Mr. Seamus McCarthy:

Go raibh maith agat. The appropriation account for Vote 31 - Transport records gross expenditure of €3.7 billion in 2024. The expenditure was distributed across six expenditure programmes, based broadly on the various transport modes. The majority of the expenditure in 2024 was under programme B, public transport, and programme C, road networks and road safety. Together, these accounted for 84% of the gross spend. This comprised significant capital investment in public transport and roads construction, as well as funding for roads maintenance and public service obligation subsidies.

There was a net underspend on the Vote for 2024 amounting to €154 million. With agreement from the Minister for public expenditure and reform, €115 million in unspent capital allocations was carried over for spending in 2025. This related mainly to capital spending shortfalls in public transport investment, electric vehicle grants and construction of national roads and greenways. The remainder of the surplus for the year, €38.4 million, was liable for surrender to the Exchequer.

I issued a clear audit opinion in relation to the appropriation account. Separately, I drew attention to the disclosure in the statement on internal financial control in respect of non-compliance with procurement rules that occurred in respect of contracts under which €544,000 was spent in 2024.

Separate from the Vote, the Department is responsible for the collection of motor tax receipts and prepares an annual motor tax account to report on this. The receipts into the account are transferred to the Exchequer, as provided for in law, and do not represent additional spending by the Department. Receipts into the account in 2024 totalled €928.6 million and were promptly transferred. I issued a clear audit opinion in respect of the 2024 account.

The 2024 report before the committee today examines the effectiveness of the controls in place over the collection of motor vehicle taxes. I previously issued a special report on motor tax collection in 2016 and published a follow-up report in 2022. To provide some context, there were around 3.1 million vehicles on the road in Ireland in 2024. The ownership and use of these vehicles gives rise to various taxes and duties, including VAT, vehicle registration tax, VRT, customs duty and motor tax. In 2024, the combined receipts from VRT and motor tax totalled €1.9 billion. A breakdown of VAT and customs duties in respect of motor vehicles is not available. As I just mentioned, receipts of motor tax in 2024 totalled €928.6 million. This included payments of arrears amounting to just over €60 million, which is substantial. Tracking motor tax arrears is a potentially useful indicator of the tax compliance levels. However, the Department does not maintain information on the total value of arrears outstanding at a given point in time. It also does not operate a formal process to follow up on outstanding arrears. Although previously recommended, there is still no system to measure or report on motor tax compliance rates.

We previously reported on some of the ways in which vehicle owners may evade payment of motor tax. This includes deliberate repeat changing of registered ownership of vehicles, perhaps among family members or friends. Arrears of motor tax attach to the owner rather than the vehicle. As a result, any arrears are effectively written off following each ownership change. The Department has estimated that 77,000 vehicles had a change of registered ownership in 2024 following a period untaxed and has estimated the associated loss of arrears at €11.6 million. This is the minimum amount lost in those cases.

Reclassifying a vehicle can also result in the vehicle owner paying less VRT and motor tax and in some cases claiming back the VAT paid at the point of sale. Between 2019 and 2024, on average, just over 1,000 vehicles a year were converted from passenger, or M1, status, to lower tax commercial, or N1, status. The rate of conversions fell by almost a half in 2024, when Revenue took over the registration of these conversions.

The Department’s national vehicle driver file, NVDF, contains key information on vehicles and their owners in Ireland and is relied upon by several public bodies. However, analysing vehicle conversion data from the vehicle file proved challenging. The examination found that inconsistencies arise in the vehicle file data due to the absence of field definitions and the use of optional data fields and free text fields. This in turn impairs the Department’s ability to meaningfully analyse NVDF data and use it as a tool for managing and reporting on tax compliance.

Vehicle misclassification within the current stock of vehicles can be identified using a range of measures, such as targeted reviews or during national vehicle roadworthiness tests. In late 2023, Revenue identified risks of vehicle misclassification during routine processing of VAT repayment claims from garages. The review uncovered two practices of concern leading to the recovery of underpaid VRT, VAT and income tax. A significant number of cases have been identified for further investigation. The examination also found that there is currently no formal process in place for the national vehicle roadworthiness test operators to communicate discrepancies identified with the NVDF data during vehicle testing to the Department. The report recommends that the Department analyses the factors influencing taxpayers to renew motor tax for periods shorter than 12 months. It also recommends that the Department should measure, monitor and report on motor tax compliance rates and the level of motor tax arrears, and that it should consider the scope for automatic issuing of reminders when motor tax is not paid on time.

Chapter 9 of my report on the accounts of the public services for 2023 reviews the extent to which capital project appraisal requirements, set out in the Department of public expenditure’s public spending code, were applied to two multi-annual public transport projects of varying scale. The examples we reviewed were the MetroLink railway project and the Limerick-to-Foynes freight line restoration project. Members may wish to note that the public spending code was replaced by the infrastructure guidelines at the start of 2024. Although the process involved in arriving at the current MetroLink project proposal has been protracted, the project demonstrated, at the time of the examination, appropriate compliance with the relevant capital investment appraisal requirements. By the end of July 2024, around €181 million had been expended on the MetroLink project. By comparison, the examination found a high level of non-compliance with the key public spending code requirements for the Foynes project. In particular, a project business case had not been completed prior to the project commencing or to the issuing of funds for the first phase.

The business case report was only completed after the second phase of the project became the responsibility of the National Transport Authority. At the time of the examination, the estimated cost of making the line operational was around €152 million for both phases, with an expected completion date of December 2025. By end-July 2024, expenditure of €78 million had been incurred on the project. The Accounting Officer will be able to update the committee on the expenditure incurred to date on each of these projects and on their current status and timeline.