Brian Hayes (Dublin South West, Fine Gael)
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Question 6: To ask the Minister for Arts, Sport and Tourism whether he has consulted with the Department of Finance regarding the implications of section 74 of the Finance Bill 2008 in respect of car hire on tourism; and if he will make a statement on the matter. [10956/08]

Séamus Brennan (Dublin South, Fianna Fail)
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I am aware that VRT relief on cars used in the short-term car hire industry was introduced in the Finance Act 1992 and amended subsequently in 1993, 1994 and 1998. The measure is aimed at boosting supply of hired cars to facilitate the development of the tourism industry.

I am advised by my colleague, the Tánaiste and Minister for Finance, that the measure has been abused by some in the car hire and leasing industries as a tax avoidance measure to support a range of business models that have nothing to do with the tourism industry. Accordingly, the Finance Bill 2008 introduces an amendment to tighten up the application of the existing policy and to restrict such abuse, while still facilitating the availability of vehicles for the tourism industry generally.

I understand that, in the course of debate on Committee Stage in the Dáil on the Finance Bill, the Tánaiste indicated the Revenue Commissioners could defer implementation of the amendment as an administrative arrangement until September 2008. This would allow the sector some time to regularise its current position in order that it be fully compliant with the requirements of the legislation for the 2009 season. The concession will not apply in the case of abuses of the VRT refund scheme or the application of the current VAT rules.

I understand the Tánaiste also offered to consult with the car hire trade to determine whether its concerns warrant changes to meet the objective of the short-term car hire scheme in respect of the tourism sector, while excluding the possibility of abuse and if so, what changes would be required. I have asked my Department, having regard to any significant tourism impacts that may be identified, to monitor and, if appropriate, assist in any consultations engaged in by the Department of Finance.

Olivia Mitchell (Dublin South, Fine Gael)
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I agree the Department of Finance cannot but ensure that schemes are not amenable to tax evasion and that it has to be vigilant of abuse in cases where VRT is not payable. However, it is almost impossible for the car hire industry to implement the scheme as proposed without increasing its costs enormously. Even though car hire companies will have to be aware whenever a car reaches its 34th day of hire and pay VRT for outstanding days, they have no guarantee that customers will not move to the next company to hire a car for another 34 days. It is a cumbersome scheme which will increase the cost of car hire generally. The industry's understanding was that the moratorium on the implementation of this measure was imposed to allow time for consultation and changes.

This is a finance measure but the Minister has also to be conscious of the effect it will have on car hire by tourists, particularly in the regions. The car hire business exists for people who may fly into cities but want to travel to the regions. Will the Minister ensure meaningful consultation takes place before this section of the Act is implemented with a view to making the system less cumbersome for the industry so that it does not increase the price of car hire generally? Our costs are high enough as it is.

Séamus Brennan (Dublin South, Fianna Fail)
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We keep a close eye on the scheme to ensure it does what is intended. The long list of avoidance practices which gave rise to concerns include breaking a long-term hire into a number of shorter term hires, providing different cars of the same type or model, including replacement cars within the short-term fleet and providing vehicles as insurance replacements. A concession originally intended to support the tourism industry was increasingly used to support a range of unrelated business models. I accept the Deputy's point that it is important from my perspective that the measures are simple and do not damage the car hire or tourism industries in any way and I will monitor them closely.