Car Scrappage Scheme.

Gabhaim buíochas as an seans an ráiteas seo a phlé. Is é mo chéad rún ar an Adjournment.

When the car scrappage scheme was introduced in the budget last December it had the effect of bringing confidence back to the car industry. Confidence is an intangible concept and is of critical importance to consumers in their respective markets and I welcome that it has returned to the motor industry.

The year 2009 was anannus horribilus for the car industry, with sales plummeting, reduced working times for staff and job losses. This year has seen definite improvements for all involved in car dealerships. First, this month the Central Statistics Office released figures that show a 30.5% increase in year on year growth recorded in the motor trade in February 2010. Second, other figures released by the CSO show that 12,379 new cars were licensed in March, a jump of 68.5% from the same month last year. Third, at the end of March some 42,500 new cars were registered in the State, yielding €159 million in VRT for new cars alone with a further €125 million from VAT on new cars. Sales of new cars were up 31% for the first three months of this year.

However, the work to rule by many Revenue staff members who deal with queries and process applications from dealerships in this regard has been a significant issue. I have been in contact with several Ministers and have been contacted by a number of car dealers in recent weeks and this is the reason for my Adjournment matter.

A key point to remember is that the profit car dealers were making on a sale was often equal to or less than the value of the car scrappage scheme allowance of €1,500. A number of dealers with whom I spoke are really feeling the pinch in not having this vital cash flow to assist their businesses.

As I said, confidence is a vital intangible concept and Irish consumers need to release their spending power. Confidence was rocked because of the recession and the ratio of people's savings sky-rocketed towards 8%. With steady national leadership in regard to public finances coupled with businesses reducing their prices we can hope the saved money will begin to be released and pumped through the veins of the private and commercial sector which has been struggling enormously to date.

I understand there has been movement on this matter and look forward to the Minister of State's reply.

I take this Adjournment matter on behalf of my colleague, the Minister for Finance, Deputy Brian Lenihan. I welcome the opportunity to explain to Members of this House the background to the scrappage scheme and to clarify the status of the repayment to car dealerships since the scheme began on 1 January 2010.

During the second half of 2008 and in 2009 there was a very considerable reduction in the sale of cars, especially new cars. The sharp decline in new car sales was an international phenomenon not unique to Ireland. Scrappage schemes were introduced in a number of EU member states with a view to assisting the motor industry. Such schemes assisted in slowing and in some countries reversing the significant declines in new car sales. Various sectors of the motor industry in Ireland sought the introduction of a car scrappage scheme to assist the sector, especially given the likely employment consequence further reductions in car sales would have. The Commission on Taxation also recommended that the introduction of a focused scrappage scheme should be considered in certain circumstances.

In that context the Government decided to introduce a car scrappage scheme aimed at replacing old cars with low CO2 emission cars. The Minister for Finance announced the scrappage scheme in his Budget Statement on 9 December 2009 and it has been enacted through the Finance Act 2010.

In summary the scrappage scheme operates from 1 January to 31 December 2010. VRT relief of up to €1,500 is available upon registration of a new vehicle, subject to the scrappage of a qualifying old vehicle. The VRT relief is provided where a new category A, or passenger car of emissions band A or B with CO2 emissions of 140g/km or lower is purchased and registered and an old car is scrapped.

To qualify for relief, the scrapped vehicle must have been registered in the State in the name of the purchaser of the new car for at least 18 months previous to the date of scrappage; on the day of scrappage be ten years old or more from the date of first registration; be scrapped on or after 10 December 2009 and no later than 31 December 2010; be scrapped within 60 days of the date of the new car being registered, or have been scrapped within the previous 60 days of the date of the new car being registered; have a valid NCT certificate of roadworthiness, or one that has expired no more than 90 days prior to the issue of the certificate of destruction, or documentation to indicate that it has been presented for and failed an NCT roadworthiness test in the previous six months; and have been insured for use on the road for at least 12 months in the 18 months prior to the issue of the certificate of destruction.

For the purposes of the scheme the term "scrapped" means that the old car has been taken to an end of life, ELY, authorised vehicle treatment facility and a certificate of destruction issued by the facility in respect of the car. In designing the scrappage scheme, one of the aims was to ensure the administrative burden on the State would be light. Accordingly, the scheme was designed so the onus was on the dealer to ensure the conditions were met. The legislation provided that all the paperwork associated with each claim would be kept by the dealer for a period of four years so in future audits the dealer's operation of the scrappage scheme could be examined by Revenue officials.

In furtherance of this aim, the claim form designed for the trader was also simplified to the extent that only four pieces of information were required by Revenue for each scrappage claim, namely, the registration number of the new vehicle, the registration number of the scrapped vehicle, the number of the certificate of destruction issued in regard to the scrapped vehicle and the amount claimed. In addition, the scrappage relief for up to 15 vehicles could be claimed on the one form.

The system was designed so that, on successful processing of a claim, a cheque was not issued to the dealer but rather their account with Revenue was credited to reflect the refunded amount. In addition, while there was no specific provision regarding the timing of the claim, it was always the view of the Revenue Commissioners that, in order to ease the processing burden, dealers should delay submitting their claims until the end of the month, or at the very least until a claim form had been fully completed, when 15 vehicles had been scrapped. This would reduce the amount of processing required in Revenue.

In practice, dealers began to submit claims on a weekly and sometimes even a daily basis, or even on a car by car basis. In the interest of customer service, Revenue aimed to process these claims as they came in, resulting in an almost immediate adjustment to the customer's account on receipt of the claim. Nevertheless, I understand from the Revenue Commissioners that due to industrial action there have been some delays in processing claims under the scheme. However, the position has improved significantly over recent weeks because, following the Croke Park discussions, the industrial action was withdrawn in that regard.

The current position is that over 4,500 claims have been processed under the car scrappage scheme up to 23 April 2010. Refunds of VRT amounting to around €6.5 million have been made to car dealers in respect of these claims. Currently there is no backlog of outstanding scrappage claims. I understand that some 80 to 100 claims per day are being received by Revenue at present and these are currently being processed on receipt or within a maximum of three working days.

Of course time can elapse between the date a garage sells the new car and the date the old car is scrapped, the certificate of destruction obtained and the VRT relief can be claimed from Revenue. However, having the old car scrapped is a necessary condition of the scheme for the claiming of the VRT relief. Such delay is unavoidable because it is a scrappage relief scheme. By definition the car has to be scrapped before Revenue can grant the relief. It is an inbuilt control and anti-avoidance feature of the scheme. If the Senator has specific information regarding ongoing delays in the processing of scrappage refund claims for certain dealers or garages, he might wish to take them up directly with the Revenue Commissioners.

I thank the Minister of State, Deputy Haughey, for that comprehensive reply on behalf of the Minister for Finance, Deputy Brian Lenihan. I read inThe Irish Times today that the director general of the Society of the Irish Motor Industry, Mr. Alan Nolan, said the scrappage scheme has had the desired effect, as noted by the Minister of State, on sales and the scheme is on target to produce approximately 10,000 new car sales from scrappage sales alone. I am heartened by the Minister of State’s indication that there is currently no backlog of outstanding claims, which would be a transformation of the case since 1 January to last week. I hope the Croke Park deal and the pressure of many groups has led to this resolution.

One dealer told me he was awaiting nearly €75,000, and others have figures between €30,000 to €40,000. Last week Mr. Bill Cullen said his motor group was owed €340,000. I hope the claims will be processed and the money will be received in the coming days. The simple fact is that no business in the current environment can do without — nor should it be expected to do without — such money rightfully due to it in this tough economic climate. I welcome the Minister of State's indication that all new claims will be processed on receipt or within a maximum of three working days. I hope that pattern continues for the rest of 2010.