I wish to raise the issue of the way vehicle registration tax is being applied by the Irish State and the fairness of that tax. We are well aware of the European Commission's dislike of this tax and that it has issued a directive that member states would phase out its application and move towards a road usage tax in the future. I appreciate the Irish State's sovereignty on this matter but we all accept the application of VRT works against the spirit of the European Union and the free movement of goods.
In my constituency in Donegal the application of VRT by this State can only be seen as the major political party in government, Fianna Fáil, profiting from partition. I represent a constituency that borders Fermanagh and Tyrone and the people in that community, particularly those living beside the Border, know the same type of car can be brought 36% cheaper across the Border which, effectively, is the cost of VRT on some classes of car. This State increases the price of a vehicle by 36% simply because it is bought on this side of the Border.
The figures for the number of vehicles on which VRT was paid in 2009 illustrate the importance for people in Donegal of this tax in that they look across the Border when they want to buy a car. Donegal has the second highest number of vehicles on which VRT was paid in 2009. Some 8,757 cars were registered in Donegal in 2009 and VRT was paid in respect of them — the highest number were registered in Dublin, which had some 300 more vehicles. Therefore, a total of nearly €15 million accrued from VRT from that county alone in 2009.
I call on the Minister for Finance to bring forward proposals that are practical, sensible and that recognise that the European Union is trying to phase out VRT in all member states, to introduce a proposal that would phase out VRT over a period of time and, if need be, replace it with a more common-sense approach in this respect.
I checked the Green Party's website and I note that under its policy on the economy section it has a statement on VRT to the effect that the Green Party will abolish motor tax or VRT on a phased basis. The Commission on Taxation report, commissioned by the Government in 2009, recommended its abolition over a phased period of ten years. When the Commission on Taxation made its recommendation it was working on figures that were outdated because it did not have the information we have today, which is that the total tax take from VRT in 2009 had dropped significantly by 66% down to €375 million. The projections by the Government and the Department of Finance for this year's tax take from VRT is that it will decrease again down to €365 million.
I hope the Minister of State will not put forward the argument that if VRT was to be abolished, excise duty on a litre of petrol and diesel would have to be increased by 25 cent to 30 cent because that is inaccurate. If he were to do so, he would be misleading this House because that would be based on figures for VRT at the height of the boom. I hope the Government has woken up to the fact that those days are over. The tax yield from VRT last year was €375 million, not €1.2 billion or €1.4 billion which it was in 2006 to 2008. Those days are over for many reasons that I do not have time to go into. One of the reasons is that the changes to the application of VRT in the past two years has meant it can no longer be passed on to apply to second hand cars.
The reality is that if VRT were abolished we would not have to come up with €365 million accruing from that tax. If VRT was abolished over a phased period, there would be an increase in new car sales. I note from figures I checked that the sale price of a 1.6 litre family car in the Twenty-Six Counties is €26,000 from which the Department of Finance takes €10,000. The car only costs €16,000 and of that €10,000 tax take €5,600 accounts for VRT. It is no wonder that people go across the Border to purchase their cars.
I am not asking for VRT to be abolished over night. If that was to happen, it would cause chaos because it would devalue cars that are in the system and it would create a shock in the second hand car market. We need a proposal to phase out the application of VRT. For example, if we needed to recoup all the tax foregone from increasing the excise tax on fuel, which I would not recommend, it would amount to a 1 cent increase over the next ten years. Perhaps there is a case for not phasing out VRT completely and that a small standard charge should apply, but it is wrong that there is a difference of 36% between the price of a car bought in Lifford and the price of a similar car bought in Strabane.
I often listen to Conor Faughnan's announcements on the radio although I have not met him. He said:
VRT was always a con trick, a tax avoidance by the Government that stole back from the Irish people the benefits we voted for when we passed the Single European Act. Everyone has hated VRT since its inception. We hate it for the same reason we hate pickpockets.
Now is the time to bring forward proposals to abolish VRT, as the European Commission and the Commission on Taxation have requested us to do, and while the tax take from VRT is at rock bottom and is due to decrease this year. We need to strike at time and come up with a fairer system for those who want to purchase new or second hand cars in this State.