Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I move amendment No. 23:

In page 133, between lines 15 and 16, to insert the following:“Report on economic impact of VAT rebate on car rental sector

41.The Minister shall within three months of the passing of this Act, prepare and lay before the Oireachtas a report assessing the economic impact of ending the VAT rebate on VRT on the car rental sector in section 37.".

This amendment relates to the issue of the VAT rebate in the car rental and leasing sectors. I will deal initially with the issues in the car rental sector. During the Committee Stage debate the Minister made an estimate of the impact of the measure as being between €1.50 and €2 per vehicle per day. That estimate has been examined. The estimate presumes a pass-through spread across 12 months. The nature of the car rental market and the movement of the fleet mean that typically the measure should be spread across a period of three to five months.

The estimates I have seen, which were prepared by professionals, put the impact at a figure of between €5 and €8 per day for an average vehicle. For a typical tourist or customer who rents a car for seven days the impact is estimated to be between €36 and €55, which is not insignificant. North American tourists typically rent automatic vehicles or larger people carriers. The impact will be far greater, perhaps between €14 and €23 per day. The impact on the end consumer of this measure will be considerably greater than the estimate made by the Minister, which was based on certain assumptions.

At a time when VAT is going up in the tourism and hospitality sectors, this is further blow in cost competitiveness and to the offering we make. The nature of the car rental market has changed dramatically in the past 40 years. It is rather seasonal but we now have five large operators within the market. This is an extra significant cost.

The car leasing aspect got less attention on Committee Stage. The issue is that the change to VAT will impact on car leasing but will not impact on the other form of competition within that area, including hire purchase or people acquiring vehicles through loans. The potential is that this would have a significant impact on corporate and small and medium-sized car leasing businesses by resulting in rather hefty increase of perhaps €700 for an average vehicle in the sector. The issue did not get a great deal of attention on Committee Stage but the impact is not insignificant.

Again, I have looked at the background to this, which dates back to 1992. The Minister has presented this as being a concession, a tax expenditure. There is a strong argument that it was in fact a tax equalisation measure at the time, one not intended to be temporary in nature. I call on the Minister to re-examine the matter and consider the amendment we have brought forward.

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