Amendment 69 is an alternative and will be discussed with amendment No. 68.
SECTION 19.
I move amendment No. 68.
In page 30, subsection (1) (a), line 46, to delete "£13,000" and substitute "£15,000".
This amendment relates to the capital allowances that are claimable on the depreciation of a car and the Minister will probably crow a little that he has increased the limit claimable from £10,000 to £13,000. We in the Opposition party take the view that he has not gone far enough. It is not often that these things are changed and when they are it is better to do a proper job. It is important to consider what type of car £13,000 will buy. I suggest £15,000 would be a fairer figure.
The Minister for Finance yesterday flatly rejected my humble submission in relation to benefit in kind for sales and marketing personnel who travel between 25,000 and 30,000 miles a year. They are to get no relief whatsoever and the boot is firmly on their neck. Now a number of other developments have taken place within the car industry. In 1993, for example, there was a 72 per cent increase in the importation of second-hand cars because people could not afford the more expensive new cars because of the capital allowance and benefit in kind provisions. Thirdly, the devaluation aspect, which the Minister did everything humanly possible to resist, pushed up the price of new cars.
What about the decreases?
Both were beneficial in terms of competitiveness but particularly in terms of interest rates. The Minister has basked in the reflected glory of devaluation since it happened, welcoming every one of the interest rates decreases.
I got all of the stick for the increase too.
Devaluation caused an increase in car prices, making new cars more expensive and the gap between a new car and a trade-in even greater. The new EC directive in relation to compulsory catalytic converters has made new cars more expensive. Second-hand cars do not need to have catalytic converters but new cars do. For all of these reasons the new car has gone beyond the reach of the ordinary punter.
Last year we imported 30,000 secondhand cars and we had the lowest level of new car sales in four or five years. Obviously there is some pent-up demand and with lower interest rates and cheaper hire purchase there is going to be a pickup in car sales this year. Before the Minister basks in the reflected glory of that, it would be more creditable for him to go a little bit further in the capital allowance provisions.
As the Minister has framed it, the capital allowance provision refers to new cars only. The wear and tear allowance is the same. The £13,000 proposed here is only for new cars so it is of limited application. Some of the amendments such as Deputy McDowell's yesterday costing £620 million were slightly beyond the scope of what the Minister could do but this one is well within the scope of what is affordable and possible and I ask him to accept it.
I find this business of putting a limit on car expenses and depreciation ridiculous. I avail of this provision in my other capacity. I buy large Mercedes cars as they are cheap second-hand; people are frightened of the cost of their annual taxation etc. I would not buy a Fiesta because I get a better deal with a Mercedes under this system. With the regime now in operation the Minister is cutting off his nose to spite his face. The reality is that by relieving this limit there will be more new sales and fewer people like me buying second-hand cars. The system is negative and discourages me from investing in a new car. I buy a car which is five to seven years old and in good nick. I spend money maintaining it because it is old and I get tax deductions on that account. My motoring expenses are higher than with a new car and the people who are losing on this at present are the Revenue Commissioners. I do well out of the present system but it is a bureaucratic shot in the Revenue's own foot.
At least the Deputy is doing his bit for employment by investing in repairs and maintenance.
That is true but with a big old Merc, one does not have many problems.
Section 19 raises the capital value from £10,000 to £13,000. Amendment No. 68 proposes the value be raised to £15,000 and amendment No. 69 proposes a further increase to £17,500. Prior to 1973 capital allowances for tax purposes were calculated on the full cost of a car used for business purposes. Prior to 1973 capital allowance for tax purposes were calculated on the full cost of a car used for business purposes without any limitation to the cost of the car. In the Finance Bill of that year a restriction was imposed so that where the cost of the car exceeded £2,500 no relief was given on the excess and the intention of the restriction was to allow full relief for medium price cars but to limit the capital allowances in respect of more expensive cars. The capital limit has been raised on a number of occasions in the years since then. It fell out of line with the cost of standard business cars and I acknowledged that this year when I announced in the budget an increase from £10,000 to £13,000.
Does it only apply to new cars?
Yes. The reason I did it was to try to get the Deputy to buy a new car.
I will not do it and that proves my point. It is not worth it.
As the Deputy has been caught here for the third day in a row, he will not be able to afford it.
If the Minister only knew the truth.
Will we tell it?
I am doing very well, thank you, this week.
One does not always have to turn up to get paid.
The case is settled.
Next year the limit will be £14,000 and that reflects the average cost of the 1.6 litre car. We have agreed that it will be reviewed annually having regard to the sales of cars. This was worked out with SIMI.
What Deputy Yates says is true; the higher the allowance the better the position. Rather than just leaving it at a reduced amount we have set it out and then from 1996 onwards it will be reduced on an annual basis. That keeps it in line with the 1.6 litre car. I am not saying that it will make anyone ecstatic but it is a substantial improvement on where it was over the last number of years because since 1973 it did not fall totally out of line but it will be back by 1996. It will be in line with budgetary circumstances and other things that we have done. We have done a number of things for the motor industry such as the 12.5 per cent on the repairs and the drop in the VRT.
I would like to correct Deputy Yates in case he feels that I have totally thrown in the towel on the BIK. I said yesterday that my difficulty was one of definition and I will continue to pursue that. I feel some sympathy for those people who are genuinely driving the miles and if we can find a way of dealing with that problem we will. The VRT, the capital allowances and the 12.5 per cent for which I have to fight again in the autumn of this year to try to maintain intensive labour services are doing a lot. The SIMI conference which I had the honour of opening this morning, is the first SIMI conference in eight years because trade had been so bad, but this year they had 80 people more than they had originally booked in. The president announced that new car sales for the first four months were up by 48 per cent on last year. I think I have done my bit for 1994 at least.
Mr. McDowell
Perhaps the Minister for Justice will fix up the Garda.
Before the Minister gets carried away with his full Irish breakfast from the SIMI, could I ask him what the cost of accepting the amendment would be? Would it not be possible as it is such a marginal change?
Deputy Yates's amendment would cost £4 million and Deputy McDowell's amendment would cost £8 million in a full year. The existing amendment which I brought in cost £9 million.
Amendment put.
Vótáil.
The division will take place at 1.30.
Mr. McDowell
I move amendment No. 69:
In page 30, subsection (1) (a), line 46, to delete "£13,000" substitute "£17,500".
Amendment put and declared lost.
Section 19 agreed to.