AN extension of the scrappage scheme for older cars is under consideration by the Government, according to the Minister for Finance.
Speaking at the Society of the Irish Motor Industry annual conference, Mr Quinn also announced the abolition of the special advance VAT payment, made in December each year, by the largest VAT payers. This will provide the larger companies with a cash flow boost at the end of the year.
The scrappage scheme, introduced in July 1995, has been partly responsible for the boost in car sales. The latest figures show a 30 per cent rise in new car sales to 106,130 in the period from January to September 1996. The scheme provides a VAT (vehicle registration tax) relief of £1,000 where a new car is purchased while, at the same time, a car at least 10 years old is scrapped.
Mr Quinn noted that, under the terms of the Finance Act 1995, the scheme will end on December 31st. However, a request from the society for an extension for a further year "is being examined with particular reference to its impact on safety, the environment and, of course, Exchequer revenues".
While the abolition of the special VAT payment will give rise to a once off cash flow cost of some £120 million to the Exchequer in 1996, it will not affect the budgetary position in 1997, or subsequent years, Mr Quinn said. The payment was introduced in 1993 to offset most of the cash flow loss to the Exchequer which arose from the abolition from January 1st, 1993, of VAT at point of entry in intra community trade.
Traders with a net VAT liability of £1 million, or more, had been required to pay one month's VAT to the Exchequer in December, one month before they would have been required to. But a full credit for the payments was granted in the following January.
In effect, the scheme took extra, cash flow from the companies in December and gave it to the Exchequer. With its abolition, the larger firm will now have a larger cash flow at the end of the year than they have had since 1993.
Mr Quinn noted that a special inter departmental group had been examining the strategic impact of taxation on environment policy and planned to bring forward specific tax measures for the 1997 Budget. The group would be examining a report shortly but he stressed that any proposals would have to have due regard for competitiveness considerations.
Referring to the scheme in the last Finance Act which allows for the exemption from excise duty of bio fuel pilot scheme production, he expressed surprise that interest in the scheme had not been significant. "This is somewhat surprising given the frequency with which the scope for substitute products are referred to in the media," he said.
Mr Quinn's move to abolish the special advance VAT payment was welcomed last night by the Irish Business and Employers Confederation (IBEC). The advance payment arose from abolition of VAT at the point of entry and was an interim measure, IBEC said.
Its removal would improve the cash flow position for firms with an annual net VAT liability of £1 million or more, the body said.
But the Irish Small and Medium Enterprises Association (ISME) said Mr Quinn had missed a chance to improve the liquidity and ability to fund new jobs for the small enterprise sector.
"These small companies at present pay VAT 60 days after raising the invoice. Typically they get paid in 90 days, often by Government Departments," ISME said.
