Revenue increasing VRT on the sly

For a while I have been monitoring the price of VRT needed to pay on a car that I want to import into Ireland. This weekend I went back to check again because since the beginning of the July C02 emissions are now taken into account. I was shocked to find out that the Revenue had increased the ‘open market selling price’ of the car in question by 20% since I last checked in November despite the fact that the details I included had an extra 10,000 miles on the clock .

This is nonsensical and smacks of the Revenue abusing their power to manipulate VRT receipts.  Anyone with the slightest bit knowledge of the Irish second hand car market knows that the bottom has fallen out of the value of Irish second hands cars, which are now generally worth a lot less than they were in November.

It appears that the Revenue are trying to manipulate their position by virtue of the fact that they can decide on whim what the supposed ‘open market selling price’ of car is so that they can increase the VRT take without anyone noticing.

VRT is a completely inequitable tax, which is illegal under EU law. Within the EU there should be a free movement of goods, this means that any Irish resident has the right to go to any other EU country, buy a car and bring it back to Ireland without being penalised by the Irish Government and having to pay an import tax, which is what VRT is.

VRT is currently being challenged in the EU Court. It unfairly protects the Irish car industry that rips off Irish consumers by charging them way more than or EU counterparts. Ironically the car dealers blame VRT for keeping the prices high. In their defence the car dealers are forced to add VRT into the price. This is one of the reasons why Irish cars always have such low specifications to our UK neighbours because dealers here take cars with no extras in order to keep the price lower.

The Revenue Commissioners don’t divulge how they calculate the open market vehicles of vehicles, which leaves the system open to manipulation. But, in blatant cronyism they also add VAT onto the second hand open market value, in order to support the dealers. This means that if you bring a car into Ireland from the UK, the Revenue calculates the 28% VRT by deciding what the open market price of your car plus an additional 21.5% VAT.

Thankfully some common sense on the issue is emerging. With car sales drastically reduced the governments overall VRT take is reduced greatly because it comes mostly from new cars that dealers import so they are looking for a more stable way of taxing cars. No doubt the Irish dealers have also been lobbying the government to remove VRT in order to boost their sales. The article below appeared in today’s Sunday Tribune and relates to advice by the Commission on Taxation, which has advised the Government to tax driving rather than the cars themselves.

The Commission suggests a congestion charge for Dublin city centre, similar to that imposed in London and also higher fuel duty. These options would also garner favour from environmentalists they are likely to reduce the overall level of journeys taken.

If brought in this system would be more akin to the European model and would be a big improvement to Dublin city centre.  It should also be rolled out to regional cities. It certainly makes more sense than the current system.

Sunday Tribune (August, 2009.)

Congestion charges or petrol tax to replace VRT

Radical moves proposed by Commission on Taxation include levy on cars in Dublin city

Emmet Oliver, Business Editor

Vehicle registration tax (VRT) should be abolished on all cars sold in Ireland and replaced with a UK-style congestion charge or an increased tax on petrol, according to proposals submitted to government by the Commission on Taxation.

The radical measures are aimed at “taxing driving, rather than taxing cars” according to the report of the commission, which goes to the Department of Finance this week. If the government implements the measures it would represent a major change in taxation and transport policy.

The recommendations, which could provide an unprecedented boost to the faltering Irish motor trade, would involve charging drivers a fee when they enter designated and often congested urban areas. For example, in Dublin the charge would most likely kick in if a car travelled within either of the two main canals.

The report comes to the conclusion that VRT is a “lumpy tax” that is dependent on one large purchase being made by a consumer. A tax on driving and use of the road network would throw the net much wider and mean the government would receive large revenues even if car sales slumped as they tend to in recessions.

“It will provide the exchequer with more stable sources of revenue and is part of the general drive to broaden the tax base,” a commission member told the Sunday Tribune.

The London congestion charge levies drivers who enter certain defined zones from the hours of 7am to 6pm with a charge of £8. Residents who live within the congestion-charge areas and those driving green vehicles are either exempt from the levy or can avail of a discounted rate.

A set of cameras have been placed around central London to take images of drivers’ registration plates, and a number of payment methods, online, by phone or in a shop, are available.

The motor industry desperately wants a car-scrappage scheme introduced in the December budget, a measure it says could help to salvage large parts of the sector, but the idea of abolishing VRT could provide an even bigger lift, although petrol taxes or congestion charges are not popular with the motor industry. VRT is the main reason why cars are more expensive in Ireland than in other EU countries. The prices of new cars here increase by up to 30% when VRT is applied.

Commission members who spoke to the Sunday Tribune said the measure was also designed to have a ‘green’ impact.

“The idea is to lower people’s use of their car and get them to switch to public-transport alternatives.

“Just taxing the car itself doesn’t do that, because once somebody has paid the tax they can drive it as much as they like.”

A congestion charge, which the report refers to, would be more popular than a general increase in petrol costs, which are already high based on recent hikes in oil prices. While the government’s tax receipts for 2009 remain under pressure, the importance of VRT has hugely dropped over the last six months.

Net VRT receipts in the first half of the year amounted to €269m, compared to €866m for the same period last year, according to Department of Finance figures.

Ends