Motor trade seeks Budget cut in VRT

 

THE motor trade has called for the reduction of vehicle registration tax (VRT), the introduction of compulsory MOT style tests and the extension of the "scrappage" scheme for a further year.

The Society of the Irish Motor Industry (SIMI), in its pre Budget submission to the Select Committee on Finance and General Affairs, also wants fuel duties to be maintained at the current levels and a further reduction of corporation tax for small businesses.

SIMI chief executive, Mr Cyril McHugh, said that, despite the record sales figures released yesterday, the high level of VRT was causing a fundamental structural problem in the industry. The organisation wants VRT reduced to 20 per cent.

Mr McHugh said that while VRT was nominally 23.3 per cent, it actually represented 36.5 per cent of the untaxed price of the car as it was levied on the taxed price of a car. "This exorbitantly high tax could put all the gains of recent months in jeopardy," according to the SIMI preBudget submission.

Lowering VRT would create a virtuous circle, the SIMI argues. It claims VRT is artificially suppressing the market for new cars, and that any reduction in the tax would stimulate sales and result in more tax revenue for the Government.

If VRT was reduced to 20 per cent, new cars sales should reach the 100,000 figure next year but without the tax cut, sales of new vehicles will fall back to about 80,000, according to the SIMI.

Mr McHugh said that the overall Government take would be more than £1.7 billion, which is almost 17 per cent of total Government revenue. The level of dependency on one sector was unhealthy for the Government and damaging for industry, he added.

Unless the VRT structure is changed, the Government will lose out substantially on revenue from car sales over the coming years the submission states.

The SIMI is also calling on the Government to introduce vehicle testing for all cars over four years of age. Under an EU directive all member states must introduce such tests, and the Republic, which has a derogation until January 1998, is now the only state without them.

The submission states that introducing the tests would create 1,100 jobs and reduce emissions from cars as an emissions test is a key part of the scheme. Irish vehicle tests will also prevent the dumping in the Republic of unsafe cars which have failed the UK MOT test. This is an increasing problem, according to the SIMI.

Lower insurance costs should also result from the introduction of testing as at least 8 per cent of accidents are directly related to vehicle defects, the SIMI argues.

The pre Budget submission also calls for the Government's scrappage scheme to be extended for a further year until the end of next December. The society said it was clear that the scheme had worked.

Government revenue from new cars bought under the scheme during its first year of operation was £41.8 million, net of the £1,000 VRT refund. The society estimates that about 6,000 additional people would avail of such an extension to the scheme.