Next week's budget may bring more woe for motorists from a Minister for Finance who seems to regard car users as a useful source of ready cash.
Industry sources claim that last year's decision to widen the top rate of Vehicle Registration Tax (VRT) to include cars over 1,900cc was taken late in the planning and under the advice of civil servants who needed to fill a potential hole in the finances and needed a quick fix. The Department denies it was such a haphazard decision. Regardless of the timing, the motoring populace duly obliged with the cash.
This year, there are suggestions that in spite of concerted campaigns both from the industry and consumer groups to reduce the tax burden on motorists, Mr McCreevy will actually widen the top band yet again, this time including cars over 1,800 cc.
Unlike his previous decision however, this one may actually be welcomed by some in the industry who found the previous decision gave competitive advantage to those with 1.8-litre models in their fleets. This internal jockeying for position is undoubtedly doing some harm to the overall campaign.
It's estimated that motorists contributed €3.8 billion to the exchequer in 2002, with each motorist, on average, paying €2,700 in tax each year.
While the majority of this is made up of excise duty on fuel - €1.5 billion - the next biggest contributor is VRT, worth €792 million according to figures from the industry lobby group, the Society for the Irish Motor Industry (SIMI).
It recently joined the Consumers' Association of Ireland and RAC Ireland in a campaign for a fairer deal for motorists.
The campaigning groups cite an example of an average family saloon, with a pre-tax price of €13,017: the total tax take on it with a retail price of €21,000 is €7,983. Realising the cost of removing VRT entirely would be detrimental not only to the Government's coffers but also to used car prices, the lobby groups have called only for an initial reduction of 2.5 per cent. Aside from VRT, the industry is also calling for the re-introduction of a scrappage scheme, providing a VRT discount on new cars bought to replace cars over eight and 10-years-old.
According to the SIMI, next January the volume of 10-year-old cars and older will be the same as it was in July 1995 when the previous scheme was started. While it accepts that the National Car Test (NCT) has improved the state of our national fleet, they point to emissions from these cars and commitments undertaken in the Kyoto Portocol.
However, a new scrappage scheme has not won support from the likes of the NCT, where they claim that the introduction of car testing was aimed at helping car owners to hold on to their cars for a little longer.
As for motor tax, which accounts for €581 million, it's under the remit of the Department of Environment and the minister responsible, Mr Cullen, has announced an increase of 5 per cent from January 1st, raising €34 million, all of which, according to Mr Cullen, will be spent on regional and county roads. For motorists that means a rise of between €7 and €64, depending on engine capacity.
This at a time when the amount spent on capital projects including roads will increase by a modest 2 per cent over 2003, according to the spending Estimates for next year.
While the Government may dismiss offhand any calls for tax reductions in VRT, it does face a dilemma in the coming years for while some regard motor taxation as one of the handiest forms of "stealth" taxation, it's set to become a lot more transparent as the car industry moves towards harmonising pre-tax prices in the EU, with the discrepancies between State taxes here becoming clear to even the most nonchalant of motorists. Yet if Mr McCreevy acquiesces to the calls for a reduction in VRT he will be hard-pushed to find a replacement source of income.
There are also those in the industry - a small minority admittedly - who believe a campaign against VRT is wrong-footed. Speaking to Motors earlier in the month, Chris Hanlon, managing director of Permanent TSB's car finance arm, voiced the dissenting opinion expressed by some within the industry who support the Government's system of low central taxation. "I don't see why the guy on the street should have a hard time subsidising my new car. If I want to buy a new car it's my decision and someone else shouldn't have to pay for it."
However, these are very much voices in the wilderness where, particularly at dealer level, many are feeling the effects of significant investment in showrooms to meet new EU block exemption rules and criteria imposed by distributors, while at the same time witnessing their sales margins being squeezed in a highly competitive market-place with multiple models and niche categories.
Away from the public campaign, many in the industry privately hope for a neutral budget for the motorist, seeing the likelihood of a reduction in VRT as slim and the introduction of a new scrappage scheme as more of a medium-term aspiration.
So what else can we expect? Mr McCreevy's overall budget strategy may be to touch on several items rather than single out one area for punishment. So we may expect small rises in excise duty on fuel.
Last year diesel prices rose 3 cent a litre. The sale of diesel models here has grown from 10 per cent of the car market in 2000 to 17 per cent last year. However, on the Continent diesel sales have risen from 28.8 per cent of the market in 1998, to 40.3 per cent last year. In six major EU markets, most recently Italy, diesel models now outsell petrol versions. Mr McCreevy may form the opinion that now is the opportune time to raise excise on diesel and reap the rewards in the future when, it's expected, diesel sales begin to mirror European levels. We'll have to wait and see if the Minister has more financial gaps to fill.
