M50, Port tunnel users face toll hikes after EU court opinion

ECJ says Republic must impose VAT on tolls levied across the State-owned motorways

M50 and Dublin Port Tunnel users face the possibility of toll increases of up to 60 cent after a European Court of Justice said the State must impose VAT on tolls levied on State-owned motorways.

The imposition of the 23 per cent VAT rate on existing M50 toll rates would see the fee for a driver with a tag account rise from €2.10 to €2.50, while a driver with a video account would see their €2.60 charge rise to €3.20 per journey.

The opinion issued by the European Court of Justice's advocate general is the latest stage in a long-running dispute between the Revenue Commissioners, which believes VAT should apply to tolls on State-owned motorways; and Transport Infrastructure Ireland (TII) and the Department of Transport, which believe it should not.

The origins of the disagreement stem from May 2010 when the Revenue directed the TII's predecessor, the National Roads Authority, to impose VAT on State-owned motorway tolls. This decision was immediately appealed by the Department and the NRA.

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The matter was considered by the Revenue Appeals Commissioner who then forwarded it to the European Court of Justice.

While the matter was under consideration the TII/NRA has been paying roughly €17 million a year, around €70 million to date, by absorbing VAT into existing tolls.

No additional exchequer funds were provided to the TII/NRA to cover the cost of paying the VAT which meant the cash used was taken from the roads budget.

In an opinion issued last week the advocate general for the EU European Court of Justice said VAT does apply to State-owned motorways.

If the EU Court of Justice endorses this opinion with a ruling, which is usually does, then Revenue and the TII must decide how to impose the VAT on tolls on the M50 and the Dublin Port Tunnel.

One option is to impose VAT on top of the existing tolls, which would see toll rates increase sharply and is unlikely to be very unpopular with commuters.

Another option is for the TII to absorb part of the VAT cost into existing toll fee structure.

Final judgment

However, it is thought unlikely the current practise of the full VAT cost being absorbed in the existing toll can continue.

TII communications director Seán O’Neill said “the opinion is not favourable to TII’s position on this VAT question. Currently, TII is absorbing the VAT cost and we will not be making any decisions on next steps until a final judgment is made”.

It is understood that prior to the opening of the Dublin Port Tunnel in 2008, and the takeover by the State of the west-link toll, the NRA was told by the Revenue that VAT was not applicable for tolls on these roads.

Two years later, the Revenue changed its stance following a European Court of Justice ruling in relation to the imposition of VAT of State-owned car parks.

At the time, private car parks had to impose VAT, while State-owned car parks were exempt. The ECJ ruled that this was unfair and Vat should apply on both.

Following this ruling the Revenue instructed the NRA that VAT be imposed on M50 and Dublin Port Tunnel tolls.

A spokeswoman for the Revenue said opinion of the Advocate General had been noted and said the decision of the Court of Justice of the European Union was awaited.

She said for reasons of taxpayer confidentiality “Revenue is precluded from commenting on particular cases”.

David Labanyi

David Labanyi

David Labanyi is the Head of Audience with The Irish Times