Brian Cowen (Laois-Offaly, Fianna Fail)

While The European Commission has published a proposal for a directive on car taxes, nothing has been decided at this stage. The Commission proposal has not yet been discussed by all member states although these discussions will commence shortly.

In essence, the Commission proposal supports the gradual abolition of registration taxes which it believes impact on the functioning of the Internal Market. However, the aim of the proposal is that such registration taxes would be replaced by circulation taxes which would have a CO2 element.

We are willing to enter into the debate with the European Commission and other member states of the EU about the merits or otherwise of this proposal. However, from our perspective, it must be said that VRT provides significant revenue to the Exchequer —€946 million last year — which is used to fund vital public services. The collection of this tax is also very cost efficient, with the large majority of transactions now being on-line. In addition, its existence, while obviously not popular, has not impacted negatively on car sales in the State. Latest data show a 12% increase in new registrations to the end of September compared with the same period last year and strong sales are expected next year.

We regard VRT as a national tax that falls within the national competence. The mix of taxes, their levels and rates are a matter for EU member states based on legitimate choices. As regards the balance of taxation, Ireland has prioritised tax reductions on income earned by employees in preference to other tax areas, and this policy has helped create record employment levels.

While we are open to considering environmentally based tax measures, we again see this as an area for member states to decide themselves. Notwithstanding this point, I accept that the Commission in its proposal is attempting to design a structure which ideally would go some way towards incentivising behaviour that reduces carbon emissions and as discussions commence, we will be interested in the further views of the Commission in this area in conjunction with the views of other member states.

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