VEHICLE LEASING companies have said they are facing huge increases in their costs due to the introduction of the new barrier-free tolling system on Dublin's M50 motorway as they will no longer be able to reclaim VAT on tolls, writes Elaine Edwards.
The National Roads Authority, which will operate the new eFlow toll-free system from August 30th, confirmed yesterday that public sector tolls do not attract VAT. Previously, when the tolling system was operated by NTR plc, the toll charge on the West Link had a 21 per cent VAT element built in. Companies were allowed to reclaim this element from Revenue as a legitimate business expense.
However, the NRA confirmed that since August 1st, when it took over the operation of the tolls from NTR, there is no VAT applicable on tolls. The basic toll charge of €2 will remain the same, but there is no VAT element.
President of the Vehicle Leasing Association of Ireland John Wallace said: "In effect, that's a 21 per cent increase in cost for a business user straight away."
"The rates remain the same - there are some changes for some of the axle weights etc - but for passenger cars the charge is remaining at €2 but it's now exempt from VAT. It sort of slipped through and no one pointed it out. Of course, they [the NRA] wouldn't have pointed it out because it's not in their interest. This whole thing is just a fiasco. It's taxes by stealth."
The owner of a computer business with about 40 vehicles and offices in the North, in Dublin and elsewhere in Ireland, told The Irish Times he reclaimed between €300 and €500 each month in VAT from toll charges alone. The majority of that amount was due to tolls on the M50, the businessman said.
"Like everybody else, we are looking at how we are going to manage this barrier-free tolling and I was just looking at the website today and discovered that to register as a business user, the VAT rate is now 0 per cent. But the cost hasn't dropped to correspond to that. So whoever is getting it, is now getting it all."
"I reckon it could be €300 to €500 a month just from the VAT point of view. I've only seen that today."
The NRA estimates that approximately 25-30 per cent of the 100,000 or so vehicles using the M50 toll bridge each day are fleet or company vehicles, although many would be registered to rental firms who can reclaim tolls from their customers.
NRA project manager for eFlow, Cathal Masterson, said: "We have kept the overall amount of the toll for cars the same, but no VAT is applied. People such as commercial entities, who could have reclaimed the VAT, under the old scheme, won't be able to do so now."
Mr Masterson conceded this would effectively result in an immediate increase in cost for business users. The NRA took control of the toll bridge this month after buying out the NTR contract for €488 million.