Brian Cowen (Laois-Offaly, Fianna Fail)

As the Deputy will be aware, it is a long-standing practice of the Minister for Finance not to comment in advance of the budget on any tax or expenditure matters that might be the subject of budget decisions. I am sure the Deputy will not wish me to depart from this practice given that budget day is so close. He will, however, recall that in my 2007 Budget Statement, I announced it was intended to rebalance the current VRT system to take greater account of environmental policy objectives, in this case reducing carbon dioxide — CO2— emissions. I indicated that there should be greater rewards built into the VRT system for choosing lower emission vehicles and that those choosing higher emission vehicles should pay more. For that reason, a range of options was set out in the budget booklet for making such a move and a public consultation process was announced. Any changes were to have effect from a target date of 1 January 2008.

At the same time, the then Minister for the Environment, Heritage and Local Government announced he would consult on his proposals for a complementary rebalancing of annual motor tax. Underpinning both of these initiatives would be a new mandatory labelling system for cars based on CO2 emission levels somewhat on the lines of that used for white goods. The programme for Government further underpinned the commitment to examine this issue, stating "we will introduce measures to further weight VRT and motor tax in favour of cars with lower emissions".

The consultation paper issued last December set out four broadly revenue neutral possible options for rebalancing VRT to take greater account of CO2 emissions. More than 60 submissions were received, of which 19 were from representative organisations or firms, with the remainder from individuals. Representatives from the Department of Finance, the Revenue Commissioners and the Department of the Environment, Heritage and Local Government have met eight representative organisations and some individuals to discuss their submissions. Work on considering possible options has continued, taking into account the growing emphasis being placed on climate change at national and international level and the views expressed during the public consultation process.

As I stated in reply to a parliamentary question on 3 October, as regards the timing of when any changes in VRT would be implemented, it is desirable that members of the public be given reasonable notice of changes being introduced. For this reason, it is proposed to provide in the Finance Bill 2008 for changes to the VRT system that might be introduced, with an implementation date of around mid-2008.

VRT is an important source of revenue for the Exchequer, yielding €1.3 billion in 2006 or approximately 3% of the total net tax receipts.

Additional information not given on the floor of the House.

In introducing changes to the VRT system it is desirable that the system be maintained as simple as is possible in terms of its administration and the ease with which it is understood. In addition, the VRT yield should, as far as possible, be protected and retained at the level it would have achieved if the proposed changes had not been introduced. Consequently, there is much to consider before any changes are decided.

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