The purchase of new school buses should be exempt from VAT like buses used in tourism, according to Fine Gael Senator Jim Higgins.
"I have written to the minister for finance urging him to examine the issue with a view to having the VAT waived where buses are bought specifically for school transport purposes," he said.
Mr Higgins said that the 22 per cent VAT on the cost of a school bus brings the total cost to approximately €148,000.
"It is clear that the VAT disincentive is a major cost deterrant to private operators who wish to upgrade their fleets," he said.
Mr George O'Callaghan, of the Joint Managerial Board, which manages secondary schools, said that he would welcome "anything that would lower costs".
"If it led to the improved state and quality of school transport, which undoubtedly it would then we are in support of it," he said.
If VAT was abolished on school buses, he believes that more private investors would be interested in investing in school runs.
"There are buses at the moment that are not suitable for the purpose for which they are intended," he said. "With high costs, we have to keep buses running past their sell by date".