Brian Hayes (Dublin South West, Fine Gael) | Oireachtas source

I thank Deputy Hannigan for bringing this matter to the attention of the House and for rightly highlighting the importance of the motor industry to the economic recovery of this country and some of the difficulties it is going through. As the Deputy said, the Minister for Finance, Deputy Noonan, indicated in last year's budget that he would review all of the issues surrounding vehicle registration tax and motor tax revenues for future years this year. That work took place this year and obviously any outcome from it will emerge in the budget in two weeks time.

The real problem here is that some years ago, when the new motor tax system was being introduced, there was an understandable bias towards low emission cars. What is interesting from the figures I have is that 96% of new cars purchased in 2011 were in the first three CO2 emission bands where the VRT rates are lower. People who bought new cars with low emissions paid very little tax indeed and that put out of kilter the total revenue yield from motor taxation.

The consultation process attracted 34 submissions from various sources. The motor industry's representative association, the Society of the Irish Motor Industry, submitted a comprehensive document setting out its proposals in this regard. Aside from its proposals on VRT and motor tax, the industry also put forward proposals in regard to issues surrounding the seasonality of the motor industry and, in this regard, proposed the introduction of a second registration period which it felt would bring a degree of stability to the sector in terms of employment levels.

Some of the proposals contained in its consultation paper were already contained in SIMI's pre-budget submission to the Minister for Finance in respect of the 2012 budget and have again been included in its budget 2013 submission. The industry asked that consideration be given to a number of initiatives that it felt would protect employment and give some stability in the motor industry while at the same time generating some additional revenue for the Exchequer. It pointed out that one of the biggest problems facing the motor retailers is the seasonality of car sales in Ireland, to which the Deputy referred. Each year new car sales become more compacted in the first quarter of the year - 48% in 2010 and 53% in 2011.

The industry is becoming more seasonal each year leading to funding and cash flow issues that add to uncertainty and instability. As a result, it says the following issues arise. As car sales become more seasonal so does employment in the industry as business is over-stretched early in the year and over-resourced later in the year. The costs associated with a seasonal business mean that motor retailers require large funding arrangements with their banks at the start of the year. The costs associated with holding stock both new and used are the largest cost after labour costs. Motor retailers need to have sufficient floor space for the first three months of the year and generally do not require this floor space throughout the rest of the year. As the year the vehicle was first registered is obvious on the Irish number plate, there is a strong emphasis on the age of the car. If a motor retailer is holding used stock over the change in the year, those vehicles will be perceived by the customer to be a year older, leading to depreciation of that vehicle.

Proposals put forward by the Society of the Irish Motor Industry, together with a wide range of proposals submitted to the Minister for Finance from a large number of interested parties in issues across all tax heads, are being considered in the context of the forthcoming budget. I am sure the Deputy will appreciate that I cannot comment on what might or might not be in that budget.

However, I assure him, on behalf of the Minister for Finance, that his proposal is being actively considered in the context of submissions that have been received from the industry to see how the implementation of that proposal would affect the industry. We all appreciate that it is going through a very rough time at present.

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