SELECT COMMITTEE ON THE ENVIRONMENT, TRANSPORT, CULTURE AND THE GAELTACHT (Sub-Committee on the Environment, Community and Local Government) debate -
Wednesday, 14 Mar 2012

Motor Vehicle (Duties and Licences) Bill 2012: Committee Stage

Chairman

The meeting has been convened for the purpose of consideration of the Motor Vehicle (Duties and Licences) Bill 2012. The Bill gives a permanent legislative basis to the increases in motor tax and trade plate licences contained in the financial resolution passed by the Dáil on 6 December 2011.

The increases were announced in budget 2012 by the Minister for Finance, Deputy Noonan. The Bill increases the motor tax rates for CO2 band vehicles A to B by 54% and 44%, respectively, for all other vehicles except exempted vehicles. For trade plate licences the increase is 7.5%. This is the first increase in motor taxation since 2008 and the new rates apply to new licences commenced on or after 1 January 2012. The increases are expected to yield an additional €46.5 million yearly.

The select sub-committee will consider the Bill from now until 5.30 p.m., if necessary. If proceedings have not concluded by that time the meeting will be adjourned until a later date. Is that agreed? Agreed.

I welcome the Minister for the Environment, Community and Local Government, Deputy Phil Hogan, and his officials Mr. Donal Enright, principal officer, and Ms Marie Gleeson, assistant principal officer, local government policy and motor tax section. I thank them for their attendance and I will proceed to deal with the Bill.

Sections 1 to 5, inclusive, agreed to.

NEW SECTIONS

Chairman

It is proposed to discuss amendments Nos. 1 and 3 together. All other amendments will be discussed individually.

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

I move amendment No. 1:

In page 4, before section 6, to insert the following new section:

6.—Section 6 of the Local Government Act 1998 is amended—

(a) by inserting the following subsections after subsection (2B):

"(2C) Subject to subsections (2E) and (2G), the Minister may, from time to time, pursuant to a request from the Minister for Finance, make one, or more than one, payment out of the Fund in the amount requested by the Minister for Finance and such payment, or payments, shall—

(a) be made, subject to paragraphs (b) and (c), from the moneys that have been paid into the Fund,

(b) be made, subject to paragraph (c), out of the moneys specified in subsection (2D), and

(c) be limited to such moneys that represent the increase, calculated in accordance with subsection (2F)—

(i) in the rates specified for motor vehicle tax in respect of licences referred to in subsection (2D)(a), and

(ii) in the rates specified for duties of excise, charged, levied and paid on a trade licence under section 21(3) of the Finance (No. 2) Act 1992, referred to in subsection (2D)(b).

(2D) A payment under subsection (2C) shall, subject to subsection (2C) (c), be made out of those moneys paid into the Fund on and after 7 December 2011 for—

(a) motor vehicle tax in respect of licences having a commencement date between January 2012 and December 2012, and

(b) miscellaneous fees and duties, within the meaning of section 5, in so far as they relate to moneys collected from duties of excise charged, levied and paid on a trade licence under section 21(3) of the Finance (No.2) Act 1992 for 2012.

(2E) The total amount of all payments made under subsection (2C) in respect of 2012 shall not exceed €46.5 million.

(2F) For the purposes of subsection (2C)(c) and the calculation of the increase referred to in that subsection—

(a) such increase for the motor vehicle tax in respect of licences, referred to in subsection (2D)(a), shall be calculated by ascertaining the difference between the rates of such motor vehicle tax in respect of licences that applied—

(i) on 1 January 2011, and

(ii) on 1 January 2012, and

(b) such increase for the duties of excise, referred to in subsection (2D)(b), shall be calculated by ascertaining the difference between the rates of such duties of excise that applied—

(i) on 1 January 2011, and

(ii) on 1 January 2012.

(2G) The Minister shall, from time to time, provide the Minister for Finance with information relating to the amount of the moneys, specified in subsection (2D), paid into the Fund and the amount of such moneys that represent the increase referred to in subsection (2C)(c).”, and

(b) by inserting the following subsection after subsection (6):

"(6A) The moneys paid out of the Fund under subsection (2C) shall be paid into, or disposed of for the benefit of, the Exchequer in such manner as the Minister for Public Expenditure and Reform may determine.".".

Deputies may recall that, on 22 February 2012, I signalled on Second Stage that I would introduce an amendment on Committee Stage to provide for the transfer of the income from recent rate increases in motor tax from the local government fund to the Exchequer. This proposed transfer was announced on budget day and in order to give effect to the transfer an amendment to section 6 of the Local Government Act 1998 is required. I am introducing an additional section to the Bill for that purpose.

Section 6 of the Local Government Act 1998 sets out the purposes for which moneys may be disbursed from the fund, such as the discretionary funding of day-to-day activities of local authorities, and the construction and maintenance of non-national roads. The transfer of such funds to the Exchequer is not currently provided for.

Deputy Clare Daly

The section of the Local Government Act 1998 that is being amended is, in essence, the one which ring-fences funding for local authorities. The Minister is seeking to change this to the detriment of the funding of local authorities. Therefore, it cannot be seen in isolation from all the other charges, taxes or levies that go into that pot as well. Why has the Minister set the figure at €46.5 million for this year? What is that about and how will it be dealt with in future? It is not clear but it strikes me as quite a dangerous precedent. This enables the Minister to take money from the local government fund, while he appears on television to appeal to people to pay their household charge to fund local services. He is potentially taking out more than one third of what would be raised if everybody paid their household charge. That is a contradiction which sets a dangerous precedent because it would undermine local services. Can the Minister provide some more information in that regard?

Deputy Phil Hogan

We are in a difficult financial situation, as the Deputy knows. The Minister for Finance needs a certain level of income in order to balance the books and deliver services as set out on budget day. The local government sector has to make its contribution to that, which is an increase in motor tax. The increases of 7.5% in motor tax across the board are providing €46.5 million this year to the Minister for Finance to meet the deficit reduction requirements he has.

The Government is committed to the provision of sufficient funds for the local government fund, including the household charge. Some €164 million was part of the deficit reduction measures taken in order to meet our financial targets. The establishment of this fund works in conjunction with the Department of Transport in enabling funds to be brought from the motor tax area into the local government fund and be dispersed to each local authority. For this purpose the Minister for Finance has signalled that he needs additional resources to bridge the gap between income and expenditure, and that is what we are doing to facilitate him.

Deputy Clare Daly

Where does it stop? This amendment provides only for the increase to be transferred to the Department of Finance, but what is to stop more than that happening next year? Is it the case that there can be a provision for endless increases? The hike is unfair and discriminates against environmentally-friendly cars, as was mentioned on Second Stage. Where is the protection in that because the sky is then the limit? The Minister could essentially take huge chunks out of the local government fund in future. I do not see where the safeguards are in that respect.

Deputy Phil Hogan

This is for the purpose of 2012. I cannot say what budgetary provisions will be proposed in 2013. Every year will be treated separately. This committee will have a chance to approve, or not approve, any increases that arise on budget day. I cannot predict the future concerning what will happen to motor tax. That will be a matter for the next budget. Nonetheless the Deputy is correct to say that this is an enabling provision for the €46.5 million to be transferred to the Exchequer on this occasion in 2012.

Deputy Clare Daly

The Minister is wrong because this Bill allows that in future any amount could potentially be factored in. It is not only limited to the increase in motor tax as of now. They are not the only moneys that can be deducted from the local government fund.

Deputy Phil Hogan

Any Act can be amended at any time depending on the Government's requirements to meet its financial targets. In this case we are dealing with meeting our financial targets through a part contribution from the motor tax area of the local government fund of €46.5 million.

Deputy Clare Daly

I am sorry but maybe I did not understand. My understanding is that the Minister's amendment proposes an indefinite alteration of the Local Government Act, allowing that in future the Minister for Finance can take moneys out of the local government fund. The Minister is specifying the amount in 2012, but he is not saying there cannot be a different amount in 2013. The legislation provides for an indefinite amendment to the Act. I have serious concerns about that as regards the implication for local government funding.

Deputy Phil Hogan

I am glad to allay the Deputy's fears and say that this is for the purposes of 2012 only.

Deputy Clare Daly

Is there a time limit for 2012 only?

Deputy Phil Hogan

Yes.

Deputy Clare Daly

That is okay.

Amendment put and declared carried.

Deputy Phil Hogan

I move amendment No. 2:

In page 4, before section 6, to insert the following new section:

7.—(1) Paragraph 6 of Part 1 of the Schedule to the Act of 1952 (amended by section 3 of this Act) is amended—

(a) in subparagraph (d), by substituting “subject to subparagraphs (f) to (n), any vehicle” for “any vehicle”,

(b) in subparagraph (e), by substituting “subparagraphs (f) to (n)” for “subparagraph (f)”,

(c) by substituting the following subparagraph for subparagraph (f):

"(f) where a vehicle mentioned in subparagraph (e) which at the time of registration—

(i) was a new vehicle registered under section 131 of the Finance Act 1992 as a category A vehicle during the period beginning on 1 January 2008 and ending on 30 June 2008, and

(ii) in respect of which the rate of duty that would have applied to it under subparagraph (d)(i), if that subparagraph had been in operation when it was so registered and had applied to it, is less than the rate of duty specified in relation to it in subparagraph (e),

then, the rate of duty as respects that vehicle for licences taken out-

(I) during the period beginning on 1 July 2008 and ending on 30 April 2012 for periods beginning on any date between 1 July 2008 and 30 April 2012 shall be the rate of duty specified in subparagraph (d), and

(II) on or after 1 May 2012 for periods beginning on or after that date shall be the rate of duty specified in subparagraph (h),”,

(d) by substituting the following subparagraph for subparagraph (g):

"(g) where a vehicle was registered outside of the State during the period beginning on 1 January 2008 and ending on 30 June 2008 and is subsequently registered in the State on or after 1 January 2008 under section 131 of the Finance Act 1992 as a category A vehicle or a category M1 vehicle, as the case may be, and which has an identification mark assigned by the Revenue Commissioners under section 131(5) of the Finance Act 1992 which signifies that the vehicle was first brought into use during the year 2008, then, notwithstanding any other provision of this paragraph, the rate of duty as respects that vehicle for licences taken out—

(i) during the period beginning on 1 July 2008 and ending on 30 April 2012 for periods beginning on any date between 1 July 2008 and 30 April 2012 shall be chargeable at the lower of the rates of duty for the vehicle under subparagraph (d) or (e), and

(ii) on or after 1 May 2012 for periods beginning on or after that date shall be the rate of duty for the vehicle under subparagraph (j), (k), (l), (m) or, as the case may be, (n),”,

and

(e) by inserting the following subparagraphs after subparagraph (g):

"(h) on or after 1 May 2012 the rate of duty for a licence taken out in respect of a vehicle referred to in subparagraph (f) for periods beginning on or after 1 May 2012 shall be the rate of duty—

(i) specified in subparagraph (d) if, in respect of such vehicle, the rate of duty paid on—

(I) a licence taken out for any period beginning on 1 December 2011, or

(II) a licence taken out for any period beginning before 1 December 2011 that was in force on that date, was the rate of duty specified in subparagraph (d), and

(ii) specified in subparagraph (d) if the rate of duty in respect of a licence—

(I) that was required to have been taken out for any period beginning on 1 December 2011 but was not taken out on that date, or

(II) that was required to have been taken out for any period beginning before 1 December 2011 and be in force on that date but was not taken out or in force on that date, would have been the rate of duty specified in subparagraph (d) had the licence had been taken out on 1 December 2011 or before 1 December 2011 and had been in force on that date,

(i) without prejudice to subparagraph (h) and for the avoidance of doubt, where a vehicle referred to in subparagraph (f)(i) did not comply with subparagraph (f)(ii) and the rate of duty as respect that vehicle—

(i) for a licence taken out—

(I) for any period beginning on 1 December 2011, or

(II) for any period beginning before 1 December 2011 and in force on that date, was the rate of duty specified in subparagraph (e), then on and after 1 May 2012 the rate of duty for licences taken out in respect of that vehicle for periods beginning on and after 1 May 2012 shall be the rate of duty specified in subparagraph (e), or

(ii) in respect of a licence—

(I) that was required to have been taken out for any period beginning on 1 December 2011 but was not taken out on that date, or

(II) that was required to have been taken out for any period beginning before 1 December 2011 and be in force on that date but was not taken out or in force on that date,

would have been the rate of duty specified in subparagraph (e), then on and after 1 May 2012 the rate of duty for licences taken out in respect of that vehicle for periods beginning on and after 1 May 2012 shall be the rate of duty specified in subparagraph (e),

(j) where a vehicle referred to in subparagraph (g)—

(i) was registered in the State during the period beginning on 1 January 2008 and ending on 31 December 2011,

(ii) in respect of which a licence had been taken out for any period beginning—

(I) on 1 December 2011, or

(II) before 1 December 2011 and was in force on that date,

and

(iii) the rate of duty paid on such licence was the rate of duty—

(I) under subparagraph (d), then the rate of duty for a licence taken out in respect of such vehicle on or after 1 May 2012 for periods beginning on or after that date shall be the rate of duty specified in subparagraph (d), or

(II) under subparagraph (e), then the rate of duty for a licence taken out in respect of such vehicle on or after 1 May 2012 for periods beginning on or after that date shall be the rate of duty specified in subparagraph (e),

(k) where a vehicle referred to in subparagraph (g)—

(i) was registered in the State during the period beginning on 1 January 2008 and ending on 31 December 2011, and

(ii) in respect of which a licence was required to have been taken out for any period on 1 December 2011, or before 1 December 2011 and to have been in force on that date but was not taken out or in force on that date,

then on and after 1 May 2012 the rate of duty for a licence for that vehicle for periods beginning on or after 1 May 2012 shall be the rate of duty-

(I) specified in subparagraph (d) where the rate of duty in respect of that licence would have been the rate of duty under subparagraph (d) if the licence had been taken out, or had been in force, on 1 December 2011, or

(II) specified in subparagraph (e) where the rate of duty in respect of that licence would have been the rate of duty under subparagraph (e) if the licence had been taken out, or in force, on 1 December 2011,

(l) where a vehicle referred to in subparagraph (g)—

(i) was registered in the State during the period beginning on 1 January 2008 and ending on 31 December 2011, and

(ii) in respect of which a licence would have been required to have been taken out for any period beginning on 1 December 2011, or before 1 December 2011 and to have been in force on that date but, in accordance with section 20(1)(b)(i) of the Finance (No. 2) Act 1992, a licence was not taken out in respect of that vehicle,

then on and after 1 May 2012 the rate of duty for a licence for that vehicle for periods beginning on or after 1 May 2012 shall be chargeable at the lower of the rates of duty under subparagraph (d) or (e) that would have applied had a licence been taken out for any period beginning on 1 December 2011,

(m) where a vehicle referred to in subparagraph (g) was registered in the State during the period beginning on 1 January 2012 and ending on 30 April 2012, and in respect of which a licence—

(i) had been taken out for any period beginning—

(I) on 1 April 2012, or

(II) before 1 April 2012 and was in force on that date,

(ii) was required to have been taken out for any period beginning—

(I) on 1 April 2012, or

(II) before 1 April 2012 and required to have been in force on that date,

or

(iii) would have been required to have been taken out for any period beginning—

(I) on 1 April 2012, or

(II) before 1 April 2012 and would have been required to be in force on that date,

but, in accordance with section 20(1)(b)(i) of the Finance (No. 2) Act 1992, a licence was not taken out in respect of that vehicle,

then on or after 1 May 2012 the rate of duty for a licence taken out for that vehicle for periods beginning on or after 1 May 2012 shall be chargeable at the lower of the rates of duty under subparagraph (d) or (e) that would have applied had the vehicle been registered in the State on 1 December 2011 and had a licence been taken out for that vehicle for any period beginning on 1 December 2011,

(n) on or after 1 May 2012 the rate of duty for licences taken out on or after that date for periods beginning on or after that date in respect of a vehicle referred to in subparagraph (g) that is registered in the State on or after 1 May 2012 shall be chargeable at the lower of the rate of duty under subparagraph (d) or (e) that would have applied had the vehicle been registered in the State on 1 December 2011 and had a licence been taken out for that vehicle for any period beginning on 1 December 2011.”.

(2) This section shall come into operation on 1 May 2012.".

This amendment provides for the amendment of the Long Title to the Bill, specifically to make provision for the Local Government Act 1998 in order to provide for the transfer of the increases arising from the budget to the Exchequer. It is a technical amendment to facilitate that purpose.

Chairman

Do members wish to respond?

Deputy Clare Daly

I am opposing it for the same reason.

Amendment put and declared carried.

Section 6 agreed to.

Schedule agreed to.

TITLE

Deputy Phil Hogan

I move amendment No. 3:

In page 3, line 9, after "THEREUNDER," to insert the following:

"TO AMEND AND EXTEND THE LOCAL GOVERNMENT ACT 1998 TO PROVIDE FOR PAYMENT OF CERTAIN MONEYS FROM THE LOCAL GOVERNMENT FUND TO THE EXCHEQUER,".

Amendment agreed to.

Title, as amended, agreed to.

Chairman

I thank the Minister, Deputy Hogan, and his departmental officials for attending today's session.

Bill reported with amendments.