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  • irishtimes.com - Posted: December 9, 2011 @ 6:55 am

    Consultation Convulsions

    Neil Briscoe

    So, when is a consultation not a consultation? When it’s a fait accompli.

    Minister for Finance, Michael Noonan, in concluding his 2012 budget speech, announced that he would be requesting submissions and suggestions from “interested parties” (for which read, the motor industry, the environmental lobby and sundry other lobbying groups) on adjustments to the motor tax and Vehicle Registration Tax (VRT) bands and rates, with proposals to be in by the end of March.

    This is something rather new. Previously, when it came to dreaming up new wheezes to squeeze more money out of motorists and the car trade, the figures were drawn up by the Department of Finance, presented to the Department of The Environment and were handed down as diktat to the industry as whole.

    Oh sure, there were meetings between the Society Of The Irish Motor Industry and representatives from the larger importer/distributors and officials from both departments. Rumour has it that a minister or two might even have wandered in during these meetings. But by and large, the industry was given a finished, finalised set of plans and told to go away and work with it.

    That’s how the current numberplate system was foisted upon the industry and that’s also how the current VRT and motor tax rates were decided upon. Coming up to the 2008 tax system change, the industry as a whole said to the government “do what you want, within reason, but just give us warning and do it so that it coincides with the main selling period in the first quarter of the year.”

    The changes were introduced in July 2008, sent second hand values into a death spiral and generally banjaxed any chance the Irish car industry had of making the most of the last decent year of car sales before the recession hit.

    Now though, things are different. Clearly, no civil servant or politician who established the existing tax bands had even the faintest idea of the low carbon models coming down the pipe from almost every manufacturer. Who would have thought that everything from a Ford Fiesta to a Volkswagen Golf to a BMW 520d would all slot neatly into the cheapest two bands for VRT and motor tax? Clearly, no-one in government buildings.

    It seems that Mr Noonan is not going to make the same mistake, a mistake that has cost the exchequer billions in VRT and motor tax receipts, again. The feeling on the ground is that, while decisions have already been made and the Government’s side is essentially going to be telling the industry “We need this cash, now tell us how best we can get it out of your customers,” there is a greater chance of the powers that be actually listening this time.

    We spoke to James Brooks, MD of Kia Motors Ireland and he reckons that things are going to be somewhat different this time around. “I know the Taoiseach is talking about open government, and we’ve already met with Pat Rabbitte a couple of times, and the fact that we actually got to meet him and he told us they he is open to suggestions on lowering carbon emissions, I’m very encouraged by that. So long as the adjustment is done at the right time, and isn’t too extreme, the industry recognises that cars are getting cleaner and that the Government is losing revenue. So long as we feel we have some input into it, we’ll feel better than we did in 2008, because ultimately those moves cost jobs and this has to be about promoting jobs.”

    Fiat Ireland, and its MD Adrian C. Walsh, are somewhat less sanguine though. “There has clearly been no thought given to all of those people living in remote areas, those driving back and forth every day from commuter towns, or those families with young children where there is no other suitable transport alternative. The Government has also shown little regard for the thousands of jobs that the motor industry supports all over Ireland both directly and indirectly.
     
    “Quite simply, Fiat Group Automobiles Ireland sees the motor vehicle as a vital and hugely under-rated cog in the Irish economic machine and not a soft-target luxury to be taxed on whim.”

    Mr Noonan may be about to find out that consultations aren’t all chummy and friendly, it seems.

    There are a couple of other salient points too. First off, the changes to the motor tax system laid down in the 2012 budget are a serious volte face to the encouragement to purchase carbon-efficient vehicles. Any changes that come out of the new consultation will doubtless be more of the same. Clearly, the ability for the relatively well off to buy low-emissions BMWs and Mercedes and pay the same tax rate as someone buying a Fiesta has stung the Government, and created more than a little jealousy in some quarters. Nevertheless, this is going to look and feel like a rowing back on a system that has gone a long way to reducing Ireland’s transport Co2 footprint.

    Secondly, any rises in the rates paid on pre-2008 cars are going to seriously affect the economic prospects of those on lower wages. Clearly, paying nigh on €600 a year for a car that could have been, potentially, taxed for €156 a year later is going to continue to sting, and with investment in public transport likely to be cut (making a terrible situation worse again) people who are struggling to keep their cars on the road now are either going to have to take a hit on their mobility (and therefore their employment prospects) or attempt to cheat the system.

    Finally, the figures being quoted in terms of lost VRT and motor tax receipts (and the consequent loss of VAT on vehicles sold) are not the full picture. The Government has other ways of extracting tax revenue directly from motorists…

    Hopefully, the consultation will involve more listening that dictating on the Government’s part, and hopefully this time the Irish car industry can get its points across forcefully enough that any future changes won’t have the same effect on sales, tax revenue and jobs as previous ones have had.

    Unlikely though isn’t it. And that’s without even taking the VAT and fuel duty rises into account. Similar public-industrial consultations in Canada and Australia have actually worked quite well, helping the motor industry to adapt more easily to changing regulatory regimes. Of course, in both of those countries, there is actual vehicle manufacture taking place, enhancing the industry’s ‘protect the jobs’ mantra, and crucially, both countries have weathered the global economic situation vastly, galactically better than have we.

    Perhaps we should have a consultation about that…

    • Benny Kevitt says:

      The emission based system of taxation should never have excluded low emission vehicles registered pre 2008. Apart from the injustice of extorting hundreds of euro per year from their owners as compared to their post 2008 counterparts, it also penalised them in terms of trade-in value making it more difficult to upgrade in the future and pay more VRT. The then Green Minister was not for turning but the Opposition, now in Government, opposed the regime. Time now for them to right the wrong. European Legislation has required emission data to be provided for new vehicles since 2001, so there is no excuse for not using this to the benefit of the low emission vehicle owners. Or was this mess, which the present Government are trying to undo, dictated by administrative convenience. Or a rush to do the green thing without due consideration to fair play? Would other low emission vehicle drivers of pre 2008 vehicles PLEASE WAKE UP.

    • J Flynn says:

      Sorry but the current system, and few that I have heard being proposed, doesn’t take into account the number of kms actually driven by individual car owners. These flat rate motor taxation schemes just bundle all “enviironmentally unfriendly” cars into the same extortionate tax bands, despite many only being used as weekend transport

      Surely the fairest way is to remove motor taxation in its current form, and instead charge it through fuel duty. That way, anyone who wants to use an inefficient car and cover huge mileage will have to pay for it. Those doing a reduced mileage, and therefore “protecting the environment”, would be charged less. Reduced administrative overheads would also be a nice side-effect, as would the inability of many motorists to then tax-dodge


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