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

At the outset, the Deputy should note that neither the Government nor the Minister for Finance has a role in dictating the list price of vehicles, which are decided by car manufacturers or car dealerships. My colleague, the Minister for Transport, has overall policy responsibility for transport policy including managing the national vehicle and driver file, which is a database containing details of all 2.5 million registered vehicles and their owners as well as the 2.6 million licensed drivers in the country. The role of the Department of Finance, on the other hand, is limited to the taxation of vehicles through vehicle registration tax, VRT, motor tax, VAT and benefit-in-kind provisions.

Regarding taxation, VRT is an emissions-based tax and therefore the amount of VRT incurred will vary across different vehicle makes and models. The charge is determined by the open market selling price of the vehicle. While there were no changes to VRT as part of budget 2023, recent reform to the rates structure has provided for increased VRT rates for high-emission vehicles while lower-emission vehicles continue to incur low rates of VRT. This reflects the environmental rationale of the tax and underpins Government commitments to decarbonise road transport. It is important to note that VRT is a tax chargeable on the first registration of vehicles in the State and so is not chargeable on second-hand cars sourced here.

The EU VAT directive requires that VAT on motor vehicles should be charged at the standard rate, which is 23% in Ireland. While the standard rate can be as low as 15%, it should be noted that any decrease would have to be applied to all services and supplies that come within this category and that every 1% reduction in that rate would cost the Exchequer €575 million.

For cars that are being imported into the State, VRT and VAT are also chargeable. This includes vehicles that are imported into the State from the UK. From the date it left the EU Single Market and customs union in January 2021, the movement of goods from Great Britain into the EU is considered an importation from a third country and, in accordance with the terms of the withdrawal agreement, such goods must be declared to Customs and Excise and are liable to customs duty, if applicable, and VAT on import.

See this speech in context