MOTORS:GOVERNMENT INCOME from Vehicle Registration Tax (VRT) fell by €597 million over the first six months of this year as a result of the 63 per cent fall in new car sales, writes MICHAEL McALEER, Motoring editor
Net VRT receipts up to the end of June amounted to €269 million, compared to €866 million for the same period last year, according to figures from the Department of Finance.
While sales in May and June seemed to recover, initial figures for July show a fall-off in the region of 80 per cent, largely due to inordinately high sales during the same month last year, when the new emissions-based tax system came into effect.
Most industry estimates predict total sales for this year will reach just 57,000, down from 151,607 in 2008. The most optimistic estimates suggest 2010 will show just a slight increase on this year.
The significant drop in both tax revenue and car sales has led the Society of the Irish Motor Industry (SIMI) to call for a review of the road tax system prior to the next Budget.
In particular, a reduction in the gap between the seven emissions bands is being suggested by the industry as a step both to increase Government revenue and to assist sales.
“We estimate that the total tax received by Government on new car sales this year could be as low as €500 million, compared with €2 billion in 2007 and €1.5 billion last year,” said Alan Nolan, director general of SIMI. “One problem is the significant annual cost differences between the bands.”
Under the old system, road tax rates were divided into 22 different bands, determined by engine size. Under the emissions-based system, applied to new cars from July 1st last year, there are only seven bands in use.
Meanwhile, changes to the VAT system for dealers, announced in April’s Supplementary Budget, now seem unlikely to be introduced until next year.
While the move was designed to help the industry, several dealers complained that it would reduce their everyday working capital. In the end, it was omitted from the Finance Bill at the request of the industry.
Some estimates suggest that up to €100 million would have been removed from the working capital of dealers if the scheme had been introduced. This would not have easily been replaced in the current climate.
Securing finance is a particular problem for the motor industry at present, according to Mr Nolan. Significant write-downs in the value of stock has been compounded by difficulty securing loans for customers.