I am grateful for the opportunity to speak on the Non-Use of Motor Vehicles Bill 2013 and welcome the prospect of closing a loophole worth approximately €55 million per annum. It might surprise Deputy John Paul Phelan to learn that I agree with him on the need to increase revenue by preventing scams or tax avoidance. In the context of our current economic crisis, €55 million is a considerable sum. However, when we speak about motor taxes and the expenditure of taxpayers' money, we should link these issues to the broader debate on taxation.
The primary purpose of the Bill is to provide for a system of declaring vehicles off the road in advance for motor tax purposes, thereby closing a tax evasion loophole whereby owners can declare retrospectively that a vehicle has not been in use on the public road, which declaration is unverifiable. My colleagues spoke about roads and local government services. My area of Dublin Bay North could do with this money but other needs also arise in respect of revenue raising. The cystic fibrosis unit in Beaumont Hospital is seeking €1.7 million. Last night in Croke Park I met Joe Brolly and other people to discuss the funding needed for the organ donation scheme. For many projects, €2 million or €3 million would solve their problems.
The new arrangements for making off-the-road declarations in advance will make no difference to those who pay the correct tax on their vehicles and will only require those who plan to take their vehicles off the road to notify their intention in advance rather than retrospectively. Those who are compliant in paying their motor taxes make a massive contribution to this State. The Bill also provides for a three month transition period following enactment to allow those who are in arrears or who genuinely have their vehicles off the road to regularise their affairs and make arrangements so their vehicles continue to be off the road. The key word is "genuinely". Deputy Tom Hayes estimated that the number of those who use this loophole to pull stunts and scams in order to avoid paying motor tax is between 5% and 10%. It is not fair on compliant taxpayers that such individuals do not pay their fair share of taxes. The Opposition benches have experience of this issue. It is not acceptable, particularly at a time when the country desperately needs revenue. It is a cross-party and citizen rights imperative that everybody contributes in a fair and meaningful manner.
The Bill contains 12 sections, nine of which set out the substantive provisions for off-the-road declarations and three set out transitional financial arrangements following the transfer of the driver licensing function from licensing authorities to the Road Safety Authority and declaring the Minister for Transport, Tourism and Sport a licensing authority for the purpose of motor tax law.
In the past 24 hours a number of reports have issued on the subject of taxation. Many people are not aware that we pay less in taxes than the rest of Europe. The Irish pay less tax than anywhere else in western Europe and our tax rate on company profits is one of the lowest among EU member states. The Government is trying to claw back €3.1 billion in taxes and cuts next year. Figures from Europe show that the amount of money taken in by the Government through taxes and social contributions is equivalent to less than one third of the entire value of the economy. Despite the recession, the figure is lower than what it was in 2000. Only Slovakia has a lower tax rate than Ireland according to the European Commission. The latest data indicate that Ireland's tax to GDP ratio was 28.9% in 2011, compared to France at 43.9%, Belgium at 44.1% and the UK at 36.1%. The social security fund receives 16.4% of tax revenue, compared to an average of 37.3% across the 27 EU member states.
I outline these figures in the context of the debate on this Bill because we must face up to the need to make a fair contribution. We have to be creative and radical in considering new taxes. The Government appears to have problems with taxing wealthy people. It should up its game and investigate the potential for raising taxation. I support the commitments on raising tax contained in this Bill but 15 countries in Europe have a higher top rate of tax than Ireland. The Commission does not state the point at which the top rate applies in the various countries, however. For example, a single person in Ireland pays tax at 20% on income up to €32,800 and 41% thereafter. Irish GDP figures are also skewed because of the impact of multinationals basing their European operations here. The revenues reported by these companies as part of Ireland's economy ultimately make their way elsewhere. We should take cognisance of these facts.
A number of speakers referred to the carbon levy. People can jump up and down about the carbon levy but the reality is that people are suffering because of it. The price of a 40 kg bag of coal will increase by €1.20 and a bale of briquettes by 26 cent. Regardless of the broader environmental and tax issues, we must acknowledge that families, senior citizens and people living in isolation need our support. This levy is having a major impact on these people and the pressure will only increase if, as proposed, the rate is doubled in 2014.
The total tax to GDP ratio in Ireland in 2011, at 28.9%, was the sixth lowest in the European Union and second lowest in the euro area. The figure in 2000 was 31.3%. Direct and indirect taxation accounts for 43.4% and 39.4%, respectively, of total revenue. Value added tax, at 54.1%, accounts for the largest share of tax receipts and is broadly in line with the European average of approximately 53%. At 12.5%, Ireland's corporation tax rate is the third lowest in the European Union, with only Bulgaria and Cyprus having a lower rate of 10%.
Motor tax is payable on most vehicles that are used in public places and approximately €1 billion is paid into the local government fund from motor tax each year. The precise figure in 2011 was €992 million, a 5% decline since 2009 when the figure was €1.045 billion. Part of this decline can be traced to a reduction of 1.8% in the number of vehicles being taxed and the move towards a tax system based on carbon emissions. Given the substantial contribution motorists make to the State coffers, it gets up my nose that we are not listened to in the broader debate on how money is spent and the quality of road infrastructure, services and so forth.
It also gets up my nose when I encounter the anti-motorist attitude that prevails among a section of the cycling population. Many, although not all, cyclists speed around Dublin, jump lights, cycle up one-way streets and clip the wing mirrors of cars caught in traffic jams. I regularly refer to these individuals as "Speedy Gonzales" types who arrogantly believe they are cool, clean heroes in contrast to motorists who are polluting the country. They should know that we motorists contribute €1 billion in motor tax to the economy and we also have certain rights. We should be listened to and taken seriously.
The motor tax evasion rate is estimated to be approximately 5%, which results in an annual loss in revenue to the Exchequer of between €50 million and €55 million. I hope this figure is accurate and has not been massaged, as the Garda Representative Association might say. That 95% of motorists are tax compliant in respect of motor tax should not be taken for granted, especially given the financial position of the country.
It is currently possible to claim back motor tax if more than three months remain on the tax certificate, provided a declaration is made that a vehicle will be off the road for a certain period. In addition, if motor tax has lapsed and a period of time elapses prior to renewal, it is possible to declare that a vehicle has been off the road for the period in question, thus avoiding payment of tax for the period. The making of such a declaration is not verified. Evidence shows a problem with false off-the-road declarations being made, with a consequent loss in revenue. Since 2010, only 160 cases have been taken for making a false motor tax declaration. Clearly, a large number of people are engaged in this scam. They should be targeted to ensure those who pay their motor tax every year are not penalised but are treated in a fair and just manner.
The Bill provides a prospective system of declaring vehicles off the road for the purpose of motor tax, with a view to reducing tax evasion. When a declaration is made in advance it will not be necessary to pay motor tax for the period that a car is off the road. The move to a prospective declaration will mean that individuals will no longer be able to claim, when renewing their motor tax, that a vehicle was off the road during the period that motor tax has lapsed and must thus pay arrears for such periods. Other proposed changes in the legislation include the removal of the current one month grace period for the renewal of motor tax, a provision making it possible to prescribe an administration fee for the making of a non-use declaration and the introduction of transitional financial arrangements following the transfer of the driving licence function from the licensing authority to the Road Safety Authority.
While the Road Safety Authority does great work, it is sometimes a little sensitive to criticism. We have all seen examples of signs on roads which have not been planned properly. Some of the speed limits are crazy, with drivers able to drive at fast speeds on small country roads but required to drive so slowly on certain stretches of motorway that they can barely shift beyond second gear. Sensible decisions must be taken by the Road Safety Authority. I accept, however, that we must up our game on road safety and support road safety policy.
Enactment of the Bill may have a positive impact on Ireland's EU environmental obligations. Owners may be more likely to avail of legitimate waste operators when scrapping cars to obtain a certificate of destruction, without which they may be made liable indefinitely for the off-the-road declaration fee. There is, therefore, an environmental aspect to this important legislation.
The motor tax system is administered and enforced by a number of different organisations. The Office of the Revenue Commissioners is responsible for the registration of vehicles, the Department of the Environment, Community and Local Government is responsible for motor tax policy and the Department of Transport, Tourism and Sport is responsible for the online collection of motor tax and maintaining the national vehicle and driver file, a database which contains details of all registered vehicles, their owners and all licences. It is important that all such information is held.
The Department of Transport, Tourism and Sport has compiled a report on the number of off-the-road declarations made in the year to August 2012. Over this period, the number of Garda witnessed vehicle licence exemptions was 538,312, of which approximately 20% coincided with a change in the ownership of the vehicle in question. It is likely that this category largely consists of legitimate declarations from the new owner or car salesperson. On the other hand, slightly more than 428,000 declarations were made when no change of ownership took place. The resulting loss in revenue to the State was more than €88 million. We need to focus on this issue.
Section 8 creates an offence for the making of a false or misleading declaration of non-use, which on summary conviction carries a class B fine - up to €4,000 - and-or imprisonment for a term not exceeding six months. Section 10 creates an offence for the making of a false or misleading declaration as part of an application for a refund, with the same penalties as those contained in section 8 applicable. The way in which offences are dealt with under section 8 is both fair and reasonable. As already stated, 95% of people pay their motor tax on time and make a contribution to society. In view of the fact that almost €1 billion is coming out of their taxes, it is very important that those who fail to comply should be guilty of an offence. The imposition of a fine of up to €4,000 or imprisonment for a term not exceeding six months should put the frighteners on those who might contemplate not complying with the law.
Reports suggest that there is abuse of the system relating to the scrapping of vehicles, with illegal waste operators being responsible for a significant proportion of scrapped vehicles in Ireland. In 2009, for example, 21,883 certificates of destruction, CODs, were issued, while it was estimated that 152,544 cars were taken off the road. This means that approximately 130,000 vehicles were potentially left unaccounted for in 2009 alone. That is a massive number. Obviously, some of these vehicles might have been declared as being off the road, others could have been exported and others still may have been legitimately destroyed but a COD may not have issued. If there is a lack of proper regulation, then crime and drugs gangs are going to operate on the fringes of the industry. To some, those people may seem to be petty criminals. However, many of the cars are often used in the commission of murder and other crimes. This issue has arisen in my constituency, Dublin North Central. If the State is only in a position to indicate that 21,833 cars were destroyed in 2009 and if 152,544 other vehicles which disappeared from the roads in that year are unaccounted for, then we have a problem.
I thank the Acting Chairman for granting me some leeway. I broadly welcome the legislation, particularly in the context of the €55 million it can bring in to the Exchequer. During this period of economic difficulty, there can be no question of dilly-dallying. If we have the opportunity to close a loophole and bring in an additional €55 million as a result, then we should do so.