Ciarán Lynch (Cork South Central, Labour)

I think it was George Bernard Shaw who said "If I had more time, I would have written a shorter letter". Unfortunately, there is an exception to every rule. In the case of this legislation, 30 minutes is not sufficient to cover every issue I would like to raise.

Is this Bill a revenue-driven exercise, if Deputies will pardon the pun, or is it an environment-driven exercise? As Deputy Hogan said, the measures being proposed have revenue and environmental implications. Everyone concedes that the proposal to base car tax and vehicle registration tax on CO2 emissions, rather than on an outmoded and arbitrary distinction between various engine sizes, has some merit. There is overwhelming support for this aspect of the Bill throughout the House. However, the Minister's proposal does not comprise a total review of motor taxation. The manner in which the Bill is being presented to the House creates a number of anomalies and inequities. The Labour Party will seek to rectify such problems by proposing amendments on Committee and Report Stages.

In the time available to me, I will refer to the serious concerns that have been expressed about the ineffectiveness of the proposed changes in reducing carbon emissions. These proposals will potentially have an unfair effect on families. There is a danger that this legislation will penalise the owners of large family cars who are not in a position to buy a new car, which would be unfair. Those who own larger cars with cleaner emissions will have to pay more tax than those who own smaller cars which are less environmentally friendly.

In recent years, there has been a clear need for a new policy direction on energy efficiency in the transport sector. This Bill sets out the direction in which we will go in the future. People need incentives to make better environmental choices. It is disappointing that transport energy efficiency increased by less than 1% between 1995 and 2005, particularly as the programme for Government set a target of making energy savings of 20% by 2020. I hope this Bill will indicate how we can improve our performance in this area. The Minister needs to clarify his emission rate targets. How will this legislation help us to meet the 2020 target set in the programme for Government? Will performance indicators be set or is it just something that is in the moment?

The AA made a number of substantial points in the submission it made to the Minister on this Bill. It argued that there is too much taxation on the purchase and ownership of cars, rather than taxation on usage. The restricted availability of flexifuel in many parts of the country is one of the difficulties faced by those who own environmentally friendly cars. I understand that just one petrol station in Cork sells flexifuel. If we are to consider tax incentives, we should focus on this area. The AA submission also states:

In essence it (the Minister's proposal) falls into the 'Catch 22' of eco-taxes, whereby the more effective a measure is at its stated purpose of improving the environment the less revenue it raises. Faced with this choice between the two, both Departments have chosen to preserve the revenue.

That is the point I made at the outset. This Bill must be driven by environmental considerations, rather than being a revenue-driven exercise. If it is revenue driven, it will completely undermine what it is supposed to do.

The AA suggests that any attempt to call vehicle registration tax an environmental tax represents a misunderstanding of the original reasons for its introduction. According to the AA:

VRT came about because Vehicle Excise Duty was cynically renamed to avoid Ireland's Single European Market commitments. It would be still more cynical to evade the concerns of the consumer and the European Commission by renaming the tax again as a 'Carbon Levy' or some similar piece of sophistry.

In our consideration of this Bill, we need to examine what vehicle registration tax is. It should work as a once-off addition to the purchase price, based on the engine size. It was introduced for certain reasons and is being retained for those reasons. This legislation does not change the rationale for its initial introduction.

The Labour Party will seek to rectify the anomalies in the Motor Vehicle (Duties and Licences) Bill 2008, as it is being considered today, during the debate on Committee and Report Stages. This legislation provides for changes in the rates of car tax and introduces a system whereby the amount of tax payable on a car will be linked to its emissions. Those are the two key points underpinning the Bill. Several aspects of the legislation are poorly thought-out and will create a number of anomalies. For example, motorists who currently drive cars with low emissions will not benefit from these measures. Similarly, motorists who buy used cars with low emissions, rather than new cars, will not benefit from these proposals. Since the introduction of the national car test, the average car is well in excess of a decade on the road. Therefore, the current and future owners of cars which were registered for the first time in recent weeks will not benefit from the proposed changes for the next ten or 12 years. If someone who cannot afford to buy a new car decides to buy a second-hand eco-friendly car in 12 months, 18 months, two years, six years or eight years' time, he or she will never benefit from this legislation. The extent to which such people will be penalised will depend on their incomes and the value of the cars they can afford.

The lack of retrospection in the Bill is a serious concern. The benefits of lower taxes will not apply to those who currently own low emission cars. If one buys a low emission car in July, one will be liable to pay €100 tax annually for the lifetime of the car. However, if a person purchases the same car before July, given dealers have the same cars in their forecourts now that they will have in July, he or she will be subject to a different tariff system, which the Labour Party believes is iniquitous and unfair. He or she will never benefit from this taxation system proposed in the legislation. In general, second-hand cars, regardless of how low are their emissions, will be taxed at higher rates into the foreseeable future and, therefore, people on lower incomes who buy such cars will never benefit.

There are further implications. Second-hand cars sourced in the Republic of Ireland will be taxed at the old rate while second-hand cars sourced in the North or abroad will be taxed at the new lower rates. Second-hand car dealers must be seriously asking themselves about their future. If I were a car dealer along the Border, I know where I would relocate in the next six months and where I would source cars from for the foreseeable future. The imported car will be liable for the lower rate of car tax compared with an identical model bought here, which means the new system will penalise the owners of used low emission cars, who acted responsibly in the first place, by making it difficult for them to sell their car on the second-hand market as a private citizen or to a dealer.

While I wholeheartedly agree with the principle underpinning these changes, it is clear they have been rushed and not thought out. It is imperative and necessary that the Minister re-examines the Bill to iron out these difficulties. The problem with taxing cars on the basis of CO2 emissions is they are a moving target. According to the Department of Finance's briefing notes to the Minister for the Environment, Heritage and Local Government, almost 65% of all cars sold in 2005 produced between 146g and 190g of CO2 per kilometre. Almost 14% produced more than 190g, which is in the high pollution category, and only 3.85% were in the low engined category, producing less than 1.25 g.

Flexi-fuel cars such as the Minister's or dual energy system cars, which the taxpayer pays for, account for 5% of the national fleet and because this is such an insignificant number, the anomalies that exist could be ironed out and resolved. The broader difficulty is this percentage will change significantly in years to come. It is predicted that by the end of the decade at least 60% of cars on our roads will come under this new taxation measure. Industry analysts predict CO2 emissions will reduce further, which means the revenue the Minister perceives will derive from this measure will fall over that period.

There are two significant aspects to this. The first is the impact this will have on local government because the tax take in this regard will reduce. The motor industry will respond and predictions relating to diesel vehicles over the next few years are that the levels of emissions will be so much smaller that the tax on large engined cars will reduce. Jaguar is launching a diesel model shortly, which will have a lower CO2 emissions rate than the Fiat 500, which was launched recently and which has an engine size one quarter the size of the Jaguar. If Jaguar can manufacture such an engine, every other manufacturer will match it, which will result in a significant depreciation in tax revenue, creating further difficulties.

Second, those who wish to buy the largest gas guzzler they can get their hands on will receive a windfall because between now and July no matter how large engined a car they buy, they will not be penalised even though they know this legislation is coming down the line. Anyone who bought a large engined car prior to the announcement of these changes should not be penalised for the decisions they made blindly but the notion that somebody can buy such a car now and not be penalised for doing so is a major anomaly and it undermines the intent of the legislation.

I refer to the 5% of motorists who bought ecofriendly cars with the greatest motivation. They did so for the right reason. Unfortunately, the Bill has more stick than carrot for them. They did something out of positive motivation, yet they will never benefit from the new taxation system. If they sell the car to a dealer, the return will be poor or should they wish to sell it privately, they will not benefit. Last autumn, the Minister set his own example by purchasing a hybrid car. It is unfortunate that more of his ministerial colleagues did not follow his lead. I noticed a number of large gas guzzling 2008 cars walking out of the Leinster House complex last night. It would be interesting to audit them to ascertain their emission levels. While the Minister has taken a lead on this, what differentiates him from other motorists who drive hybrid and ecofriendly cars is they have paid for them out of their own pockets and they will continue to pay for the anomalies in this legislation out of their own pockets for the next ten to 12 years.

The Labour Party will table amendments. Deputy Hogan referred to the kilometre evaluation system, which is of particular relevance to diesel cars. The deletion of the words "on or after 1 July 2008" on page 3 and "on or after 1 July 2008" on page 9 would rectify the anomalies to which I referred because those references will penalise the 5% of motorists who did the right thing and bought environmentally friendly cars in recent years. Massive changes are not required in this because 5% is a not a large number. All that would be required is to ensure local motor tax offices have a procedure in place so that when these motorists renew their motor taxation, they will be subject to the new rates and not the higher rates in place when they purchased their cars. Less than 5% of motorists are affected by this anomaly, which is a small number, and this can be sorted out.

The Minister also referred to the difficulties in providing a fairer system in his contribution. One clear response to this is the categories for grading cars from 1 July will not change and, therefore, I am not sure what the Minister means by his reference to a fair system. The specifications, the printing of the manuals and the documentation which accompanies the brochures will not change after 1 July. This information is set out in the catalogue of every car purchased, so there is no difficulty in that respect.

The second-hand car market reveals an anomaly in that cars imported from Japan will not qualify under the Bill. Cars coming off the Toyota assembly line in Tokyo may be destined for different markets but they are manufactured under the same process. It is ridiculous that two cars which are made side by side will not qualify equally under the same criteria. The Minister should re-examine this area with a view to bringing clarity because it reveals an absence in the Bill as drafted. I am sure he did not intend this anomaly.

Since the introduction of the NCT and alongside the improvement in road quality, this country's motoring culture has completely changed in terms of the lifespan of modern cars. I refer to a parliamentary question I put to the Minister for Finance last year. Some 1.5 million people in this country earn less than €38,000 per year, the equivalent of the wage increase the Taoiseach proposed to give himself. On that modest wage, it is difficult to purchase a new car on an annual or even a biannual basis. Most people in that earning category also face high mortgage repayments. After the family home, a new car is the most expensive purchase made in the majority of people's lifetimes. Environmentally friendly cars bought before 1 July will never be an attractive purchase for people in this wage category. The Minister is preventing people who cannot afford a new car from using financial incentives to do the right thing.

Can the Minister indicate the options he considered? I understand three options were available in terms of changing the system. The first involved the entire fleet but significant difficulties would have arisen if the changes were made on that basis from 1 January because those who bought cars prior to the introduction of the legislation would have been penalised. The second option was to cherrypick cars that would qualify, while the third option was the cut-off date. Why is the Minister so adamant on the cut-off date despite failing to consider further options that would improve his proposals? If he had introduced flexibility to the area, he would have resolved the difficulties I describe.

Deputy Hogan referred to the benefit-in-kind scheme. Prior to the introduction of the Bill, a friend of mine who works in the sales industry noted that sales people have an incentive to drive as far as possible in order to clock up miles and minimise their benefit-in-kind payments. We should introduce a taxation system which reduces emissions levels. At present, unnecessary journeys are being taken by sales people at the end of each month because their clocks are not in line with their benefit-in-kind calculations. Deputy Hogan can attest to this practice.

See this speech in context