John Gormley (Dublin South East, Green Party)

I propose to take Questions Nos. 12 and 15 together.

The changes I introduced last year to charge motor tax on new cars based on their CO2 emissions, together with the linked changes to vehicle registration tax introduced by the Minister for Finance, provided significant financial incentives to purchase new low emission cars.

The two lowest CO2 bands for motor tax — bands A and B — are significantly lower than the minimum annual car tax rate of €172 charged under the engine size cc system. The motor tax rate for cars in band C is on par with the average tax rate charged under the old system.

The VRT rate imposed on cars in these three bands is also lower than the previous minimum rate charged prior to July 2008. The lowest rate of VRT is now 14% compared to the old minimum of 22.5%. The system of vehicle registration tax is administered by the Revenue Commissioners and issues regarding it are a matter for the Minister for Finance.

The incentives provided by the Government have been successful in ensuring a dramatic shift towards the purchase of more environmentally friendly cars. A total of 85% of all cars registered under the new system are in the lower bands A, B and C and are subject to a very favourable tax regime. The introduction of emissions based VRT and motor tax had a dual objective of encouraging a move to lower emission vehicles while protecting central and local government revenues. It is my intention to keep these dual objectives under review, in conjunction with the motor industry, in the light of experience of the new system.

Global economic conditions have had a significant impact on the motor industry internationally, and Ireland is no different. The Society of the Irish Motor Industry, SIMI, has put forward a number of proposals to Government on the car market and my Department met a delegation yesterday to discuss issues relevant to my departmental brief. The core SIMI proposal related to a scrappage scheme, and that is a matter for the Minister for Finance.

Unlike VRT, motor tax receipts depend on the total taxed vehicle fleet, and the motor tax rates charged, rather than the purchase of new vehicles. The economic slowdown is likely to impact on the total vehicle fleet. In 2008, the increase in the fleet was in the order of 2.3% compared to an annual average increase of 5% since 2000, and little growth may be evident in the fleet in 2009. Forecast motor tax receipts for 2009 are of the order of €1.08 billion. All motor tax receipts are paid directly into the local government fund for local government purposes.

My Department will continue to keep the position regarding the motor tax receipts under review.

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