Tax on Irish drivers adds up to raw deal

HARMONISATION: Amazing but true: cars in the Republic are among the cheapest in the European Union. Also amazing but true: after tax, our cars are among the most expensive in the European Union. Herein lies one of the greatest irritations of car buyers across the EU - we have one currency, one competition policy and one interest rate, but a lack of tax harmonisation means on-the-road car prices vary so much they are almost beyond comparison.

For Irish residents, the biggest problem lies in vehicle registration tax (VRT), a levy that ranges between 22.5 per cent and 30 per cent of a car's open-market selling price - meaning that it is calculated after VAT of 20 per cent has already been imposed.

After the Netherlands and Denmark, our VRT levels are the highest in the EU and, when compared to states such as France, Germany and Britain, which don't apply any VRT, appear to be unfairly high.

Take a Fiat Punto, which, according to the most recent European Commission research into car prices, starts life in the Republic costing €7,519 (£5,900), making it the eighth-cheapest car of its type in the EU.

After VAT of 20 per cent and VRT of 22.5 per cent have been imposed, that price rises to €11,053, turning the Irish car into one of the most expensive Puntos to be found in the continent.

Mr Alan Nolan, deputy chief executive of the Society of the Irish Motor Industry (SIMI), agrees that Irish cars seem expensive when compared to their equivalents in VRT-free states.

"Before tax, Ireland is one of the cheapest countries in Europe and, after tax, it's one of the most expensive. The level of tax that the Government levies on vehicles is unreasonably high," he says.

The VRT issue has become particularly thorny since the beginning of this year, when the arrival of the euro made it easy for EU consumers to compare prices across various states for the first time. There is an argument that this could make the option of importing cars from other euro-zone countries more realistic than before.

Mr Nolan, as befits someone representing the domestic motor industry, argues that VRT will continue to stand in the way of such transparency. He also points out that, by the time import charges are imposed and VAT paid in the country of origin, savings notched up through importing are unlikely to be substantial.

From the Irish consumer's viewpoint, there's also the small glitch of being one of just two EU states that likes to have their steering wheels on the "wrong" side.

Pre-tax price for a Fiat Punto

UK* €8,769

Germany €8,002

Austria €8,000

The Netherlands €7,831

Italy €7,670

Belgium €7,522

Luxembourg €7,522

The Republic €7,519

Sweden* €7,418

Spain €7,240

France €7,137

Finland €7,118

Denmark* €6,705

Portugal €6,581

Greece €6,240

Source: Competition DG, May 2001

*Not in euro zone