Seán Sherlock (Cork East, Labour)
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Question 52: To ask the Tánaiste and Minister for Finance his proposals to weight vehicle registration tax in favour of cars with lower emissions; the estimated annual cost of this proposal; and if he will make a statement on the matter. [29589/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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As the Deputy will be aware, it is a long-standing practice of the Minister for Finance not to comment in advance of the budget on any tax or expenditure matters that might be the subject of budget decisions. I am sure the Deputy will not wish me to depart from this practice given that budget day is so close. He will, however, recall that in my 2007 Budget Statement, I announced it was intended to rebalance the current VRT system to take greater account of environmental policy objectives, in this case reducing carbon dioxide — CO2— emissions. I indicated that there should be greater rewards built into the VRT system for choosing lower emission vehicles and that those choosing higher emission vehicles should pay more. For that reason, a range of options was set out in the budget booklet for making such a move and a public consultation process was announced. Any changes were to have effect from a target date of 1 January 2008.

At the same time, the then Minister for the Environment, Heritage and Local Government announced he would consult on his proposals for a complementary rebalancing of annual motor tax. Underpinning both of these initiatives would be a new mandatory labelling system for cars based on CO2 emission levels somewhat on the lines of that used for white goods. The programme for Government further underpinned the commitment to examine this issue, stating "we will introduce measures to further weight VRT and motor tax in favour of cars with lower emissions".

The consultation paper issued last December set out four broadly revenue neutral possible options for rebalancing VRT to take greater account of CO2 emissions. More than 60 submissions were received, of which 19 were from representative organisations or firms, with the remainder from individuals. Representatives from the Department of Finance, the Revenue Commissioners and the Department of the Environment, Heritage and Local Government have met eight representative organisations and some individuals to discuss their submissions. Work on considering possible options has continued, taking into account the growing emphasis being placed on climate change at national and international level and the views expressed during the public consultation process.

As I stated in reply to a parliamentary question on 3 October, as regards the timing of when any changes in VRT would be implemented, it is desirable that members of the public be given reasonable notice of changes being introduced. For this reason, it is proposed to provide in the Finance Bill 2008 for changes to the VRT system that might be introduced, with an implementation date of around mid-2008.

VRT is an important source of revenue for the Exchequer, yielding €1.3 billion in 2006 or approximately 3% of the total net tax receipts.

Additional information not given on the floor of the House.

In introducing changes to the VRT system it is desirable that the system be maintained as simple as is possible in terms of its administration and the ease with which it is understood. In addition, the VRT yield should, as far as possible, be protected and retained at the level it would have achieved if the proposed changes had not been introduced. Consequently, there is much to consider before any changes are decided.

Joan Burton (Dublin West, Labour)
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On the promise to rebalance the car taxation system in VRT and annual motor tax, members of the public want to know whether tax on the very large gas guzzling sport utility and other vehicles one sees in parts of central Donnybrook will increase. As these vehicles are relatively new and their emissions will be lower than some older vehicles, with the result that the changes in the budget could benefit the owners of these vehicles and give a fiscal belt, as it were, to less well-off drivers with older cars that have higher emissions levels. The Minister referred to rebalancing the system. Has he made up his mind in this regard?

The programme for Government included a promise to produce an annual carbon budget immediately beside the budget. This and the estimates for budget day are a surprise. Will it set out the comparative emissions costs and the Minister's ambitions regarding vehicle emissions, in terms of VRT and annual road tax?

Brian Cowen (Laois-Offaly, Fianna Fail)
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I provided detailed replies on the carbon report in response to previous parliamentary questions, including some of today's questions.

The proposal on vehicle registration tax is based on moving the focus of VRT from engine size to a vehicle's CO2 emissions. I do not propose to provide details at this stage as this is a matter for announcement at the appropriate time. The proposal is to replace the old system, which was based on engine size, with one based on CO2 emissions.

Richard Bruton (Dublin North Central, Fine Gael)
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While I welcome the proposed change in vehicle registration tax, I will press the Minister on whether the initiative will be revenue neutral. An important principle the public wants applied to green taxation is that revenue derived from taxing something undesirable should be recycled and should not result in an overall increase in taxation levels. Will the Minister give a commitment that he will rebalance motor tax and vehicle registration tax on the basis of tax neutrality and that it will not raise revenue for Exchequer purposes.

Brian Cowen (Laois-Offaly, Fianna Fail)
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With any rebalancing there will be winners and losers. In this case, the category into which one falls will depend on the type of vehicle one drives. We are trying to achieve an outcome broadly in line with what the Deputy suggests.

Seán Barrett (Dún Laoghaire, Fine Gael)
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There has been a great deal of discussion about the imposition of higher VRT rates on larger engines. Some people will continue to drive cars with larger engines regardless of what VRT rate is imposed. If we are serious about addressing CO2 emissions, surely action can be taken in respect of matters over which the State has control, for example, public transport. What is being done to introduce buses with hybrid engines? As Deputy Bruton stated, surely it is time to ring-fence revenue extracted from people so that we can deal with the serious issue of CO2 emissions.

Brian Cowen (Laois-Offaly, Fianna Fail)
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Measures such as the modernisation of the bus fleet obviously help to reduce the fleet's CO2 emissions and its contribution to environmental damage. A range of public transport initiatives have been introduced, including infrastructural projects and measures to remove trucks from some routes. People can see the visible improvement these measures have had, for example, in improving the quality of life for people living in Dublin. Deputy Barrett is correct in that everyone must put his or her shoulder to the wheel in the area of environmental protection and engage in more environmentally friendly behaviour, particularly in the area of transport. The significant investment initiatives in public transport under Transport 21 are designed to reduce the rate of increase seen in private vehicle use and ensure that people have quality options which are more environmentally friendly.

Joan Burton (Dublin West, Labour)
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On the issue of possible changes in annual road tax, does the Minister propose to move away from the system where road tax is based on engine size? The European Union has a long-standing proposal for a directive on car taxation and harmonisation, in favour of reducing tax on vehicles that have lower emission levels per kilometre travelled. Does the Government agree with the overall EU approach to the harmonisation of motor vehicle taxation? Is that consistent with the carbon budget principles outlined in the programme for Government?

Brian Cowen (Laois-Offaly, Fianna Fail)
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Motor taxation is, primarily, a matter for the Minister for the Environment, Heritage and Local Government as proceeds from it go to local government funds. It is a devolved matter in terms of the availability of the resources to local authorities. Therefore, I do not want to comment, pending the announcement of any arrangements the Minister wishes to make in that respect, particularly at this stage of the budgetary process.

I am not au fait with the details of the directive and perhaps it would be better for the Deputy to make contact with the Departments of Transport and the Environment, Heritage and Local Government or put a question to them to check the situation.

Brendan Howlin (Wexford, Labour)
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I call Question No. 53.

Richard Bruton (Dublin North Central, Fine Gael)
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On a point of order, as Questions Nos. 53 and 54 have already been answered through a priority question, will the Chair call the Minister to answer Question No. 55?

Brendan Howlin (Wexford, Labour)
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I will call Question No. 53 and if there are no supplementary questions, that will be it.

Richard Bruton (Dublin North Central, Fine Gael)
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It has already been answered as a priority question.