Car registration tax to be phased out

Seth Brundle

from http://www.breakingnews.ie/2006/02/24/story246335.html

Car registration tax to be phased out
24/02/2006 - 15:03:42

Costly car registration tax is to be phased out over the next decade in a bid to ensure a true EU single market for vehicles, it was revealed today.

European Commissioner for Taxation, Laszlo Kovacs, admitted the Irish Government was strongly against the elimination of the revenue-generating Vehicle Registration Tax (VRT), as well as any attempts to harmonise corporate taxes across the EU.

On car taxes, Mr Kovacs said: “The idea is to eliminate in a period, not in one step, of five to 10 years, to eliminate the registration tax.”

Mr Kovacs said 16 EU member states operated VRT taxes varying from a couple of hundred euro to thousands.

“For the car manufacturers it results in a very, very fragmented market. They simply cannot benefit from the single market, with 450 million consumers, in the case of the car industry, in the case of the car market it simply doesn’t function,” he said, as he prepared to meet Finance Minister Brian Cowen to discuss the issues.

But Mr Kovacs said rather than completely removing the registration tax it would be integrated with an annual circulation tax so individual governments would not suffer a major loss in revenue.

“Owners of the car would not pay it in a lump sum with the purchase of the car but year after year as a part of the annual circulation tax,” he said.

Mr Kovacs, who said the commission’s proposals on altering vehicle tax were citizen, industry and environmentally friendly, said currently people often faced double taxation on the vehicle if they moved country.

The commissioner said that from 2008 onwards a quarter of the combined car tax would be based on the carbon dioxide emissions of the engine.

Mr Kovacs said the commission had no ambition to propose the harmonisation of corporate tax rates across the EU.

But he said the commission intends to begin working towards a common consolidated corporate tax base to present a legislative framework by 2008.

The commissioner said this would involve harmonising the method of calculating the tax base in EU countries.

“There are too many tax measures which encourage firms to invest and operate domestically rather than in another Member State,” he said.

The commissioner said he did not believe the economic success of Ireland was solely attributable to the favourable corporate tax concessions the country has offered since the 1960s.

“The majority of Member States are supportive or at least open to this idea, while some Member States, including Ireland, have expressed serious reservations,” he said.

“If necessary we will propose the adoption of the common tax base by those Member States who are interested under the enhanced cooperation mechanism because we cannot allow some States to hold others back.”

Great news

unkel

rather than completely removing the registration tax it would be integrated with an annual circulation tax so individual governments would not suffer a major loss in revenue.

“Owners of the car would not pay it in a lump sum with the purchase of the car but year after year as a part of the annual circulation tax,” he said.

So just being replaced by a huge annual tax? :rolleyes:

mike65

I'll be most interested to see what level the annual tax is pitched at, will there be many different levels, a la the road tax?

Mike.

faigs

'Phased out', as in, covered over by other taxes and costs I reckon. We probably won't notice a difference at all.

mike65

mike65 wrote:

I'll be most interested to see what level the annual tax is pitched at, will there be many different levels, a la the road tax?

Mike.

I'm sure it will be based on emissions or how much fun your car supposedly is.

Interceptor

Its very hard when you've been fukcing someone for years to suddenly just stop, and governments are no different. VRT is one of the greatest injustices of the current government. I depressed myself by reading the latest Top Marques magazine and realising what an automotive backwater this country is. There are more TVR's for sale in one small garage in the UK than there are in the whole of Ireland. If it wasn't for VRT.... BRRRRMM, BRRRRM

'cptr

Tipsy Mac

The current system of VRT suits the government and most of all car dealers, can't see it changing anytime soon.

Owen

How the hell does it suit car dealers/manufacturers? I work for one, and let me tell you it's a nightmare. More paperwork, more hassle, and more accounting. I'd rather it be over and done with, thank you very much!

Owen

And let me tell you, if VRT which is currently a source of millions for the Government is phased out, it will be levied in other places. On road tax, on more stringent NCT tests, and more importantly, on Petrol. Don't be fooled, in Ireland, with a population as small as ours, they will find a way to tax us to death. Whether it's up front as in VRT, or sneakily as in Petrol, we will end up paying for it.

faigs

Tipsy Mac wrote:

The current system of VRT suits the government and most of all car dealers, can't see it changing anytime soon.

Ain't true, my gf's family are car dealers, her dad gets in a few cars a month from england because the demand is here for them(good spec'd GT Golfs, Passats etc). He paid over €60000 in six months clearing cars for VRT. A merc he had in last week had to be cleared at a cost of €11000. The government is screwing the dealers as well as us.

css

faigs wrote:

Ain't true, my gf's family are car dealers, her dad gets in a few cars a month from england because the demand is here for them(good spec'd GT Golfs, Passats etc). He paid over €60000 in six months clearing cars for VRT. A merc he had in last week had to be cleared at a cost of €11000. The government is screwing the dealers as well as us.

What a load of rubbish, screwing the dealers... the dealer is a middle man, anything they pay out, they charge on. How is the dealer being screwed if he gets all his money back, plus more?

MrPudding

faigs wrote:

Ain't true, my gf's family are car dealers, her dad gets in a few cars a month from england because the demand is here for them(good spec'd GT Golfs, Passats etc). He paid over €60000 in six months clearing cars for VRT. A merc he had in last week had to be cleared at a cost of €11000. The government is screwing the dealers as well as us.

So he took an 11k hit on a single car? The margins on the cars must he huge if he can afford to get screwed by the gov to the tune of 11k on a single sale.

MrP

full forward

Great to hear its going. EU good for somthing. I hope they dont mess with our coproration tax though. The government will have to put it up anyway to get back the loss from VRT.

FYI Current VRT rates...

Cars up to 1400 cc 22.5%
Cars 1401cc-1900cc 25%
Cars over 1900cc 30%

mike65

So he took an 11k hit on a single car?

He did'nt take the hit, his customer did (plus a little extra for paperwork).

Mike.

Tipsy Mac

It suits dealers because it basically prevents buyers from going abroad for new cars as by the time they get the car back here and the VRT payed there is little difference for a normal sized car and you would be just as well getting it from your local dealer. Also the price that Revenue calculate the open market selling price from is based on data supplied by the Irish Motor Industry (I think SIMI but not 100%) so it's in their interest to supply a higher price in order to increase the tax take and make importing less attractive and they can then split the profits between the government and the dealer.

Tipsy Mac

ned78 wrote:

And let me tell you, if VRT which is currently a source of millions for the Government is phased out, it will be levied in other places. On road tax, on more stringent NCT tests, and more importantly, on Petrol. Don't be fooled, in Ireland, with a population as small as ours, they will find a way to tax us to death. Whether it's up front as in VRT, or sneakily as in Petrol, we will end up paying for it.

Well the argument you are making that it should stay in place as otherwise it will need to be found somewhere else is the same as you saying a Mafia Don should be given a government grant to make up for the money he has lost when he is found guilty of extorsion. To me it's an illegal tax, I don't care where they have to get the money from to make up the difference, it's wrong and against what the EU was supposed to be about.

murphaph

I expect (and would welcome) VAT on vehicles increasing to 25% (maximum permitted by the EU). I believe a tax based on the car's purchase price is a good thing as pricy cars attract more tax from the wealthy and cheapo cars attract less tax from the poor. I know that's a gross over-simplification, but why should the ordinary taxpayer subsidise Bentley drivers who's car of choice will now be cheaper. The tax has to come from somewhere afterall. Placing all the tax on fuel may also penalise the poorer in society as they may only be able to afford older, less fuel efficient cars and so on. It's not a simple area to tax fairly.

faigs

mike65 wrote:

He did'nt take the hit, his customer did (plus a little extra for paperwork).

Obviously, he takes the initial hit and then has to put the money onto the price of the car. It is his profession, he does need to make a profit after all, and in doing so cover his costs of flying to England and driving the car back. The customer doesn't pay any more than they would for a similiar car coming from ROI, he sells at very reasonable prices and hence has loyal customers. The only reason he gets them there is because they're usually in far better condition and have more extras.

css wrote:

What a load of rubbish...How is the dealer being screwed if he gets all his money back, plus more?

I'm just saying that it doesn't suit the dealers just like it doesn't suit us. We're all being screwed on tax, and the dealers have to pay it just like the buyer does, and it only becomes apparent when you see how much you have to pay to clear a car. The only reason extra profit is made on English cars is because they're better cars, the dealer pays VRT as well as more taxes for buying/selling.

nxbyveromdwjpg

Tipsy Mac wrote:

It suits dealers because it basically prevents buyers from going abroad for new cars as by the time they get the car back here and the VRT payed there is little difference for a normal sized car and you would be just as well getting it from your local dealer.

:eek: The reason its the same price as getting it after VRT as buying from the local dealer is because he has already paid for vrt beforehand on the same car if its on his forecourt. Common sense :rolleyes:

It does NOT suit dealers - I mean cmon use your brain here - how would the governments 30% mark up on their product (that is putting off god knows how much custom) be helping them do business?

unkel

nm wrote:

It does NOT suit dealers - I mean cmon use your brain here - how would the governments 30% mark up on their product (that is putting off god knows how much custom) be helping them do business?

Exactly. SIMI would be absolutely delighted if VRT was scrapped

irishpartyboy

Scrapping VRT would have serious repercussions for the used car market and could cause the market to crash.. all the dealers existing stock would be worthless cos the VRT has already been paid.. so why would consumers bother buying the 2nd hands when they could buy the exact same car NEW, for cheaper if VRT is scrapped.

So although dealers dont make any money out of existing VRT, they definitely dont want it scrapped. Plus any private motorists out there could instantly lose anything from 200-16000 on the value of their car.. i.e. VRT already paid.

esskay

irishpartyboy wrote:

Scrapping VRT would have serious repercussions for the used car market and could cause the market to crash.. all the dealers existing stock would be worthless cos the VRT has already been paid.. so why would consumers bother buying the 2nd hands when they could buy the exact same car NEW, for cheaper if VRT is scrapped.

It said VRT would be phased out over a decade so the prices of new cars would drop slowly over 10yrs and then so would the prices of second hand cars.

drdre

thats hopefully good news,

irishpartyboy

A phased approach, yes I would agree with that.. but how exactly would they implement that? that's the difficult one.

Anyway finally we will be able to get good value for money....plus all the new cars will have to be fully specced out like they are in the UK.

Guy:Incognito

I love the way people are sayign the government will "sneakily" add it on to fuel to make up teh differecne.Yes, fuel will go up, but most like to the same price the rest of europe pay, ie a lot more than what we have been paying.

irishpartyboy wrote:

A phased approach, yes I would agree with that.. but how exactly would they implement that? that's the difficult one. .

I would assume phasign it out will kill car sales for a few years as, generally, people should'nt be stupid enough to keep payign for something they won't have to pay for if they wait a while.

Tipsy Mac

The value of 2nd hand cars defreciating will only matter to people who will be retiring from driving and selling their car on, anyone else will have the same deal as before (their current car will be worth less but new car will be less too) or they will get a better deal.

curiosity

I'm sure it will be interesting to see what kind of timetable the Government puts on this (it's quite possible they will dig in their heels for a bit, at least until the supposed SSIA related surge iin car buying dies away). Perhaps car manufacturers will raise pre-tax prices to compensate, meaning we would see no appreciable difference. Does anyone know if our pre tax prices are appreciably lower than other EU states? An increase in standard spec for cars is also possible. Whatever happens, I'd be inclined to hold off on a new car purchase as long as I could now.

And don't we already have an 'annual circulation tax' in the form of road tax?All the Government have to do is jack that up, leading to no loss of revenue. Indeed, this would suit the State's finances better as it would be a more reliable source of revenue, being less dependent on sales peaks and troughs.

However this annual circulation tax will hit those who usually go for older cars, thus avoiding most of the VRT related slice of a cars value. One person might be quite happy to get a 6 year old car, which has depreciated substantially, and pay the same road tax as their neighbour who just bought a brand new set of wheels. At least you have a choice as to whether you splash out on a new car. However, many of us do need to have some type of car. It looks like we are going to have to pay more for that 'privilege'.

Anyone know much about how the emissions related tax system works in UK?

Tipsy Mac

How I would like to live in a world of no VRT, I can only imagine what I could drive...

Volkswagen Golf GTI

USA (Remember the car is made in Germany)
€18,535.34 ($21990)
www.vw.com/gti/index.html

Ireland
€ 35,260
http://www.volkswagen.ie/configurator/index.cfm?fuseaction=vw.modelOverview&modelID=281&bodyID=4256

unkel

Tipsy Mac wrote:

How I would like to live in a world of no VRT

You forgot to mention VAT - it's almost as bad as VRT and the deadly combination of the two leads to new European cars costing about half in the US compared to what they cost here

Guy:Incognito

Tipsy Mac wrote:

How I would like to live in a world of no VRT, I can only imagine what I could drive...

Volkswagen Golf GTI

USA (Remember the car is made in Germany)
€18,535.34 ($21990)
www.vw.com/gti/index.html

Ireland
€ 35,260
http://www.volkswagen.ie/configurator/index.cfm?fuseaction=vw.modelOverview&modelID=281&bodyID=4256

You say that like its Ireland on 35k and the rest of the world pay the US price. Nowhere else in Europe can you get it at the Us (or anywhere near) we do however have a better welfare (welfare state maybe) and free healthcare system, which would you prefer, the option of choosing not to buy a car (or buying a cheaper one) or haveign to pay everytime you so much as walk by a hospital. It's all a trade off. The also pay 1/3 or 1/2 of what we do on petrol, which isnt feasable for other countries. Plus, as I said, your not going to save anything, you'll just spread the payment. Petrol WILL go up, to be in line with the rest of Europe.