Fergus O'Dowd (Louth, Fine Gael) | Oireachtas source

I note that Deputies are opposed to the increases that took effect from 1 January 2013. I recognise that any increase in tax is unwelcome, this being the second increase in as many years. However, it is an unavoidable fact that the new CO2-based system introduced in July 2008, has resulted over time in a decline in motor tax receipts. This means it has worked. Instead of the switch being revenue-neutral while also providing an environmental incentive for use of the more fuel-efficient cars, the tax was structured in such a way that in the absence of budget increases the effect is that by the time the switch to CO2 taxation is completed in the next decade and a half, the tax base will have shrunk by 50%.

Since 2008 there has been a year-on-year reduction in motor tax income related to the changeover to CO2 taxation. Income went from a high level of €1.060 billion in 2008 to €1 billion, approximately, in 2011. There was an increase to €1.05 billion in 2012, due to the increases in motor tax rates announced in the budget for 2012. In the absence of that increase, it is estimated that the income would have been in the order of €954 million, a reduction of 5.5%, over the 2011 income. In the absence of further rebalancing measures, the downward trend will continue as the proportion of vehicles taxed on CO2 increases as an overall proportion of the car fleet and as technologies mandated by the EU requirements lead to a greater proportion of cars being even more efficient.

This year for the first time, the majority of new registrations are in the lowest tax band. In the absence of increases in motor tax, the bulk of which goes to the Local Government Fund, and supports the general funding of the local government system, as well as the roads and public transport system, the Deputy may be aware that other forms of financing of local government would have to be found.

The increase in motor tax this year amounts to €86.5 million, which is a significant sum to make up in the current financial circumstances. The Government and the Minister for the Environment, Community and Local Government, Deputy Hogan, have encouraged the local authorities to exercise restraint in the setting of commercial rates and where possible, to reduce them. This is one of the measures provided for in the action plan for jobs. The other sources of funding for local authorities from 2014 will be the local property tax. The Deputy must recognise that cutting motor tax would place inevitable pressure on locally-elected members to increase the take from the local property tax within the 15% discretion.

Ensuring sustainable funding for local authorities is a priority for this Government. Cutting one important source of funding, as the Deputy proposes, would damage our efforts to restructure the financial base for local authorities. We do not propose to accept the relevant amendment to that effect.