The origins of this Bill were established with the passing in the Dáil on 8 March last of a financial resolution which essentially amended the Finance (Excise Duties) (Vehicles) Act, 1952, and the Finance (No. 2) Act, 1992, in relation to rates of motor taxation and trade plate licences. The resolution has, however, only limited statutory effect and needs to be replaced by a Bill which provides a permanent legal base.
The primary purpose of the Bill gives effect to the increase in motor taxation of between 4% and 6% for private cars and 6% on goods vehicles with effect from 1 April 2001. It provides for a reduced rate of motor taxation for vehicles kept exclusively on an offshore island. Furthermore, it expands on the categories of vehicles to be exempt from payment of motor tax in that it includes in this exemption the category of vehicles which are used exclusively for mountain and cave rescue purposes as well as vehicles which are used exclusively for underwater search and recovery purposes. Finally, the Bill provides the euro rate of motor tax arising from the introduction of euro currency from 1 January 2002.
To an extent, the rebalancing of the motor tax rates will "green" motor tax. While motor tax cannot be regarded, in itself, as a green tax, we can nevertheless configure the motor tax code to give it a greener slant, which will hopefully have positive environmental effects. On this premise, lesser increases in motor tax are applying to cars with smaller capacity engines which, as a general rule, do not use as much fuel as larger cars and, accordingly, create less harmful environmental side effects, particularly in relation to lower carbon dioxide emissions.
By way of information, the moneys collected by the motor tax offices of the local authorities are paid directly by them into the local government fund which was established under the Local Government Act, 1998. The motor tax proceeds in the fund are supplemented by an Exchequer contribution, which is increased each year at least in line with inflation. For example, this year the fund will amount to about £720 million, of which £319 million will be contributed by the Exchequer and about £400 million will come from motor tax receipts. This amount is being used primarily to finance non-national road grants and general purpose block grants for local authorities.
The importance of this source of income to local authorities cannot be over-emphasised. It greatly assists them in not only upgrading the country's non-national road system but also in providing adequate funding for whatever day-to-day operations they consider necessary. If local authorities are to meet the ever increasing demands being placed upon them, then it is incumbent on all of us to ensure that they are adequately financed in their endeavours. This is the great benefit of the local government fund as its resources, through general purpose grants, can be directed by local authorities to cover the areas of local priority, including maintenance of housing, roads, water and sewerage, fire services, the natural environment, community development, etc. The list is endless.
The motor tax rate changes, to which I referred earlier, came into force on 1 April 2001. In the rebalancing of the rates, it will be noted that, while there were increases in certain categories of vehicles, in other categories no increases have been applied, in one category a reduced rate is being introduced and two classes of vehicles have been added to the exempt status from payment of motor tax. I will outline these in more detail for the House.
The increases are as follows. First, a 4% increase for private cars up to 1,100cc which represents an annual rate increase of between £4 and £6. Second, a 5% increase for private cars from 1,101cc to 1,500cc which will result in annual increases of between £8 and £10 and, third, a 6% increase for private cars of 1,501cc and over, which will translate into annual increases ranging from £15 per annum at the lower end of this bracket to £51 for private cars over 3,001cc. These increases cannot be regarded as excessive, especially as almost two thirds of the current vehicle population is under 1,500cc and will, therefore, be subject to relatively low increases.
An across the board 6% increase is provided for goods vehicles. This, in effect, will in the majority of cases represent an approximate annual increase of £10, as over 80% of commercial vehicle owners pay the minimum rate. Motorcycle tax rates have been revised to reflect the different sizes of these vehicles. The single rate of £22 is being replaced by the three bands, which existed prior to 1992. The new rates range from £25 for motorcycles of 75cc and under, £35 for those at 76cc to 200cc and £45 for motorcycles of 201cc and over. In this regard, the maximum rate for the higher cylinder motorcycles of £45 compares very favourably with the £40 rate for the similar cc band which operated prior to 1992. The motor tax class of vehicles which are classified as machines, workshops and recovery vehicles has been brought into line with the goods vehicle rate, the minimum of which is £170.
The Bill provides for a 6% increase for agricultural tractors. The rate for non-agricultural or general tractors is being aligned with the minimum goods vehicle rate of £170 in view of the purpose to which such vehicles are being used. In addition, the Bill provides for average increases for trade licences or trade plates by which they are commonly known. These are green registration plates used by motor traders on vehicles, which are temporarily in their possession, in lieu of a tax disc on the vehicle.
There are some categories of vehicles where no increases were invoked. These include public service vehicles such as buses, taxis and hackneys and youth-community buses, school buses and electric vehicles. A reduced rate of tax, £52, is being introduced for vehicles which are kept and used exclusively on offshore islands not connected to the mainland. This reduction is in recognition of the limited use of such vehicles.
Motor tax is being abolished for vehicles used exclusively for mountain and cave rescue pur poses and for vehicles used exclusively for underwater search and recovery purposes. Both of these classes join the exempt category which include ambulances, fire brigade vehicles, civil defence and disabled vehicles, that is, full motor tax exemption is now being accorded to all vehicles used in emergencies.
While not specifically covered in the Bill, provision has been made in regulations which came into effect on 1 April 2001 to assist people who may face difficulty in taxing their cars on a full year basis. These regulations provide for a reduction in the surcharge which applies to vehicles which are taxed half-yearly or quarterly. The savings envisaged on a half-yearly disc equate to an annual saving of £2 up to the middle cc band rates, rising to £8 in the two highest bands. Savings in respect of a quarterly disc of £4 annually will arise for the two lowest bands, increasing to £8 in the highest bands.
Aside from the motor tax element, the Bill also empowers the Minister to vary the cost of full driving licences by regulation. Driving licence fees for provisional licences are already prescribed by regulation. The extension of this regulatory power to full licences will enable the undertaking of a review of the overall driving licence fee arrangements so as to introduce a more equitable licence fee arrangement for persons aged more than 70 years. Enacting legislation will be required to enable these arrangements to be implemented. This Bill is the vehicle for this change. As soon as it is enacted it is intended to proceed quickly with the necessary regulatory changes for the introduction of this more equitable system.
Under existing legislation, given that motor tax proceeds are paid into the local government fund for local authority use, costs incurred by the Department in connection with the collection of motor tax are recoupable from the fund. Aside from motor tax, fees from driver licences and other minor miscellaneous fees and duties are also paid into the fund for distribution to local authorities. Even though such fees are paid into the fund, the Local Government Act, 1998, does not specifically refer to the recoupment from the fund of the costs associated with the administration of these fees. As with the costs associated with the collection and administration of motor tax, it is considered that the same provisions should apply in respect of driver licences. Section 7 provides for this.
With the introduction of the euro notes and coins from 1 January 2002 the Bill provides the euro rates of motor tax. The euro amounts were arrived at by dividing by the euro converter, 0.787564, disregarding cents. This approach not alone ensures that motor tax offices continue their practice of handling whole units of currency but will also provide for a reduction in motor tax to all customers. Savings vary from under a euro for annual renewals to over one euro for half-year applications, and one to three euro for quarterly renewals.
The Bill is the necessary legislative requirement to the Financial Resolution for motor tax changes which have been in place since last April. The motor tax increases are, by and large, minimal and below the level of inflation. The increases are more than balanced by the benefits which the additional income will generate. They will greatly assist in improving the capabilities of local authorities in providing an improved customer service to all its customers. In addition, they will also be a factor in our campaign in the improvement of our environment by encouraging the continued use of smaller capacity cars.