Mr. Denis Murphy:

I appreciate the opportunity to present my submission to the committee. Committee members should not believe the current car registration statistics because they are being manipulated by manufacturers. The basis of my proposition is to increase Exchequer revenue through efficient taxation. We are not looking for a handout or a tax break. If we reduce vehicle registration tax significantly or abolish VRT over a period of years, the resultant increase in sales and employment would more than compensate for the loss of tax revenue from the reduction or abolition. One estimate puts the benefit at ten times the amount of the reduction.

There are many estimates as to how the market would react to a reduction in or the abolition of VRT and many anti-reform activists will always cast doubt as to the potential size of the market and claim we cannot afford a reduction. My analysis proves the opposite and concludes we really cannot afford not to reform VTR.

I will give three recent concrete proven examples of the potential size of the market. In 2013 some 52,000 cars were registered in Northern Ireland while 74,000 cars were registered in the South. We have 2.5 times Northern Ireland's population and its property crash and banking crisis is as significant as ours. If we extrapolate the Northern Ireland number, we should still be selling 130,000 new cars per annum, even in the depths of this recession.

In 2013, some 50,000 used cars were imported from the UK where VAT is paid to the UK Exchequer and there is little or no consumer protection, a very significant problem that gets little or no publicity. So many cars are imported because of the lack of new car sales which produce used cars for the used car market in Ireland. Irish car retailers cannot meet the demand for used cars owing to the lack of new car sales. Every time we import a used car we export jobs and pay VAT to the UK Exchequer. We believe these imports constitute a substitution purchase for a new car and if prices were reduced, buyers would purchase a new car rather than importing a used car. This has been proven economically.

In 2009 the new car market fell to 50,000 units. In 2010 and 2011 the market increased to 90,000 units after the introduction of a scrappage scheme where a VTR subsidy of €1,000 to €1,250 was given by the Exchequer. In 2013 the market fell back to 74,000 units following a 2% VAT increase and a 3% VTR increase.

These three recent and unquestionable figures give a very good idea of the size of the new car market and its potential size in the future. They also prove the price sensitivity of the market. The economist, Mr. Peter Bacon, in a report on VRT and other issues in 2009, estimated that the abolition of VRT would leverage the economy ten times. This means that for every €1 lost on VRT, the economy would gain €10.

The average family car in Ireland is taxed by almost €8,000 - one of the highest taxes on cars in the European Union. This is an indiscriminate, inefficient and socially regressive method of taxation. The European Commission, the Commission on Taxation, consumer groups and representatives of the motor industry have called for its reform or abolition. I hope the committee members will support the call for major reform of VRT.