Fergus O'Dowd (Louth, Fine Gael) | Oireachtas source

I move: "That the Bill be now read a Second Time."

I am pleased to open the debate on the Non-Use of Motor Vehicles Bill 2013, the primary purpose of which is to provide for a system of declaring vehicles off the road in advance for motor tax purposes. In other words, we are introducing a prospective system of making off-road declarations. This will close the loophole, whereby owners are able to declare retrospectively and unverifiably that a vehicle has not been in use on the public road. This evasion loophole has allowed many people to take a holiday from paying motor tax, which is unfair to the majority who pay their motor tax conscientiously. For their sake and in the interests of equity in the collection of this tax, the changes contained in the Bill are necessary. The substantive issue being tackled in the legislation is the abuse of the loophole by non-compliant taxpayers. The regime for those who pay their motor tax as intended will not be affected in any way.

Under the existing system, vehicles can be declared off the road retrospectively. The declaration is part of the motor tax renewal form. The owner's signature is witnessed by the Garda Síochána when the applicant next taxes the vehicle after the period for which the vehicle was off the road. Members of the Garda are not required to verify the veracity of the statement made by the owner. I do not doubt that many owners risk driving for a month or two without paying tax. If they are not stopped at a Garda checkpoint, they take the view that they can tell a lie about the car having been off the road and tax it from the start of that month. The current arrangements facilitate this. There is little prospect of getting non-compliant taxpayers to mend their ways as arrangements stand.

The use of such declarations is increasing, with a consequent loss to the local government fund which provides funding for local authorities and the roads programme of the Minister for Transport, Tourism and Sport. An analysis of Garda witnessed vehicle licence exemptions in the 12 months to the end of July 2012 showed that 539,000 such declarations were made during the period. The value of the declarations during that period was over €110 million, of which €22 million related to changes of vehicle ownership. The remaining €88 million related to exemptions not linked with change of vehicle ownership, with the majority of such declarations being made for periods of between one and three months. While some declarations are genuine, it is suspected that there is widespread abuse, potentially costing up to €55 million per annum. It is anticipated that implementation of the measures contained in the Bill could increase the income from motor tax by up to this amount, although some residual levels of evasion may remain.

It will be necessary to make provision for genuine periods of non-use of a vehicle, for example, in the cases of people who are ill or working overseas. It is proposed to introduce a system like the statutory off-road notification system used in the United Kingdom. A declaration will only be possible in advance for a specified period. The minimum period will be three months - the same as the minimum taxation period - and the maximum period will be 12 months. The declaration must be made in the month before tax is due to expire. This measure was recommended in the report of the local government efficiency review group. It is the largest single element, in value terms, of the report that falls to be delivered by my colleague, the Minister for the Environment, Community and Local Government, Deputy Phil Hogan. It should be noted that the 2011 annual report of the Comptroller and Auditor General contained a chapter highlighting the level of motor tax evasion and recommending that a more robust system than the present one be put in place. The system provided for in the Bill conforms to an important element of the recommendations made by the Comptroller and Auditor General.

I would like to go through some of the specific arrangements proposed. A declaration of non-use must be made in the month before motor tax or an earlier declaration of non-use expires. Owners of new or newly purchased vehicles will have ten days from the date of purchase to furnish a declaration if the vehicle is not to be used immediately. The vehicle can be declared off the road for any period, in whole months, of between three and 12 months. In the month before the declaration expires the owner will receive a renewal notice and can then either tax the vehicle or make a further declaration of non-use, again for a period of between three and 12 months. One can put the vehicle back on the road at any time during the non-use period by taxing it. In such circumstances the non-use declaration will be deemed to have been cancelled. A vehicle may be used during the period of a non-use declaration solely for the purposes of bringing it to or from a test centre, or bringing it to or from a premises for repairs when an appointment has been made with an authorised tester after the repairs have been carried out for a subsequent test.

The Bill creates an offence of making a false or misleading non-use declaration with liability to a fine of up to €4,000 and-or six months imprisonment on summary conviction. This will be in addition to the existing penalties for non-display of a valid motor tax disc. While the Bill provides for an administration fee to be prescribed, we do not plan at this moment to prescribe a fee. The emphasis is on ensuring vehicle owners take the opportunity to regularise their affairs. There will be a three month transition period in which to do so. Following that period - the exact date will depend on the progress of the Bill through the Houses of the Oireachtas - it will no longer be possible to make a retrospective declaration of non-use. The Minister intends to widely publicise the proposed changes in the coming months with a view to ensuring motorists are aware of their obligations in this regard.

The Bill also contains provision to make the Minister for Transport, Tourism and Sport a licensing authority.

Responsibility for the national vehicle and driver file, NVDF, which administers motor tax online, was transferred to the Minister for Transport, Tourism and Sport in 2007, while the Minister for the Environment, Community and Local Government retains responsibility for motor tax policy. The provision has no impact on policy or procedure; it is merely to set out the role of the Minister for Transport, Tourism and Sport more clearly. This change also has no bearing on the flow of income to and from the local government fund. Income from motor tax online will continue to accrue to the fund and will continue to be allocated between roads and general purpose grants in line with agreed protocols.

Finally, the Bill contains provision for transitional financial arrangements following the transfer of the driving licence function from licensing authorities to the Road Safety Authority, RSA. With the introduction of a plastic card driver licence from January 2013, a requirement of EU Directive 126/2006, responsibility for driver licensing transferred from local authorities to the RSA. The RSA has put arrangements in place for the issuing of a plastic card licence. It is also proceeding to centralise front and back office operations following a review of the driving licence service in 2010. However, as all elements of the new arrangements are not yet operational, the RSA has made arrangements that local authorities will continue to provide these services for a transitional period, expected to be until September 2013. During this time, all driver licence revenues will continue to be deposited in the local government fund. The portion of these revenues derived from the increase in driver licence fees that took effect from January will be paid from the fund to the RSA. The local government fund will retain the income from the fees that applied prior to the increase. The Bill also provides that the cost to local authorities in providing the driving licence service can be taken into account in deciding on allocations from the local government fund to the local authorities. When the new structures are fully established, all driver licence revenue will flow to the RSA.

I would like, at this point, to bring to the attention of the House the provisions of section 6, where it is provided that monthly arrears are to be charged at one tenth of the annual rate of motor tax. In the course of drafting the Bill, it emerged that the legal power to charge a penalty rate for arrears of motor tax was inadvertently removed from primary legislation some years ago. Notwithstanding this, provision continued to be made for the setting of rates of arrears in secondary legislation, most recently in 2008. Monthly arrears were set at one tenth of the annual rate, and payment of arrears at the current motor tax rate, that is, the historic rate not applied if the arrears period straddles an increase in motor tax.

In this regard, the Office of the Attorney General advised that the charging of an arrears rate over and above the tax due and the practice of charging at the current rate of arrears are ultra vires. Accordingly, once the legal position was clarified in late October, the Minister revised the arrears rate to one twelfth of the annual rate of motor tax per month. Analysis conducted at the time showed that, arising from charging at one tenth rather than one twelfth of the annual rate per month, there were 375,000 instances of overcharging, totalling €3.8 million in 2011, with the average payment just over €10 and 93% of payments under €20. Some 0.23% of payments were in excess of €100. The costs associated with directly repaying the excess tax charged via a cheque in the post would, in a large proportion of the cases, exceed the amount of money due to the individual.

With regard to the charging of arrears at the current rate of tax when the owner is paying back-tax, that is, charging the higher rate for the full arrears when the arrears owed straddle a change in the rates of tax, this is of significance for a number of months immediately after an increase in motor tax rates. Calculating arrears based on a split calculation creates difficulties in the NVDF, and it is not intended to provide for refunds of tax where arrears straddle a rate increase. In regard to the rate increase from 1 January 2013, it is estimated that the overcharging arising amounts to less than €10 in over 92% of cases and less than €20 in over 98% of cases. Very small numbers of cases exceed €50, with €217 being the maximum. In view of the difficulties in repaying a large volume of very small amounts in both scenarios, it is not intended to provide for this.

Given the need for a deterrent against late payment of tax, this Bill reinstates the monthly arrears rate at one tenth of the annual rate of duty at the current rate of motor tax. Arrears payable during the transition period will remain at one twelfth in order to encourage those in arrears to bring their tax up to date.

To conclude, I wish to stress that the new arrangements being proposed in this Bill will not impinge on compliant taxpayers in any way. This is an anti-evasion measure and is designed to close off a loophole being widely abused. I would also like to assure the House that the current arrangement for the one-month grace period is not affected in any respect by this legislation. Those who need to take their car off the road for any reason will be facilitated but they must notify the motor tax authorities in advance.

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