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Financial Resolution No. 5: Excise (Continued)

Wednesday, 5 December 2012

Dáil Éireann Debate
Vol. 785 No. 2

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(Speaker Continuing)

[The Taoiseach: Information on Enda Kenny Zoom on Enda Kenny] The new rates will apply to motor tax discs and trade licences taken out from tonight for periods beginning on or after 1 January 2013.

  The House will note that I have just referred to A bands in the plural. Deputies will be aware that, in budget 2012, my colleague, the Minister for Finance, announced a review of the carbon banding applying to vehicle registration tax, VRT, and motor tax with a view to having a revised taxation structure in place for this budget. The Government's twin priorities have been to ensure the continuation of the positive environmental impact on vehicle emissions and the protection of the tax base.

  Under the new structure for both VRT and motor tax, the CO2 band A has been broken into four separate bands and the B band has been split into two. For motor tax only, a new zero band is also introduced for electric vehicles with a lower annual tax of €120 applying. The revised banding recognises that ever more fuel efficient cars are becoming available and allows for the differentiation of the environmental incentive in favour of the most environmentally friendly vehicles now and into the future. Indeed, the reduction in tax for electric vehicles recognises that there are no emissions at the point of use of these vehicles. These changes ensure a strong environmental incentive remains in place.

  While the combined levels of increases in the lower CO2 bands in this budget and the last are higher than the rest of the fleet, the increases must be viewed against a structure that has left the bottom rates very low. The reality is that there has been a significant loss of motor tax income over the past number of years, as the number of vehicles taxed on the basis of CO2 emissions has increased by about 5% year on year. At the end of October, the CO2 fleet of nearly 429,000 cars comprised just under 23% of all cars on the road. Of these, over 385,000 are taxed at the three lowest bands. This year, for the first time, over half of all new cars purchased are in the A band, the lowest rate of tax. This erosion of the tax base presents a challenge on the taxation side of the budget and needs to be addressed.

  While the move to lower emission cars is welcome from an environmental perspective, it represented an increasing loss of income to fund local services. Receipts have reduced from €1.06 billion in 2008 to €1.01 billion in 2011. It is estimated that income for this year would have been in the region of €954 million had no increases in rates taken place in the last budget, a further reduction of 5.5%.

  This budget restructures the bands in such a way that there remains a positive incentive to purchase low CO2 cars in recognition of the need to maintain correct environmental signals in the transport sector as an important part of our national effort to reduce emissions and achieve our climate obligations. The restructuring also goes towards responding to the challenge of maintaining the motor tax base.

  The A band is split into five bands corresponding to the four bands for VRT purposes, but with an additional zero emissions category to provide an additional incentive for electric cars.

Deputy Mattie McGrath: Information on Mattie McGrath Zoom on Mattie McGrath What about the bicycle?

The Taoiseach: Information on Enda Kenny Zoom on Enda Kenny Introducing banding between 80 g and 120 g of CO2 per kilometre allows us to strengthen the environmental incentive to lower emissions cars while addressing the fiscal gap. The increase for the lowest band, the new band A1 below 80 g, is the lowest of any increase in motor tax, and the rates of increase up to band A3 at 110 g are below the average applied to the CO2 tax structure. This continues the message, in place since 2008, that lower emissions vehicles will attract the lower rates of motor tax.

  Splitting the B band into two 10 g bands allows us to differentiate the tax increase to favour lower emission vehicles within this band also. While the percentage increases for the higher bands are lower, the monetary increases for bands D to G are greater than the monetary increases applying to bands A to C.

  The restructuring of motor tax represents a continuing commitment to incentivise vehicles with lower emissions. The new bands below 120 g will allow this process to continue into the future. It is anticipated that the proposed increases this year will raise some €86.5 million for the Exchequer over a full year.

  The Minister for the Environment, Community and Local Government will shortly bring forward a Bill to close off the arrangement whereby a vehicle owner can declare retrospectively that his or her vehicle was off the road. Provision will be made for a declaration to be made that a vehicle will be taken off the road. This change is designed to close off a loophole that disadvantages compliant taxpayers and is expected to bring in an additional €31.5 million in 2013, bringing the expected yield for 2013 to €118 million.

An Ceann Comhairle: Information on Seán Barrett Zoom on Seán Barrett As there is no provision in the order for a reply to the debate, is it agreed that the Taoiseach will have two minutes to reply?

Deputy Mattie McGrath: Information on Mattie McGrath Zoom on Mattie McGrath Of course.

An Ceann Comhairle: Information on Seán Barrett Zoom on Seán Barrett Therefore, I will call the Taoiseach at 8.48 p.m.

Deputy Pearse Doherty: Information on Pearse Doherty Zoom on Pearse Doherty It is not agreed if Opposition Members are to be denied time.

Deputy Aengus Ó Snodaigh: Information on Aengus Ó Snodaigh Zoom on Aengus Ó Snodaigh Or Government backbenchers.

Deputy Pearse Doherty: Information on Pearse Doherty Zoom on Pearse Doherty Yes.

An Ceann Comhairle: Information on Seán Barrett Zoom on Seán Barrett It is not agreed.

Deputy Sean Fleming: Information on Seán Fleming Zoom on Seán Fleming I will make a brief point on the first vote in the House. To clarify, the Fianna Fáil Party opposed the changes to the alcohol products tax, but we were supportive of the changes to the tobacco products tax. Since there was a combined vote, we voted against the resolution.

Deputy Tom Hayes: Information on Tom Hayes Zoom on Tom Hayes Fianna Fáil could have done it the other way for a change.

Deputy Sean Fleming: Information on Seán Fleming Zoom on Seán Fleming We are used to the practice whereby, similar to Committee Stage,-----

Deputy Paul Kehoe: Information on Paul Kehoe Zoom on Paul Kehoe Fianna Fáil is used to talking out of both sides of its mouth.

Deputy Sean Fleming: Information on Seán Fleming Zoom on Seán Fleming -----there is a group discussion, yet it is unusual to have group voting. We might agree with some measures during the course of the night, yet be forced to oppose them because we are opposed to other resolutions in their groupings. I want people to understand.

I will be brief to allow other Deputies an opportunity. My colleague, Deputy Ó Cuív, will wish to discuss Financial Resolution No. 4. We will oppose the reduction in the farmers' flat rate addition from 5.2% to 4.8%. The Taoiseach stated that based on CSO figures and macrostatistics covering several years, this reduction will have no great effect but the figures before the House refer to collecting an extra €18 million in 2013 and an extra €21 million in a full year. That €21 million must come from somewhere, namely, farmers. I do not accept the argument that it will have no effect. It is not revenue neutral and places an extra cost on farmers.

The Taoiseach's final comment was on the change in respect of off-the-road vehicles, which is not specifically mentioned in the motion. Legislation will be introduced next year. We accept that an illegitimate loophole must be closed off but we are already being told on budget night that there will be supplementary budgets as the year goes on to address different issues and increase revenue.

Deputy Paul Kehoe: Information on Paul Kehoe Zoom on Paul Kehoe No.

Deputy Sean Fleming: Information on Seán Fleming Zoom on Seán Fleming It was not announced in the budget. A new tax accruing €31 million will be introduced whenever the Minister for the Environment, Community and Local Government, Deputy Hogan, returns from wherever he is.

The Taoiseach: Information on Enda Kenny Zoom on Enda Kenny Doha.

Deputy Sean Fleming: Information on Seán Fleming Zoom on Seán Fleming We will have supplementary budgets to raise revenue during the course of the year, yet I believed that the purpose of tonight was to budget for the full year. When the Taoiseach next gets a chance to speak - he has not been given an opportunity to respond to this debate - he might explain how many supplementary budgets there will be to raise tax during the course of the coming year.

Deputy Tom Hayes: Information on Tom Hayes Zoom on Tom Hayes That is wishful thinking on the Deputy's behalf.

Deputy Sean Fleming: Information on Seán Fleming Zoom on Seán Fleming We are generally supportive of the changes to the categories of VRT and motor tax. Fianna Fáil could oppose everything, but we agreed to the €3.5 billion. We must be responsible, put our money where our mouths are and support some measures that we might not particularly like. When the push comes, Deputies cannot support everything in principle and oppose it in detail.

Deputy Tom Hayes: Information on Tom Hayes Zoom on Tom Hayes I wonder who would do that.

Deputy Sean Fleming: Information on Seán Fleming Zoom on Seán Fleming However, we will oppose the resolution in respect of VRT. It is unfortunate that due to the grouping, all three matters are being taken together, including that relating to farmers. We will vote "No" collectively, but we are generally supportive of Financial Resolution No. 5. There will not be an opportunity to vote to demonstrate our support separately.

The Taoiseach: Information on Enda Kenny Zoom on Enda Kenny Understood.

Deputy Patrick O'Donovan: Information on Patrick O'Donovan Zoom on Patrick O'Donovan We will be devastated.

Deputy Pearse Doherty: Information on Pearse Doherty Zoom on Pearse Doherty This group of financial resolutions deals with VRT, farmers' tax and motor trade tax. I will deal with the VRT and motor trade tax issues first.


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