Monday, 24 August 2009

Commission on taxation says scrap VRT

The following is lifted, unashamedly, from yesterday's Sunday Tribune. It concerns the Irish Government's continuing application of VRT (Vehicle Registration Tax), which is a excise duty on cars imported into Ireland from other EU member states and beyond, which means motorists in the Republic can pay 40% more for their cars than people living in other EU states, for instance (Mercedes SL starting price in Ireland: €126,000. Same car in Luxembourg: €78,300). See END VRT NOW

The Commission on Taxation is expected to recommend that the Government scrap VRT and replace with a taxation on vehicle use, rather than the vehicle itself. It is to be expected that the Government will simply ignore this aspect or the report, as VRT has been such a cash cow for them in the past (though it is contributing to the collapse of car dealerships at the moment). Its attraction for them is that it is a lazy tax, and the Irish people seem happy to pay it compliantly and without protest.

If you want to end this unfair tax, which is contrary to EU principles of free trade and movement of people and goods, bring it up when the political parties knock on your door looking for a "yes" vote for Lisbon.

Tell them that you will be a good European and vote "yes", if they are good Europeans and scrap VRT.

(For the record, I am a "yes" voter by inclination, as I believe that if VRT is ever scrapped, it will happen due to pressure on the Irish Government from a stronger, more integrated EU. But just make the point to our gombeen politicians anyway!)

Congestion charges or petrol tax to replace VRT

Radical moves proposed by Commission on Taxation include levy on cars in Dublin city Emmet Oliver, Business Editor - Sunday Tribune

Vehicle registration tax (VRT) should be abolished on all cars sold in Ireland and replaced with a UK-style congestion charge or an increased tax on petrol, according to proposals submitted to government by the Commission on Taxation.The radical measures are aimed at "taxing driving, rather than taxing cars" according to the report of the commission, which goes to the Department of Finance this week.

If the government implements the measures it would represent a major change in taxation and transport policy.The recommendations, which could provide an unprecedented boost to the faltering Irish motor trade, would involve charging drivers a fee when they enter designated and often congested urban areas. For example, in Dublin the charge would most likely kick in if a car travelled within either of the two main canals.

The report comes to the conclusion that VRT is a "lumpy tax" that is dependent on one large purchase being made by a consumer. A tax on driving and use of the road network would throw the net much wider and mean the government would receive large revenues even if car sales slumped as they tend to in recessions."It will provide the exchequer with more stable sources of revenue and is part of the general drive to broaden the tax base,'' a commission member told the Sunday Tribune.

The London congestion charge levies drivers who enter certain defined zones from the hours of 7am to 6pm with a charge of £8. Residents who live within the congestion-charge areas and those driving green vehicles are either exempt from the levy or can avail of a discounted rate.A set of cameras have been placed around central London to take images of drivers' registration plates, and a number of payment methods, online, by phone or in a shop, are available.

The motor industry desperately wants a car-scrappage scheme introduced in the December budget, a measure it says could help to salvage large parts of the sector, but the idea of abolishing VRT could provide an even bigger lift, although petrol taxes or congestion charges are not popular with the motor industry.

VRT is the main reason why cars are more expensive in Ireland than in other EU countries. The prices of new cars here increase by up to 30% when VRT is applied.Commission members who spoke to the Sunday Tribune said the measure was also designed to have a 'green' impact."The idea is to lower people's use of their car and get them to switch to public-transport alternatives. "Just taxing the car itself doesn't do that, because once somebody has paid the tax they can drive it as much as they like.''

A congestion charge, which the report refers to, would be more popular than a general increase in petrol costs, which are already high based on recent hikes in oil prices. While the government's tax receipts for 2009 remain under pressure, the importance of VRT has hugely dropped over the last six months.Net VRT receipts in the first half of the year amounted to €269m, compared to €866m for the same period last year, according to Department of Finance figures.

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Ella said...

It's a good system to tax cars by use. However, I just bought a new car in January. Does this mean it's about to lose a third of it's value, now that's scary.

bigphathar said...

If you bought a new car in January it's probably depreciated a fair amount anyway. It's the nature of buying a new car, as soon as you roll it off the forecourt it's already lost thousands in value.

Taxing cars on emissions is a far more equitable way but no doubt it will somehow be cocked up by the Department of Finance once FF gets it's grubby paws on it.

I don't own a car and have no intention of buying one, but why should the Irish pay so much more than any other country on cars?

The Gombeen Man said...

Thing is, Ella... your present car's second-hand value might well drop, but so would the new car you would be trading it on.

As BP says, why should we continue to pay so much more for our cars than other EU citizens?