Thursday, 29 January 2009

Is there a case for VRT?

Has Gombeen Man missed something? Or is it the Irish motor industry that is blind to the very large (and very smelly) elephant in the showroom?

An article in the motoring section of yesterday’s Irish Times reports on the current trend for people to buy second-hand vehicles up north, lured, as they are, by cheaper Sterling prices (and let’s not have that tiresome patriotism argument again).

There is much comment from those within the industry, speculating as to how the consumer exodus might be reversed, with domestic car dealers having already seen a 66% drop in new car sales on last year, according to the IT.

Many options are discussed, with SIMI calling for a new scrappage scheme to “boost” the domestic market. The same organisation calculates that Government revenue from tax on cars will fall to below €1 billion in 2009, which sounds unhealthily like extortion to me, but will still be down from a jaw-dropping €2 billion in 2007.

Toyota Ireland’s managing director, Dave Shannon, is quoted as calling for a reduction in VAT from 21% to Britain’s level of 15% - a move he feels would be beneficial for the industry in the Republic. However, SIMI’s Alan Nolan is not so upbeat on this approach, maintaining “there are European requirements on VAT, so this is not straightforward.”

“Helloo!”, as the young things say in those American TV shows. Has everyone forgotten about VRT (Vehicle Registration Tax), which the Irish Government insists on applying to cars imported to, and sold in, this country? The EU has been asking the Government to remove this tax for years, on the grounds that is a double tax (applied after VAT) and is contrary to the free movement of goods between EU states. Our Government(s), and our present joke Commissioner in Europe, Charlie Mc Creevy, have ignored these calls.

Here’s how the Government VRT scam works:

When a car is imported into this country, you – or the dealer – are legally required to register it here. So, Revenue apply VAT of 21% on a base price concocted by a term of their own invention, which they call the "OMSP" (“Open” Market Selling Price). The OMSP is arbitrarily decided by Revenue to apply a VRT tax ranging from 14% to 36% to bring your car’s price to a level they consider suitably inflated for the Irish market. Due to the size, complexity and variety of the second-hand market, it is less easy for Revenue to accurately "calculate" the prices of used car imports as it is for them to restrict the new car market - hence with lower VAT and Sterling, it can still be possible to buy second-hand car cheaper in the north (if you do your homework) despite VRT being applied. But you are still paying way over the odds.

If anyone is stupid enough to require a reason for being “unpatriotic” in an Irish context, this tax alone is enough. It is immoral, it is uncompetitive, it distorts trade, and it lacks even the most subtle hint of transparency. If you don’t believe me, do a search to determine how it is calculated. But all you need to know is that you can end up paying over 40% more for your car in this country than you would in other some other EU states.

Successive Irish governments in the history of this banana republic have been foisting this scam on us with impunity for decades and decades, so they will never end it voluntarily.

Once again, Brussels is our only hope. Take a case, anyone?

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Ella said...

Hi GM, Subaru Outback 2.0D with sunroof, yours for EUR 33,730 in Luxembourg and the Paddy price EUR 41,995, now where is my tricolour....

The Gombeen Man said...

There you go, Ella. And that particular model has a diesel engine, with relatively low emissions, and is taxed "favourably" here in Ireland. The disparity would be even greater for some other cars.

Bernd said...

... it might also pay to look at the extras - to keep inflated Irish prices a bit lower many manufacturers seem to skimp on those.

So a Folkcedes might be the Pissart 2.0tdi here and in, say, Germany.

In Germany you will get ABS, ASR, eighteen airbags, an in-car entertainment system, satnav and a free blow... er ... you get the picture.

In Ireland you will get a smelly cardboard pine tree instead.

The Gombeen Man said...

Yep, Bernd. The Nissan Quashqai 1.5D is a specific example. In Germany it comes standard with Electronic Stability Control but in Ireland it's an optional extra, which the Government subjects to VRT. This is a proven life-saving technology...

The Gombeen Man said...

Oh... and it's way cheaper in Germany.

Sven said...

Don't get me going on the f****ng VRT: bought a Baby-Merc A180 CDI up North, 8 months old, wrote a cheque today to the VRO: €4800 (which is almost half of what she costed in Belfast)! And the car still came in way cheaper than having bought it in the ROI.
We even had tried to buy down South, but that model isn't available here plus that the Irish Merc dealers, who I was in touch with, never even came back to me with an offer for our trade-in ... ! Business doesn't seem to be bad enough yet, obviously they can still afford to be as arrogant as ever in the ROI.
Today we received a phone call from Merc in Belfast, only a courtesy call to find out if everything is ok with the car and whether we were happy with the whole deal. Yes, we were and still are and I know already who is going to service the A-Class end of this year !

Anonymous said...

This may be a naive question but given that so many people out there claim (with considerable justification) that VRT is an illegal tax then why hasn’t some independent consumer representative body (the AA would be the most obvious one but even the SIMI would have an enormous interest in doing so) taken the government to the European courts on the issue?

Ironically at the time I bought my current car a few years ago it was cheaper for me (as a UK taxpayer of course) to do so in the Republic of Ireland. The only pitfall I come up against was that the manufacturers assign slightly different model numbers to cars sold in Ireland so that my choice of insurance companies back in the UK is somewhat limited (The old “If its not listed on their computer it doesn’t exist” mentality).

Anonymous said...

every state needs tax money to fund whatever social programs they have in place.

ireland choose vrt as one big source.
had it not you would pay tax on something else.
either that or there would be no schools, hospitals, etc.

The Gombeen Man said...

I am aware of the need to raise taxes to fund services. But would you also support the introduction of a tax on windows?

VRT is an immoral, double-tax, and imposes an excise duty on Irish people who attempt to import goods from other EU states. There is no justification for it on any grounds.

There are many other sources of taxation open to this government. Income tax is the obvious one. Property tax shelters allow the wealthy to contribute little or nothing to the income tax take in this country. Lax "residency" laws for the likes of Dermot Desmond and Denis O'Brien fulfill a similar function.

This is illustrated by the fact that The Revenue Commissioners can account for only 12,300 citizens with incomes of over €250,000 in this country for tax purposes. Obviously, there are far more people in the country than that who have incomes over €250,000. In fact, the true figure, according to banks' data, is that there are over 33,000 milliionaires in the country. Let them pay income tax like the rest of us, or is that too radical a suggestion?

Ella said...

Hi GM, I do agree with Anonymous that "every state needs tax money.." true. I also agree with GM, that VRT is NOT the way to go about collecting taxes. VRT should be abolished and more tax added to petrol/diesel (not I guess what Sven wants to hearing having just paid out VRT. I'm in the same boat myself Sven). Whilst we are all trying to be green, it's not the size of your car that matters it's how often you use it. The advantage of this for the government is that even when times are hard and people are not buying cars, they are still collecting revenue. For the punter it makes the purchase of a new motor less prohibitive. That said if everybody in the country was made pay their taxes there would be no need for VRT or more taxes on petrol/diesel. For PAYE workers tax is compulsory and taken at source, for most of these millionaire types, it appears to be an option. By closing all the tax avoidance schemes available the exechequer could raise millions.

Anonymous said...


I relocated recently from the USA to Ireand and shipped my car. VRT office say that because myself and my car were seperated for 9 days prior to the 6 month ownership limit I do not qualify for tax exemption. they want 7, 500 euros. What they say is that I couldnt have used my car while it was on a ship crossing the Atlantic.

Question......when I read the Revenue web site in April 08 it said nothing about "usage" for 6 months it just said ownership. I have no way to prove that the web site wording has been changed since I first read it.......can anyone help me?????

Thank you.


The Gombeen Man said...

Have you tried contacting Citizens's Advice? Do you want to send me an email (see the address on the sidebar) with your details? I'll ask around.


Ella said...

Hi GM, The European Commission has begun proceedings against Ireland for infringing EU law by charging VRT on vehicles imported from other EU Member States. The proceedings go back to a case registered in 1999 by Niall O'Dowling of Used Car Importers of Ireland (UCII) against the "secret and arbitrary" way that VRT is imposed. The European Commission has confirmed that proceedings have been opened but added that "no public information is available at the moment". It's about time somebody brought a case. I can see that Mr O'Dowling would have a bigger incentive than a private individual, but even so. The rest of moaned and complained but did nothing. So fair play to him.