vehicles, the effect of the 7.5% increase will vary depending on the size of the vehicle in weight terms,. Some 90% of vehicles in this category are at the lowest level of charge, meaning that they will pay €310, representing an annual increase of €13 or 25 cent per week.

The vehicles that make up the remainder of the national fleet consist mainly of agricultural vehicles, motorcycles, vintage vehicles and small public service vehicles. All these vehicles have a separate tax class with a concessionary rate of tax on or under €95 after the increase of 7.5% has been applied.

A 7.5% increase is also proposed for trade licences, or trade plates as they are known. These are the registration plates used by motor traders on vehicles, which are temporarily in their possession, in lieu of taxing such vehicles. While there are strict restrictions on the use of the plates, they are transferable between vehicles. The increase for a pair of trade plates will be €23 per annum.

Three minor technical amendments are also contained in the Bill. Section 4 contains a minor technical change to relate the definition of "CO2 emissions" directly to the Finance Acts definition used for VRT purposes. The amendment in this Bill means that all the relevant definitions are common to both motor tax and VRT and ensures uniformity across both tax systems.

Part 4 of the Schedule provides for an amended definition of motor caravan. Between 1998, when a concessionary rate for motor caravans was first introduced, and 2010, the same definitions applied for VRT and motor tax purposes. The Finance Act 2010 amended the definition of motor caravan for VRT purposes to ensure conformity with an EU definition. This is the first opportunity to make a parallel amendment to the Finance (Excise Duties)(Vehicles) Act 1952 to apply the same definition for motor tax purposes. Different definitions for VRT and motor tax purposes give rise to potential confusion and the possibility of different regimes for the same vehicle under both codes.

The final amendment relates to the change in classification of passenger vehicles from category A to the EU-defined category M1. This is contained in part 6(g) of the Schedule. A provision was introduced in the Motor Vehicles (Duties and Licences) (No. 2) Act 2008 to provide that passenger vehicles registered elsewhere in the first half of 2008 and subsequently registered in the State were eligible for taxation on the basis of CO2 emissions. Passenger vehicles were classified as category A vehicles at the time.

From 1 January 2011, the Revenue Commissioners introduced a revised vehicle categorisation system for VRT purposes. The revised system reflects the categories used for the classification of vehicles at European level, as set out under a number of EC directives, including those relating to the type approval of passenger vehicles. Where a new or used vehicle is being registered in the State, use of an EU vehicle classification is now mandatory. The amendment to the Schedule reflects the current VRT EU classification for motor vehicles. The EU classification is equivalent to the pre-2011 Revenue VRT category, that is, EU classification M1 is normally equivalent to Revenue category A passenger vehicles and accordingly liability for motor tax will remain unchanged. Again, the purpose is to ensure uniformity between the tax codes and consistency of treatment of vehicles.

I will be proposing a further section to the Bill on Committee Stage intended to ensure that vehicles registered in the first half of 2008 are fixed on one system of charging for motor tax, that is, either on the basis of engine capacity or on the basis of carbon emissions, as applied to each vehicle type in the period from 2008 to budget 2012.

The background is as follows. The Motor Vehicles (Duties and Licences) Act 2008 introduced the system of motor taxation based on the CO2 emissions for private cars registered from 1 July 2008. It also inserted a provision, in paragraph (6)(f) of Part 1 of the Schedule, that new cars registered between January and June 2008 shall pay motor tax on the basis of CO2 emissions from 1 July 2008, where the CO2 rate would have been lower had the relevant provisions applied. This was a concession to purchasers of vehicles in the first half of the year to allow them benefit from the generally lower rates of motor tax based on CO2 emissions.

Using different wording, a similar provision was subsequently made in the Motor Vehicles (Duties and Licences) (No. 2) Act 2008 so that imports first registered outside the State between 1 January and 30 June 2008 could avail of the lower of the two rates. This is laid out in paragraph (6)(g) of Part 1 of the Schedule to the Motor Vehicles (Duties and Licences) (No. 2) Act 2008.

The first increase in rates since that time was in budget 2012. The approach taken in Financial Resolution No. 2 was to replicate the provisions of the legislation generally, including paragraphs (6)(f) and (6)(g) in respect of vehicles first registered between January and June 2008, and to list the increased rates of tax against each category of vehicle. This has had an unintended consequence for the rates that apply to a small number of vehicles first registered outside the State between January and June 2008, mainly those in CO2 band B, with an engine capacity of less than 1,000 cc. Hitherto, the CO2 band B rate was lower than the engine capacity rate, at €156 annually as opposed to €172. Following the increase, the CO2 rate is €225, whereas the current engine capacity rate is €185; post-budget, the CO2 rate is now €40 higher, rather than €16 lower as it was pre-budget.

When this inadvertent effect became evident over the Christmas period, refunds were made to two owners who had already paid at the incorrect rate. Arrangements were also made to switch affected vehicles due to be taxed to the engine capacity rate, and this is currently being done on a month-by-month basis. It is estimated that over the course of the year, some 67 vehicles in total are involved.

There is now an inequity in the system whereby a particular group of vehicles, i.e. the specific cohort of second-hand imports referred to above, are switched to the lower of the two applicable rates as changes to motor tax rates occur. At present, a very small group of vehicles is affected; however, as rates are likely to change over the coming years, including as a result of the current review of VRT and motor tax, there is potential for a greater number of vehicles to fall to be switched back and forth between the two systems of taxation. This was never the intention when CO2 taxation was introduced in 2008, and aside from potentially increasing inequity in the treatment of taxpayers, it would be administratively very difficult to manage and explain. I intend to ensure that the taxation structure that applied immediately pre-budget will continue into the future for affected vehicles.

There is also the potential for alternative interpretations to be taken from the wording of the provisions relating to vehicles registered in the State in the first half of 2008. This is interpreted, as intended, that vehicles remain in the taxation structure applied to them in respect of licences taken out after 1 July 2008. However, the wording of the provision is such that it is also potentially possible to interpret it as meaning that the CO2 rate should be paid only where it is less than the prevailing cubic capacity rate for the vehicle. Again, it was never the intention, on the introduction of the 2008 Act, that such vehicles would be able to flip back and forth depending on which basis of taxation was more favourable at a particular time. Rather, the intention was that such vehicles would move permanently to the CO2 system of taxation. I see no equitable justification for treating vehicles registered in the first six months of 2008 more favourably than all other vehicles. Accordingly, I will be proposing on Committee Stage to provide that vehicles first registered outside the State in the first six months of 2008 will, from the date of enactment of the Bill, be fixed on whichever of the two charging systems (CO2 or engine capacity) applied to them prior to the recent rate increases. I will also propose, for the avoidance of doubt, to provide that vehicles first registered in the State between January and June 2008 are also fixed on whichever of the charging systems applied prior to the rate increases. This provides equity with respect to all other vehicles registered after 1 July 2008, for which owners have no choice in the matter but are locked into the CO2 system.

In summary, this is a short Bill with the purpose of giving permanent legal standing to the increases in motor tax introduced by the Financial Resolution passed by Dáil Éireann on 6 December 2011. I commend it to the House.

Deputy Niall Collins

This Bill is a breach of trust for motorists who purchased environmentally friendly cars since 2008. The financial incentives established in July 2008 to encourage drivers to switch to fuel-efficient cars with low CO2 emissions was a core feature of efforts to tackle climate change. This Bill erodes the progress made on placing environmental concerns at the heart of public policy. It penalises those motorists who took the decision to use environmentally friendly cars by shifting the goalposts in the middle of the game. It sets a deeply unfortunate precedent of backtracking on efforts to tackle climate change.

The Bill gives a permanent legislative basis to the increases in motor tax rates and trade plate licences contained in the December budget. The Bill increases the motor tax rates for vehicles in CO2 bands A and B by 54% and 44%, respectively. For all other vehicles, except for certain exempted vehicles, and trade plate licences, the increase is 7.5%. This is the first increase in motor tax since 2008 and has been in effect since 1 January 2012. These increases are expected to yield an additional €46.5 million yearly. The choice to buy clean and green has been hit with €56 and €69 fees. These costs will be disproportionately borne by those motorists who in good faith availed of incentives to buy low CO2 emission vehicles.

This specific targeting of environmentally friendly cars is a regressive move by the Government that cannot be defended on purely revenue-based grounds. In our pre-budget submission we recommended a 5% rise in motor tax across the board, which does not rescind the environmental platform that Fianna Fáil built up while in Government.

Given the clear disregard for environmental concerns that underpinned this decision, it is worth looking back on the issues that originally led to the creation of incentives for low CO2 emission cars. The pressing global challenge of climate change is the backdrop to our efforts to encourage environmentally friendly driving. The comprehensive Stern Review on the Economics of Climate Change, published in 2006, points out the grave threats that climate change represents and the action we need to take to rise to this challenge. We should reflect upon the threats the Stern review sets out, which are as follows: all countries will be affected by climate change, but the poorest countries will suffer earliest and most; average temperatures could rise by 5°C from pre-industrial levels if climate change goes unchecked; warming of 3°C or 4°C will result in flooding for many millions of people; by the middle of the century, 200 million may be permanently displaced due to rising sea levels, heavier floods and drought; and warming of 4°C or more is likely to affect global food production seriously, while warming of 2°C could leave between 15% and 40% of species facing extinction. Before the Industrial Revolution the level of greenhouse gases in the atmosphere was 280 parts per million CO2 equivalent; the current level is 430 ppm CO2 equivalent. The level should be limited to between 450 ppm and 550 ppm CO2 equivalent, as anything higher would substantially increase the risk of very harmful impacts, while anything lower would impose very high adjustment costs in the near term and might not even be feasible. Climate change is the greatest and widest ranging market failure ever seen.

Those are the threats that we face. The report points to a number of actions that need to be taken. Three elements of policy are required for an effective response: carbon pricing, technology policy and energy efficiency. Carbon pricing, through taxation, emissions trading or regulation, will show people the full social costs of their actions. The aim should be a global carbon price across countries and sectors. Emissions trading schemes such as that operating across the EU should be expanded and linked. Technology policy should drive the large-scale development and use of a range of low-carbon and high-efficiency products. The economic and quality-of-life issues raised by climate change are stark, and the benefits of strong, early action considerably outweigh the costs. Unabated climate change could cost the world at least 5% of GDP each year; if more dramatic predictions come to pass, the cost could be more than 20% of GDP. The cost of reducing emissions could be limited to around 1% of global GDP, with people being charged more for carbon-intensive goods. Each tonne of CO2 we emit causes damage worth at least $85, but emissions can be cut at a cost of less than $25 per tonne. Shifting the world onto a low-carbon path could eventually benefit the worldwide economy by $2.5 trillion per year. What we do now can have only a limited effect on the climate over the next 40 or 50 years, but what we do in the next ten to 20 years could have a profound effect on climate in the second half of this century.

This major global challenge is the backdrop to the Government's decision in 2008 to encourage the use of environmentally friendly cars. It was part of holistic efforts to ensure Ireland fulfilled its duty and obligation to tackle global warming. The Government's decision to reverse this progress, betray environmentally conscious motorists and delay publication of a climate change Bill until 2013 indicates a failure to appreciate the gravity of the crisis and take action to tackle the core causes.

The decision to incentivise low CO2 emission vehicles is having a real impact on Ireland's efforts to contribute to tackling climate change. A total of 88% of new vehicles since 2008 have been purchased in the A to C bands as motorists have responded to the incentives, switching from high emission cars to low CO2 emission vehicles. This switch was made on the basis of the financial incentives provided, but the Government is now jeopardising that progress.

Last year the Environmental Protection Agency, EPA, published provisional estimates of Ireland's greenhouse gas emissions between 1990 and 2010. In 2010 emissions from transport accounted for 14% of all greenhouse gas emissions. After 2007 there was a clear drop-off in the level of emissions from transport which coincided with the switch from taxation based on engine size to CO2 emissions for new cars. In the three years from 2008 to the end of 2010 emissions from transport declined by a cumulative 18%. While there are other factors at play such as the recession, the EPA has stated "changes to vehicle registration tax and road tax introduced in mid-2008" is having an effect on emissions reductions. Rescinding the motor tax incentives and making environmentally conscious motorists bear the burden of tax increases will damage the steady progress Ireland has made in curbing transport emissions. The good work the EPA has noted will be undone by this decision.

Let us look at the impact the Bill will have on the motorist's pocket and the broader issue of transport costs. In a recent Eurobarometer survey of the issues Irish people ranked as the most important facing them personally, cost of living was ranked highest by 44% of respondents. The Bill compounds these concerns for the motorists who purchased low emission cars in the past few years. Motorists in the A band will pay an additional €56, a 53.8% increase; motorists in band B face a €69 increase, a 44.2% increase; motorists in band C will face a 9.3% increase, while those in bands D to G face a 7.5% increase. The choice to buy clean and green has been hit with an increase of €56 and €69 in fees, respectively. This amounts to a breach of trust. How seriously can we take future promises on incentivising environmentally friendly purchases when previous commitments are not honoured?

It would be remiss of me not to place these hikes in the context of broader fuel price increases and rising costs for transport across the board. According to the AA's research, the price of a litre of petrol has gone up by 2.1 cent since last month, while the price of diesel has gone up by 1.3 cent a litre. The AA states a weaker euro and high wholesale fuel costs across Europe are factors in the price hikes. However, it specifically criticises fuel taxes as the major cause of ramping up fuel prices and hitting motorists hard. The cost of petrol has hit €1.60 a litre and is heading towards €1.70 in some stations. Rising fears about the impact of the Iranian oil embargo and the volatile situation in the Middle East, exacerbated by the euro crisis, mean the €2 a litre barrier could potentially be breached.

As the price of oil has broken the $120 a barrel barrier, the need to address fuel costs should be pressing for the Government. Tackling these costs will be vital to ensuring Ireland remains competitive and the domestic economy will have an opportunity to expand. The decline in consumer spending and the erosion of take-home pay are undermining the potential for economic growth. Tackling fundamental transport costs, therefore, cannot be ignored by the Government. The Bill, however, further hits certain motorists in the wallet, with other price hikes resulting from the 2% increase in VAT.

The connection between the rate of tax one pays and the CO2 emissions from one's car was at the heart of the introduction of the CO2 based bands in 2008. It ensured there would be a link in the motorist's mind between driving an environmentally friendly car and paying a low rate of motor tax. This decision erodes that connection. It downgrades the importance of environmentally sound practices at the heart of broader public policy. Specifically, it downgrades the use of taxation to pursue a broader goal, whereby people are given the opportunity to directly respond to monetary incentives. The overarching goal of combating climate change, one of the most serious challenges we face globally, has been neglected by the Government.

Compounded by broader increases in fuel prices, the Bill hits motorists who purchased cars in good faith, in the knowledge that they would enjoy lower costs because their cars formed part of broader efforts to tackle climate change. If the Government takes the issue of climate change seriously, it must take a proactive approach to establishing incentives to shift attitudes and behaviour. Penalising those motorists who responded to such worthwhile efforts is a retrograde step that sets an unfortunate precedent for future public policy. Government efforts will be viewed more sceptically and the response will be more muted than the resounding success of this effort to encourage low CO2 car purchases.

I call on the Government to review its decision, affirm the importance of using public policy to pursue key environmental goals and set out its priorities in establishing real, meaningful incentives in tackling climate change.

Deputy Michael Colreavy

I am speaking on behalf of Deputy Dessie Ellis.

The Bill implements increases in motor vehicle tax and trade plate licences and, as the Minister said, provides for some technical changes. After 1 January, flat rate increases in the different tax bands for private vehicles were imposed. The increases range from 7.5% in bands D and G, the worst bands in terms of emissions, to much higher increases for low emission vehicles, with the A and B bands being increased by 54% and 44%, respectively. That will still leave band A at half the price for band C, but this increase cannot be wrapped in a cloak of environmental concern. It is purely a revenue raising measure, which the Minister should acknowledge.

Sinn Féin recognises the gap between revenue and spending in the State and the need to increase revenue through taxation. We are often accused of not understanding the need to close this gap which we understand must be closed. However, the measures being adopted by the Government are, frankly, an attempt to fool people into believing they are not being taxed unfairly. In fact, they are subject to many stealth taxes and charges which they must pay from their dwindling pay packets each week. Fine Gael, in particular, likes to describe itself as a low tax party, but I would describe it as a stealth tax party. These stealth taxes are strangling people who are struggling to keep their noses above water every day, week and month.

I have heard Ministers talk in this Chamber about the hard choices they must make in government. The ones who must make the really hard choices are those who must make a choice between purchasing a refill of heating oil and paying rent for a private house and between sending a child for further education and putting food on the table for the rest of their children. The hard choices are being made by families with children. They have to decide whether to stay here and be unemployed or emigrate. It is people like that, and not Ministers or politicians, who are making the hard choices. They are making those hard choices because of us.

The Government must recognise that the way to address the shortfall in revenue is to introduce real taxation reform. This is absent from all the piecemeal increases we see day and daily. The Government must begin to understand that we live in a woefully unequal society which takes a great proportion of income from low and middle income earners and provides fewer and fewer rights and entitlements to public services. Sinn Féin argued that the introduction of a wealth tax and a higher rate of income tax would go a long way towards raising the real funds needed for the running of the State and the provision of our services.

Another simple option which could be implemented in a Bill such as this would be the introduction of a higher tax rate for the, so called, luxury cars that are the preserve of those the Government is so unwilling to make pay their fair share in other taxation measures.

While the Bill will make it harder for ordinary folk to keep a car, several other Government measures are making it more difficult for them to avail of public transport, with cuts in public transport, closure of some services and fare increases on the remaining services. People are angry when they see how the money that is being taken from the people is being used. There are bonuses for super junior ministers, the Chief Whip and committee chairmen and junkets by committees, including that of the Joint Committee on the Environment, Transport, Culture and the Gaeltacht to oversee St. Patrick's Day festivities, never mind the billions in bondholder pay-offs, the money for NAMA developers and tax cuts for those earning between €75,000 and €300,000 a year. The people who are making those very hard and very real choices are angry because they see that the money being taken from them is not being invested properly.

The Bill has no strategy or vision for the future. It is simply a revenue raising operation targeted at people who cannot afford any more and who have already taken so much on the chin. The Minister for Transport, Tourism and Sport, Deputy Varadkar, said the income of ordinary people would not be touched by the budget. That was untrue. The Bill is a small example of that untruth. Ordinary people are adversely impacted by these increases.

This is particularly true in rural areas. The lack of rural transport infrastructure means that people are even more dependant on their vehicles. There have been cuts to rural transport schemes and rising fuel prices. The Minister, Deputy Phil Hogan, must have been very good at division when he was at school. When he admonished those of us who opposed the household charge he said it was only €100 a year.

Deputy Phil Hogan

I did not say that. I said it was only €2 a week.

Deputy Michael Colreavy

I thank the Minister. It was €2 a week. Today, he spoke about the annual tax increase of €13 a year, or 25 cent a week. The Irish Independent of Monday 30 January, following an investigation, pointed out that for the first time ever the cost of running the average family car had exceeded €100 per week. Where is the 25 cent per week there? That figure did not include depreciation.

This is a Bill and a Government without vision or a strategy for where we want to see the country positioned. This is a Bill and a Government that should be changed.

The Bill will pass, because the Government has the numbers in the Houses, but people will still be angry and I will still stand here trying to express their anger. I do not know how long it will take to make a difference, but a difference will be made.

Deputy Thomas Pringle

With the permission of the House, I will share my time with Deputy Healy-Rae.

Deputy Acting Chairman ( Ciarán Lynch)

Is that agreed? Agreed.

Deputy Thomas Pringle

I welcome the opportunity to contribute to the debate on the Motor Vehicle (Duties and Licences) Bill 2012.

The Bill implements the increases in car tax announced on budget day which are intended to raise an extra €46.5 million in revenue during the year. The increases in car tax will be difficult for people in a number of ways. There are huge tax increases in relation to CO2 emissions from vehicles. Changes range from 7% to 54%, depending on the band of the vehicle. The main changes on the A and B bands are 54% and 44% respectively. This is a betrayal of the people who, luckily for themselves, were in a position to purchase a vehicle since 2008 and avail of the lower tax rates on cars with lower CO2 emissions. They felt they were contributing to an environmental improvement by purchasing and using a vehicle that had lower emissions. There was a reward for contributing to an overall reduction in carbon dioxide emissions.

The increase of 7.5% across the board on all private vehicles is a regressive step. It penalises people who were not in a position to purchase newer vehicles in recent years and who, through no fault of their own and particularly in rural areas where there is no public transport, depend on the car to look for work and stay in work. An increase of 7.5% is a huge burden on those people.

People who purchased diesel cars because they were more economical to run will see significant increases in their motor tax because of the implementation of the Bill.

People are right to feel a sense of betrayal. The Minister spoke about the need to maintain a diversified and stable taxation system and said the loss of taxation income represents an opportunity cost that must be rectified. It is unfair for the Government to look for opportunities to generate more funding and to squeeze more out of hard pressed people who are dependant on cars in their daily lives. The Bill will place a huge burden on them.

Even more galling is the fact that the increased revenue generated will go straight to paying off the national debt. The €46 million raised by these taxation measures will make little difference to the more than €80 billion worth of debt, or even to this year's interest payments. It is a mere drop in the ocean.

This also represents a betrayal of the local government fund. Since 1997, revenue from car tax has been ring-fenced for the local government fund, providing much needed funding to local authorities. These increases will go towards writing down debt. We expect further increases over the next couple of years, solely to write down our debt to the IMF the ECB and the European Commission. It sticks in the people's throats. They see the real reason behind this increase in motor tax as solely being to deal with that debt. It is not to increase revenue or services, to copperfasten any reductions in carbon dioxide emissions or to further develop the system. It is only to hand back to the troika and ensure it is kept happy by the €46.5 million that will be generated this year from the increase. That will surely make an impact on the €4.5 billion in interest payments alone this year on our debt.

I suppose it shows the level to which the troika and the Government are prepared to go to squeeze extra money out of people who are already suffering in terms of the household tax, the septic tank charge, the universal social charge, cuts in wages, unemployment and cuts in social welfare. It is a slap in the face for people to see that this €46 million will merely be transferred directly to the troika. For that reason, the amendment the Minister proposes to bring forward to alter the Local Government Act to allow for this money to be transferred directly to the Exchequer should be opposed.

There has been a cut in local government funding already this year. It was announced on budget day that it will be reduced by €173 million, not €164 million as the Minister outlined in his speech. It shows that there will be further cuts in local government services. The argument that paying charges helps to increase and support services does not stand up because there will be further cuts in the services available through local authorities in order that money can be passed back to the troika to fund the totally unsustainable debt.

Dáil Éireann debate - Wednesday, 22 Feb 2012

Motor Vehicles (Duties and Licences) Bill 2012: Second Stage

Deputy Acting Chairman ( Ciarán Lynch)

Dáil Éireann debate -
Wednesday, 22 Feb 2012