Mr. Denis Murphy:

An economic analysis has been carried out and it has been proven by more than one study that the benefit to the Exchequer would be significantly greater than the cut in taxation. We hear all the time about how the Department of Finance and the Exchequer are afraid to risk a reduction. The scrappage scheme proved that taking a risk paid off. Sales increased from 50,000 units to 90,000 units in one year. When we introduced a 2% VAT increase and a 3% VRT increase, the opposite happened; there was a drop to 74,000 units – in effect, a loss of 26,000 units over two years. We do not have a problem taking a risk in one direction in terms of increasing taxes. We seem to think we can increase taxation and the number of units sold will stay the same, but the market is so price-sensitive that if one increases the price, one will sell fewer cars. That has been proven. If one reduces the price, one will sell more cars.

The Department of Finance has a large staff. Surely someone can carry out a proper analysis rather than taking a schoolboy approach to increasing tax and multiplying it by the number of units that are sold and saying that an extra €50 million will be generated. Following the previous increase in 2012, the objective was to raise an extra €50 million but the Exchequer lost €116 million. That is an error of €166 million. In spite of the current state of the country, nobody batted an eyelid. When I recommend the exact opposite of this, which is less risky, the argument I hear is that the Government cannot afford to lose the money, yet nobody is accountable when the decision is taken to increase the tax and €166 million is lost. Those involved just sit there and do not respond.