VRT, Block Exemption and the Nice Treaty

mike65 · 24-02-2002 2:48pm #1

As I'm sure all now know VRT is becoming an issue in the run up to the next election with FG making some noises about it.

With the ending of the so called Block Exemption car manufactureres are going to pursue a policy of one "pre-tax price fits all" across the EU, this means that the pretax cost of cars here which is the lowest in the EU (except for Denmark) will have to rise so as to stop any mad rush, by say a French leasing company, to order cars from here rather than France. This means that the price of a typical car here will rise by anywhere between 15 and 30% depending on who you talk to.

The only way to stop such a rise is to cut VRT a tax which goes against the spirit if not the letter of the Single European Act.

The state should have seen this coming but obviously have'nt
which means the chance to cut VRT incrementally has been lost and it'll have to do it in one fell swoop. which'll be bad news for anyone who has just bought a new car in parlicular, and thats asuming they cut it at all.

The block exemption changes take place in September about the same time as the next Nice Treaty vote is due. So if they refuse to cut VRT should we refuse to vote yes?

We'll never get a better moment to kill this unfair tax.

Mike.

Keeks · 24-02-2002 2:58pm

How exactly is it againsy the spirit of the Single European Act?

mike65 · 24-02-2002 3:11pm

When in 1992 excise duty was ended under the Single Euopean Act the government here simple replaced it with a jumped up tax
which was'nt excise but which achived the exact same goal - VRT meant the government continued to squeeze as much money as possible out of the Irish motorist.

The idea of ending excise duties was to bring greater harmonisation of prices between EU states.

Mike.

Victor · 24-02-2002 3:28pm

I think I could just about accept a cut in or abolition of VRT, but it would need to be made up in carbon taxes (on fuel), with a lesser tax based on how green the vehicle is otherwise.

mike65 · 24-02-2002 3:48pm

A tax on use is always preferable to a tax on possession.

That won;t stop screams from the haulage industry and business in general though!

Mike.

Victor · 24-02-2002 4:04pm

Originally posted by mike65
A tax on use is always preferable to a tax on possession.

Yes, but possession in the first place is not always without responsibilities, e.g. business pays rates by virtue of possessing assets.

There needs to be a balance of:

initial tax (to promote green(er) vehicle design / manufacture / disposal)
ongoing tax (to cover road services / regulation)
usage tax (to cut emissions & promote more responsible usage)

There is also the issue that as you increase vehicle size, road / bridge wear & tear increases exponentially (a 1 tonne car does more than twice the damage of a 0.5 tonne car). This needs to be accounted for.

Keeks · 24-02-2002 4:08pm

And how exactly do the EU/Government expect to raise the pretax cost of cars here?

Victor · 24-02-2002 4:16pm

Originally posted by Keeks
And how exactly do the EU/Government expect to raise the pretax cost of cars here?

They don't, it will be a matter of market forces. Items that are taxed heavily in one country have a naturally lower pretax price than the identical product in another country. VRT forces the manufacturers to be very competitive with their pretax price. People will only pay so much for a given product /services - it's a matter of supply and demand.

Keeks · 24-02-2002 4:24pm

I'm a little confused here about what exactally is being said. Mike65 has said that

this means that the pretax cost of cars here which is the lowest in the EU (except for Denmark) will have to rise so as to stop any mad rush

who is going to put the price up? The car maufacturer? and how will all this effect VRT.
Will for example Toyota Ireland bring there prices inline with Toyota France for as tostop the French leasing company form buying in Ireland instead of France? This to me sounds like it goes aginst competition laws.

Victor · 24-02-2002 4:41pm

These are hypothetical situations and the impact of VRT is actually more extreme (in particular with second-hand cars), but it demonstrates the principals:

Current situation:

Item		Ireland	UK
Base cost	10,000	11,000
VRT		 2,000	   NIL
VAT		 2,400	 1,925
Total		14,400	12,925

If VRT is abolished, there will be a tendancy for the Irish total price to rise towards the UK, this means that the base price will rise.

Suggested situation (abolish VRT):

Item		Ireland	UK
Base cost	10,000	11,000
VRT		  NIL	   NIL
VAT		 2,000	 1,925
Total		12,000	12,925

If the EU insists that manufacturers harmonize prices, there will be a tendancy for the Irish base price to rise towards the UK (or the UK will fall), this means that the total price (Irish) will rise (or the UK will fall).

Suggested situation (same base price):

Item		Ireland	UK
Base cost	10,500	10,500
VRT		 2,100	   NIL
VAT		 2,520	 1,837
Total		15,120	12,337

mike65 · 24-02-2002 6:42pm

Keeks, car companies will up the price here becasue to have a very low pre-tax price in one state will distort the EU single market.

Thousands of motorists already cross the border/Irish sea every year to get "bargins". While we cant go the other way because importing a car will incure VRT. This is why it must go. If pretax prices rise the VRT part of the retial price will also rise as its a %.

With a free market people and indeed companies that buy large numbers of vehicles will cross borders to buy cheaper, this will
cause one country to put pressure on others to level the playing field.
As we have cheap pre-tax cars when the block exemption ends in September pre-tax prices will shoot up.

Mike.

Keeks · 24-02-2002 6:50pm

I understand all that. What i don't get is:
1. why increase the pretax or who will increase it/take the profits
2. why they are so low in the first place?

mike65 · 24-02-2002 7:00pm

Pre-tax prices here are so low becasue car manufacturers know that we pay nearly half the retail price in tax so the less they charge the more affordable the car will be. After all while Ireland is a very small market they still like to make something out of us.

As for why the incrase its as I outlined above- worries over market distortion and political pressure between states, after all
if I were the French Minister for Finance and I saw countless
millions of € in sales tax being lost to another state I'd be pissed-off.

So its not about anyone making excess profits.

Mike.

Keeks · 24-02-2002 7:09pm

But isn't that the whole Idea of the common market. At the end of the day car manufacturs don't care where cars are sold, just how many that are sold.

mike65 · 24-02-2002 7:18pm

Car companies might'nt care though they would say they want a viable presence in all markets but this ain't about car makers
its about a wrong headed tax, to get back on the thread topic.

VRT is a tax on a tax (VAT) which in 1992 might have been justified on the grounds this country was stoney broke but not now. The money can found elsewhere like carbon related taxes
as Victor suggested.

Mike.

Victor · 24-02-2002 7:24pm

From another topic:

You would be surprised at how little difference there is in motoring costs. How much is petrol in the UK? Take a look http://www.aaireland.ie/home/petrol_prices.asp - about €1.23/L in the UK compared to €0.81/L here for unleaded. The base cost for cars is also higher there, as would parking charges, fines and probably a lot of other costs. perhaps we should increase fuel prices further? :troll:

Keeks · 24-02-2002 7:25pm

Agreed..but the response from the goverment will be that we need the money for road improvements. Especially if the EU is investigating where all the money it gave us for road improvements without actually improving the roads.

Victor · 24-02-2002 7:31pm

Originally posted by Keeks
Especially if the EU is investigating where all the money it gave us for road improvements without actually improving the roads.

This is misguided. Where did the M1, M4, M7, M11 & M50 come from?

mike65 · 24-02-2002 7:32pm

I've sen evidence of new roads but the ones that have been built
just end up moving cars to the next bottleneck quicker...

Mike.

Keeks · 24-02-2002 7:35pm

And how lomg do it take to get form one end of the M50 to the other during the day. And how long is it taking to finish it? When will it be finished? How many modifications have they made to these roads since they first built them?

Its great to see all those billions spent on "six" "good" roads.

Victor · 24-02-2002 7:47pm

The M50 itself is finished, save for the South Eastern Motorway ( really part of the M11 imo). They are going to add lanes, a second Westlink bridge and additional bridges at the main junctions, but the route itself is finished

Dare I visit www.nra.ie ?

2001 Completions
Route	Scheme	km
M1	Dunleer-Dundalk	17
N4	Mullingar/McNeads Bridge, Co. Westmeath	5
N4	Rathowen, Co. Westmeath	6
N4	Boyle-Carrick-on-Shannon	11
N9	Grannagh-Waterford (Phase 1B)	1
N15	Clar/Barnesmore, Co. Donegal	10
N17	Knock/Claremorris Phase 1	8
N20	Blackpool By-Pass, Co. Cork	2
N20	Croom By-Pass, Co. Limerick	6
N20	Patrickswell-Limerick	8
N21	Ballycarthy/Castleisland, Co. Kerry	10
N24	Beary&#8217;s Cross	3
N24	Pilltown/Fiddown, Co. Kilkenny	9
N25	Camaross, Co. Wexford	8
N25	Kilmacthomas, Co. Waterford	9
N33/M1	Ardee Link, Co. Louth	8
M50	Southern Cross Route, Dublin	9
N52	Link to Nenagh	5
N61	Roscommon-Cooltigue	5
N56	Mountcharles By-Pass, Co. Donegal	2

2001 Starts		
Route	Scheme	km
M1	Dublin Port Tunnel	6
M1	Lissenhall-Balbriggan	10
N2	Carrickmacross By-Pass	15
M4	Celbridge Interchange	-
N4	Enfield Relief Road	5
N4	Hughestown/Meera, Co. Roscommon	6
N4	Sligo Relief Road	4
N5	Strokestown/Longford (Scramogue)	8
M7	Monasterevin By-Pass	17
N7	Limerick Southern Ring (Phase I)	9
N7	Parkway, Limerick	1
N8	Cashel By-Pass	7
N11	Kilpeddar Interchange, Co. Wicklow	-
N11	Ashford/Rathnew By-Passes	14
N15	Bunduff/Downes River, Co. Leitrim	3
N17	Knock/Claremorris (Phase II)	10
N18	Ennis By-Pass	21
N21	Castleisland/Abbeyfeale, Co. Kerry	8
N25	Youghal By-Pass	6
N25	Cork South Ring, Kinsale Rd Interchange	-
N30	Clonroche-Moneytucker, Co. Wexford	6
M50	South Eastern Motorway	9

mike65 · 24-02-2002 7:53pm

According to NRA site the missing bit of M50- the SE motorway link
will be complete in 1st quater of 2004.

Just dont hold your breath...

Mike

Winning Hand · 25-02-2002 12:14am

There needs to be a balance of:

initial tax (to promote green(er) vehicle design / manufacture / disposal)

Indeed, lets put massive taxes on new cars which are saver, cleaner and more economical than all the old 88s trundling around

ongoing tax (to cover road services / regulation)

Havent a problem with this in theory but the government manages to screw this aswell, the idea of your registration tax is that the money you pay goes towards the upkeep of the roads in your district. But if thats the case, why are all the squad cars, buses and other state vehicles registered in dublin?

usage tax (to cut emissions & promote more responsible usage)

Like the tax on petrol??????

Solution is to make initial tax minimal, ongoing tax keep as it is but have it regulated more efficiently and increase the usage tax.

What I find interesting is that the government refuses to not tax safety features in cars, you pay extra for ABS, SIPS etc. and the government lops in more tax on top these optional extras.

Victor · 27-02-2002 4:40pm

Originally posted by Winning Hand
Indeed, lets put massive taxes on new cars which are saver, cleaner and more economical than all the old 88s trundling around .[/B]

Did you read my post? the bit where I used the word "balance"? to make the point:

bicycle - 10-15kg of (mostly) steel, small amounts of plastic and rubber
car - 500-2000kg of steel, some heavy metals, large amounts of plastic and rubber

Yes lets get rid of inefficient cars - but that mean existing ones and new ones.

Originally posted by Winning Hand
Havent a problem with this in theory but the government manages to screw this aswell, the idea of your registration tax is that the money you pay goes towards the upkeep of the roads in your district. But if thats the case, why are all the squad cars, buses and other state vehicles registered in dublin?

Vehicles are registered in the county of residence of the owner, where the owner is not an individual, the vehicle is registered in the county of the registered office of the organisation (and most companies and state organisations are based in Dublin, although you will see that Bord Gáis (owned) vehicles are registered in Cork).

Originally posted by Winning Hand
Like the tax on petrol?????? Solution is to make initial tax minimal, ongoing tax keep as it is but have it regulated more efficiently and increase the usage tax.

Not necessarily, because a large amount of energy goes into making cars and charges need to be made to ensure recycling is used.

Originally posted by Winning Hand
What I find interesting is that the government refuses to not tax safety features in cars, you pay extra for ABS, SIPS etc. and the government lops in more tax on top these optional extras.

So do you make brakes and indicators, and head-lights and seat belts and padded dashboards and laminated glass windows and curvi-linear panelling and non-combustible body panels and bumpers and roll frames all tax free? At what point would you have a taxable car? One wheel and an engine with a tendancy to catch fire?

Mercury_Tilt · 27-02-2002 5:22pm

This post has been deleted.

Morpheus · 15-03-2002 11:12am

HERES ONE FOR YOU,

IVE DONE SOME RESEARCH ON VRT.

FIRSTLY LETS CLEAR SOMETHING UP... WE PAY THE LOWEST PRETAX PRICE ON NEW CARS BECAUSE OUR GOVERNMENT CHARGE THE HIGHEST TAXES ON NEW CARS IN EUROPE, EXCEPT OF COURSE FOR DENMARK, AND OUR GOVT CHARGES NOT ONE TAX, OH NO, BUT 3, VAT, VRT AND ROAD TAX. VAT AND ROADTAX ARE STANDARD AND ACCEPTABLE, BUT VRT IS CRIMINAL!

WHY???

VRT IS NOT USED TO BENEFIT THE IRISH MOTORIST IN ANY WAY WHATSOEVER!!! THIS IS TRUE, THE MONEY TAKEN FROM VRT SIMPLY GOES INTO A GOVT ACCOUNT. THE MONEY IS NOT USED FOR ROAD IMPROVEMENT, TRAFFIC CALMING OR INDEED ANY ROAD / MOTORING RELATED SCHEMES. THE MONEY IS SIMPLY PUT AWAY FOR USE ELSEWHERE. WE PAY ROAD TAX FOR ALL THE OTHER STUFF, AND EVEN THEN SOME OF THIS IS SYPHONED OFF INTO OTHER DEPARTMENTS!!!
:rolleyes:

THATS WHY SOMETHING MUST BE DONE ABOUT IT, AT LEAST IF IT WAS BEING USED FOR OUR (THE MOTORISTS) BENEFIT, THEY COULD IN SOME WAY JUSTIFY IT, BUT TO SIMPLY TAKE NOT ONLY THE VAT (WHICH INCREASED BY 1 PERCENT LAST WEEK, DID U KNOW THAT?) BUT ALSO A "NOTHING" TAX IN THE FORM OF VRT, ON TOP OF THE VAT, IS SHEER CRIMINAL ROBBERY. WHERE IS THIS VRT MONEY GOING? THATS WHAT ID LIKE TO KNOW? BEING SPENT ON TRIBUNALS, JUNKETS AND THE LIKE NO DOUBT.

SO STICK THAT IN YOUR RIZZLA AND SMOKE IT!:eek:

Mailman · 15-03-2002 1:41pm

I like cars. I lust after the new Hyundai coupe that in the US could be yours for about 13,000 punts.

But this is Ireland. We need VRT because we have too many bills to pay. This is a fact that can't be avoided. School Teachers have to get their pensionable 27 per hour.
Bertie's folly must be built in Abbotstown, etc......

My reasons for justifying the continued existence of VRT are that you can avoid it by simply not buying a new car. A car will last you 10-12 years.

If you want to upgrade your BMW every two years then more the fool you.
The poorest sections of the community aren't shouldered with crippling taxes and the damage to the economy as whole is lower than if taxation was collected elsewhere e.g. Income Tax and VAT.

You see the problem isn't where the government chooses to levy tax, the problem is the government needs to collect so much tax in the first place just to pay the bills. Grasp a few nettles, reduce governemtn expenditure and the problem goes away.

You wouldn't be complaining about VRT if it were only 2%. It would still be an unfair tax but it wouldn't be an obstacle to purchasing a new car.

VAT at 21% really annoys me. The average in Europe is in or around 17% - that really hurts competitiveness and activity in the economy.

mike65 · 15-03-2002 7:29pm

Mailman you make some fair points, the tax revenue is required if not for the Bertie Bowl then certainly health, education etc, but
a dubious tax like VRT stilll should be ended. As I explain above,
the end of block exemption will push pre-tax prices up here by possibly 25% so something will have to give. The revenue shortfall can be found by taxing use so if you drive a gas guzzler/inefficent lump you'll feel the pinch.

Mike.

VRT, Block Exemption and the Nice Treaty

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