What next for VRT? - (Double taxation?)

spockety

With VRT being scrapped in the next few years, what do people think it will be replaced with, in terms of what the Revenue can get away with and still abide by EU legislation on the issue?

Things like a simple increase in motor tax have been mentioned, as well as perhaps an increase in tax on fuel. But both of these taxes will involve people who have already paid VRT (i.e. the entire country) paying out an extra tax on top of it, as it is not possible to direct the tax squarely at people buying new cars or importing cars from abroad.

Or will the Revenue have some clever way of aiming a new tax at new car owners and still abide by new EU rules that prevent such a tax?

Owen

There'll be a 'green tax' of some sort. Whether that's on fuel, or on road tax who knows ... but one thing's for sure. VRT won't be done away with, it'll just be renamed.

spockety

Aye, but how will they rename the tax and still only have it apply to new cars?

Or do you think they'll bother trying to be so clever about it, and just tax everyone and all cars on an ongoing basis, whether you've already paid VRT or not? (As would happen with an increased fuel levy for example)

Stephen

Whatever they do, you can bet it won't work out any cheaper for the average punter.

Steve

They'll find some spin-off "carbon" or "green" tax as that seems to be the "in" thing at the mo and will get the least resistance.

I can't understand why they can't Eurofy car registration and have one overall system that you can buy a car in any country and keep / drive it anywhere in the Euro zone. Surely the revenue potential for this in cross-border speeding fines etc could justify it.
Why is it illegal for an Irish person to even DRIVE a foreign reg vehicle in this country when a non national can drive what he wants?

pburns

See here:
http://www.ireland.com/newspaper/motors/2007/0926/1190324745639.html

It is proposed that within each of the existing cc bands, there will be three possible motor tax charges influenced by CO2 ratings as follows:

o low CO2 ratings which will attract a discounted motor tax rate;

o medium range CO2 ratings which will attract the standard rate of motor tax;

o high CO2 ratings which will attract premium motor tax charges (higher than the standard rate).

It's a step in the right direction but they're still linking taxation to CC rater that purely basing it on CO2 emissions...

Anan1

spockety wrote:

With VRT being scrapped in the next few years, what do people think it will be replaced with, in terms of what the Revenue can get away with and still abide by EU legislation on the issue?

Will VRT be scrapped? With property tax revenues falling, I don't expect there to be much political or indeed electoral appetite for scrapping it.

Steve

Anan1 wrote:

Will VRT be scrapped? With property tax revenues falling, I don't expect there to be much political or indeed electoral appetite for scrapping it.

They've no choice, it was deemed illegal by the EU - as was the previous excise duty. They just have to think of another one to tide them over till it's also deemed illegal.

Anan1

stevec wrote:

They've no choice, it was deemed illegal by the EU - as was the previous excise duty. They just have to think of another one to tide them over till it's also deemed illegal.

Has the EU given us a date by which it must be removed, or are they still at the disapproval stage?

cozmik

stevec wrote:

They've no choice, it was deemed illegal by the EU

source?

smash

it will be replaced by a carbon emissions tax

Mc-BigE

The government in the last budget said that they were proposing to introduce a CO2 emissions based taxation to replace VRT starting in 2008 (but probably phased in over 5/10 years) They also stated that any system would have to be revenue "neutral".
They even asked the public for our opinion on the subject.

But this was all before the general election, so now that the country has sold her sole to the Devil, you can be sure they won't lose money.

my advice, if you got a car, don't trade in until 2008 to see what the Budget brings.
because smaller CO2 emission cars should be cheaper then they are now.
but on the flipside, high performance cars in general will be more expensive

Steve

cozmik wrote:

source?

http://www.rte.ie/news/2002/0919/VRT.html
that was 5 years ago - and they still haven't removed it.

NewApproach

I am not really tuned into political matters, so,

may I ask how is the VRT tax illegal??

Thanks

Tipsy Mac

The only way VRT will go is if the EU give them a specific date where it must go, the only way I can see this happening is if the motorists stop taking it up the rear and when we are next presented with any new EU legislation we all mobilise and vote against it as a protest vote that we are 2nd class EU citizens not benefitting from the common market.

Stephen

NewApproach: VRT goes totally against the principle of free movement of people and goods within the EU. Theoretically we could buy a new car from any EU state but the government has placed a barrier on this in the form of VRT.

Tipsy Mac

NewApproach wrote:

I am not really tuned into political matters, so,

may I ask how is the VRT tax illegal??

Thanks

All members of the EU have signed up to guarantee the free movement of goods throughout the EU without additional taxation being imposed by member states but this not being implemented on sales and registrations of cars in this country.

Not to mention the additional taxation of safety equipment in cars which is costing lives every year as the Irish are getting the basic of the basic level of spec which is legal to sell.

Steve

NewApproach wrote:

I am not really tuned into political matters, so,

may I ask how is the VRT tax illegal??

Thanks

In case you didn't notice the link:

Thursday, 19 September 2002 20:07 Calls for abolition of VRT following court ruling
The European Court of Justice has ruled that aspects of vehicle registration tax constitute a form of double taxation and are therefore illegal under the EU treaty.
The ruling came after a Finnish citizen took a case against his own government.
He claimed that by levying vehicle registration tax on a used car he had imported into Finland, the government was taxing the same product twice, because the tax ignored the value of the tax already paid on the car in another member state.
The court ruled that the VRT law in Finland conflicts with the EU treaty, and is illegal. The ruling may affect the operation of VRT in Ireland, which also charges high rates of VRT.
The European Commission two weeks ago called for the abolition of vehicle registration tax.
The Commission said in the interim, states should ensure that their VRT systems did not discriminate by imposing a double taxation burden on motorists importing second hand cars from other member states.

Anan1

Tipsy Mac wrote:

Not to mention the additional taxation of safety equipment in cars which is costing lives every year as the Irish are getting the basic of the basic level of spec which is legal to sell.

To be fair, this argument is a bit of a joke. Most new car buyers seem to prefer alloys to ESP.

LOTTOWINNER

Anan1 wrote:

To be fair, this argument is a bit of a joke. Most new car buyers seem to prefer alloys to ESP.

I'd much prefer extra sensory perception, I'd never have a crash!!!!!:D

Owen

stevec wrote:

In case you didn't notice the link:

The Commission said in the interim, states should ensure that their VRT systems did not discriminate by imposing a double taxation burden on motorists importing second hand cars from other member states.

Hold on a second. Could someone who's more awake than me read this? Does this mean that under EU law, we shouldn't be paying VRT on secondhand cars imported from the UK? Or am I reading something that isn't there?

Tipsy Mac

Anan1 wrote:

To be fair, this argument is a bit of a joke. Most new car buyers seem to prefer alloys to ESP.

Exactly, who's going to shell out extra for ESP when it should be there as standard.

Anan1

Tipsy Mac wrote:

Exactly, who's going to shell out extra for ESP when it should be there as standard.

Why should it be there as standard? Car manufacturers are commercial entities, they give people what they want. And many people don't want to pay for ESP.

digitally-yours

The principle of free movement of goods is one of the cornerstones of the internal market. This principle implies that national barriers to the free movement of goods within the EU be removed.

Many barriers have been lifted through harmonisation in the Community, such as in the field of vehicles, pharmaceuticals, medical devices, chemicals, construction products, gas appliances, electrical equipment, mechanical equipment, metrology, pressure equipment, cosmetics, footwear, textiles, toys, and others.

In the absence of harmonisation of legislation, the provisions of Articles 28 to 30 of the EC Treaty, which are of direct effect and thus may be applicable by national courts, forbid Member States from maintaining or imposing intra-Community trade barriers, except in special circumstances

There is no definition of those special circumstances.

http://ec.europa.eu/enterprise/regulation/goods/index_en.htm

galwaytt

In NI at the moment, there are two road tax regimes afaik - one for new vehicles, one for used, or existing stock. Don't know about mainland UK.

A big issue will be how the existing fleet will fare - if new rules apply for new cars, and existing stock stays the same, and I'm looking for a s/hand car, maybe there's no point in putting it off any longer............

Steve

This link explains it all
http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/05/236&format=HTML&aged=0&language=en&guiLanguage=en

Apparently they're going to increase road tax to compensate for the loss of VRT - and base the amount of tax on CO2 emissions.
It doesn't seem fair to anyone who currently owns a car and has already paid VRT.

Interesting that UK / France / Germany don't have VRT.

digitally-yours

Also explained in simple words here

with great detail


Taxing times for motorists

A simple question deserves a simple answer, right? Well, here’s a question for you: Why are cars so damn expensive here?

Like every other country in the EU, we pay VAT on everything we buy. On everything from Swiss Rolls to Rolls Royces, we in Ireland pay a standard rate of 21% but where Ireland and a few other EU counties differ is that there’s an additional tax that makes cars, in particular, rather costly.

It’s not actually a tax on the cars, which would technically be illegal by EU law, but a tax on making the car legal to drive on Irish roads. This tax is known as Vehicle Registration Tax (VRT) and is payable on the first registration of a car in the State, which has to be done before it can be licensed for road tax purposes, thereby making the car legal to drive. You could buy a car and not pay this tax - but you couldn’t drive it or sell it on here, which more or less renders it useless.

If you import a car from abroad you must register it and pay VRT yourself, but if you buy from a dealer it’s already done for you. In fact, legally, they can’t let an Irish person drive an unregistered car off the lot.

So how is this VRT calculated? Actually it’s pretty simple. A car is imported at a certain price and after VAT and other charges are added it’s ready for VRT. (This price is known as the Open Market Selling Price or
OMSP.)

On cars from 0 to 1400cc, VRT is charged at 22.5% of the OMSP. So let's imagine a carmaker imports a car and wants €9,000 for it. The revenue commissioner will add 21% VAT to that, bringing it to €10,890. In order to register it so you can tax it and make it legal to drive, the buyer has to pay another 22.5% on top of the €10,890, bringing the price to a grand total of €13,340. So that’s almost €4,500 paid in tax on a small car excluding any delivery or additional charges.

On cars between 1401cc and 1900cc, VRT is 25% of the OMSP and VRT on anything with a bigger engine is charged at 30%.

The changing of the 30% VRT band from 2000cc to 1900cc annoyed everyone, as manufacturers had to absorb the VRT increase on 2.0 cars ordered or in stock for 2003, the year it was implemented, while they still struggle as most manufacturers build cars to meet the 2 litre class barrier meaning that importers in this country have to tack on VRT to cars that exceed 1.9 litres which is most cases. Drivers also find themselves lumbered with underpowered cars which were designed more for 2 litre engines rather then the 1.6 engines some of them have to be fitted with to make them saleable in Ireland.

Not only that, but because most other European companies tax on the basis of emissions rather than engine size, most manufacturers have settled on 2.0 litres as a decent size for a mid-range diesel engine. (Pity poor Fiat and Alfa, whose excellent JTD engines are a mere 10cc too big!)

This is bad news for Irish motorists, as well as the environment, as we will once again have to revert to thirstier, slower petrol cars, which also produce more CO2. Madness.

So let’s look at a car with a pre-tax price tag of around €24,300: a top-of-the-range Mazda6 2.3. By the time all the taxes are added, the range-topping Mazda6 will end up costing you €36,750. Compare our prices to those of the UK where tax is charged at a flat rate of 17% and the same pre-tax €23,000 Mazda is the equivalent of just €28,430. That’s how expensive cars really are in Ireland, relatively speaking.

Incidentally, the rate of VRT on large vans, lorries and tractors is just €50, while bikes are €2 up to 350cc and €1 per cc after that. Small vans, pick-ups and some 4X4s are charged at a rate of 13.3% of the OMSP. This is the reason, therefore, that there’s a difference of €9000 between a Hyundai Terracan car and van, despite their being identical bar the back seats and side windows.

There’s more, though. The Mazda6 is one of the few cars on sale that is priced fairly across Europe, it seems. Its UK price, for example, is ST£18,000, which is €28,440, meaning that Mazda are making no more money from Mazda 6’s being sold in the UK than anywhere else in Europe.

Other carmakers, though, are taking advantage of the lower tax rate in the UK. The Fiat Stilo 1.2 Active, for example, which retails at £10,800 in the UK (the equivalent of €17,170) costs £9,230 or €14,677 pre-tax over there. The same car retails at €17,600 here, which mean Fiat are only asking for €11,875 for it in Ireland, a difference of almost €3,000. Or, put another way, their profit is far lower on Irish cars.

It’s not to single Fiat out, mind, because all manufacturers will naturally want to make as much as possible from every car they sell. In the UK, a basic Renault Laguna costs ST£14,255, which is the equivalent of €22,500. The pre-tax UK price is, therefore, around €19,200 in our money. The equivalent model retails at €23,250 in Ireland, which is remarkably close to the UK’s price, but to achieve this low price in Ireland, Renault have to accept a pre-tax price of €15,245 and will therefore have to try to save some of that money by paring back equipment levels, warranty and roadside cover.

Until this year, most European carmakers only offered one-year warranties in Ireland, and have only upped that to two years recently because of an EU directive. Similarly, Irish cars will often forfeit small extras like foglamps, rear electric windows, alloys and electric mirrors or less obvious items like ABS or a leather steering wheel in order to recoup some of that lost profit for the manufacturer. It varies greatly from car to car, but seemingly similar models of the same car can have vastly different spec levels depending on where you buy it.

Still, if an English buyer buys a Laguna here and imports it into the UK, they’ll pay just 17% on the Irish pre-tax price, meaning they get a slightly lower-spec Laguna on the road back in the UK for €17,836. That’s almost a €5,000 saving and explains why so many cars are imported into the UK from here and other high-tax EU countries like ours.

Recent EU legislation has outlawed what used to be known as ‘Block Exemption’, an unwritten rule which prevented dealers from selling outside certain ‘zones’ set by the carmakers, so they are now free to sell to whomever they like regardless of where they’re from. The upshot of this is that Irish dealerships are now free to sell cars to people from outside the country and once those cars are fitted with temporary ‘ZZ’ plates, the foreign buyer is free to drive away in his or her new car and register it once they’re home.

There used to be certain drawback to importing a car into the UK and other countries, but the removal of block exemption also includes a stipulation that every dealership in the EU is bound to honour warranty claims, service and repair any of their brand cars that comes to their door, again, regardless of where it was bought.

As a result, importing a car is now much easier and financially rewarding for other EU states, but not for us. We would have to pay our 21% VAT plus, say, 30% VRT on top of an English car’s originally higher pre-tax price, so we’d end up paying even more than if we bought the car normally here. Have a look in our finance section at our report on importing a car.

The EU’s removal of block exemption is hardly surprising. Citizens in other European countries complained that they were being over-charged by manufacturers and a look at the differences in pre-tax prices corroborated this.

Manufacturers had originally put the block exemptions in place to protect the residual (second-hand) values of their cars in their country of origin and to allow the carmaker to vary the prices to suit individual markets.

The EU wanted these restrictions removed because they impede competition and fair trade, but some people think it’s a way for the EU to bring pan-European taxation levels into line after some EU states, ours included, defied EU rules by ‘creating’ new tax to replace the exorbitant VAT that they used to able to charge on new cars.

After Maastricht, EU countries were only allowed to charge their normal rate of VAT on cars, instead of the 40%-50% it used to be, so a new type of tax was invented to fill the void left by the forced reduction in VAT. VRT is a tax on making the car legal to drive on the roads and not on the car itself, a clever way around the EU’s attempt to reduce excessive car taxation.

By rightly forcing the removal of block exemption, the EU knows that carmakers will have to combat the free movement of lower-priced, but otherwise identical cars between states to protect their dealerships and businesses in countries like the UK and Germany from a flood of third-party imports. To achieve this, manufacturers will make their prices uniform across Europe which immediately cancels out the savings to be made from importing a car privately and keeping things just as they are, but in doing so, prices will skyrocket here in Ireland with cars becoming thousands of euro more expensive overnight.

It’s already started with some big-model Mercedes and BMW’s and it’s likely to trickle downwards, as with Mazda6, over time. The only way to keep prices steady is for the Government to reduce VRT, and even though Bertie Ahern himself has said this isn’t going to happen, I’m convinced the EU will eventually prevail because our sagging economy really couldn’t take the massive hike in inflation this would cause.

Public outcry at the huge hike in car prices will more than likely force the Government to back down and we will get our much-bandied reduction in VRT. Sadly, though, from a consumer’s perspective cars won’t get any cheaper. Prices will remain the same as before with manufacturers rightly claiming they’ve been forced to charge more than before to achieve pan-European price parity.

With a gaping hole in the exchequer’s balance sheet, something will have to take VRT’s place, so enter fuel tax, emissions tax, parking place tax, toll roads, congestion tax...the list is long and depressing.

If you think things are bad now, then think again. The future will see us have the roads we’ve always craved, but spiralling insurance costs and increasing taxation means we’ll be hard pressed to afford to use them. Start saving.


http://www.motornet.ie/content/templates/template_tax.asp?articleid=2963&zoneid=68

Anan1

stevec wrote:

This link explains it all
http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/05/236&format=HTML&aged=0&language=en&guiLanguage=en

Apparently they're going to increase road tax to compensate for the loss of VRT - and base the amount of tax on CO2 emissions.
It doesn't seem fair to anyone who currently owns a car and has already paid VRT.

By how much will they increase road tax to compensate for the loss of VRT on, say, an Audi A8? And how will this new rate of road tax affect the used value of the car?

pburns

Anan1 wrote:

Why should it be there as standard? Car manufacturers are commercial entities, they give people what they want. And many people don't want to pay for ESP.

I'm not a fan of 'nanny-stateism' but making ESP mandatory on all new cars sold is a no-brainer. It's pretty much standard these days anyway apart from superminis and boggo-spec boggers cars.

(Or is it? I do know it's not standard on the Nissan Cash-Cow...)

Anan1

pburns wrote:

I'm not a fan of 'nanny-stateism' but making ESP mandatory on all new cars sold is a no-brainer. It's pretty much standard these days anyway apart from superminis and boggo-spec boggers cars.

(Or is it? I do know it's not standard on the Nissan Cash-Cow...)

I don't think Golfs have it here either. For what i's worth I agree with you, but that's a different argument.

sesswhat

Thursday, 19 September 2002 20:07 Calls for abolition of VRT following court ruling
The European Court of Justice has ruled that aspects of vehicle registration tax constitute a form of double taxation and are therefore illegal under the EU treaty.
The ruling came after a Finnish citizen took a case against his own government.
He claimed that by levying vehicle registration tax on a used car he had imported into Finland, the government was taxing the same product twice, because the tax ignored the value of the tax already paid on the car in another member state.
The court ruled that the VRT law in Finland conflicts with the EU treaty, and is illegal.

So what happened then?

Was VRT removed in Finland?

Has anyone ever taken a test case in this country?

Would it even make any difference?