Financial Resolution No. 3 is intended to do two things, namely, provide for the amendment of section 132(3) of the Finance Act 1992 to provide for the introduction, from 1 January 2013, of revised rates of vehicle registration tax, VRT, and amend section 132(3)(d)(ii) of the Finance Act 1992 to provide for the amendment of the definition of N1 vehicles eligible for inclusion in VRT category C.

The proposed changes announced by the Minister today are for increases across most categories of vehicle ranging from 0% to 4%. The Minister is also taking the opportunity, following the consultation process undertaken earlier in the year, to restructure some of the bands. As indicated in last year’s budget speech, the process was to review bands and rates structures in line with technological advances in motor vehicles. In essence, the existing system, which has contributed to the large shift to smaller and cleaner low emission cars, has been maintained. The consequence of this shift, however, is that there has been a corresponding fall-off in revenue from VRT. It is intended that this revision to the structure will address this matter. It is important to note that the revised structure retains a positive incentive to purchase low CO2 cars.

It is anticipated that the proposed increases will raise some €50 million for the Exchequer over a full year. This is an immediate and necessary measure towards deficit reduction. The inclusion of the amendment of section 132(3)(d)(ii) is a technical amendment to ensure the correct classification of certain light commercial vehicles for VRT purposes.

Financial Resolution No. 4 provides for a reduction in the farmers' VAT flat rate addition for unregistered farmers from 5.2% to 4.8% with effect from 1 January 2013. The flat rate scheme is a simplified and practical method of applying value added tax to farming. It compensates unregistered farmers on an overall basis for the VAT charged to them on their purchases of goods and services. The scheme in general reduces administrative burdens, as it provides that small farmers can remain outside the normal VAT system, thereby avoiding the obligations in respect of registration, record keeping and returns.

The flat rate scheme is governed by European Union VAT law and is reviewed annually by reference to macroeconomic data for the preceding three years on agricultural production and agricultural inputs and the deductible VAT content of such inputs. The reduction in the flat rate addition to 4.8% for 2013 is a result of calculations on the basis of macroeconomic data received from the Central Statistics Office for 2010, 2011 and 2012. The new 4.8% rate for 2013 continues to achieve full compensation under the scheme.

Financial Resolution No. 5 provides for the amendment of the Finance (Excise Duties) (Vehicles) Act 1952 and Finance (No. 2) Act 1992 in relation to rates of motor tax and fees for trade licence plates. It is proposed to raise motor tax rates across all vehicle categories. The proposal is to apply an increase of 7.5% for most vehicle categories with flat rate increases of between €10 and €92 for vehicles taxed on the basis of CO2, with the level of increases graduating upwards from the most environmentally efficient A bands to the least environmentally friendly G band. The average increase for vehicles taxed on the basis of CO2 is 19.8%. Trade plate licences will increase by 7.5%.

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