John O'Mahony (Mayo, Fine Gael)
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I thank the Ceann Comhairle for having selected this issue.

The difficulties in the motor trade have been signalled over the past 12 to 18 months in particular. The solution to them, however, has nothing to do with providing extra finance. If anything, money would come into the Exchequer if this issue was dealt with in a constructive and organised way.

My constituency of Mayo woke up last Tuesday morning to the loss of 70 jobs in Casey's car dealerships in Ballina and Castlebar. Castlebar accounted for over 45 jobs, while Ballina had over 15. Casey's was not a company that grew out of the Celtic tiger over the last ten years, but had operated in Mayo for the past 40 years. It has provided hundreds of jobs and sold thousands of cars to the people of Mayo.

I have been discussing the matter with the workforce this week. Over 10% of them have 30 to 40 years' service with the company. One worker told me that on Tuesday, for the first time in 50 years, he had no work to go to. That says something about the quality of the company and its staff.

The annoying thing about these job losses is that something could have been done to prevent them, but Government inaction led us to this stage. The Government has contributed to the thousands of jobs lost in the motor industry over the last 12 months. Over 60,000 jobs are involved in the motor trade nationwide. Before the recession, in July 2007, the Government introduced an emissions-based tax on cars, which opened the floodgates for imported cars. The Government then increased the VAT rate from 15% to 21%, which further widened the gap. The result, in Mayo alone, cost the Exchequer millions of euro in lost vehicle registration tax or VRT.

In January 2007, some €12 million was paid in VRT by car dealerships in Mayo. At the beginning of this year, however, that sum had fallen to €1 million. For the country as a whole, the sum in 2007 was €2 billion, but it is projected to be €500 million this year. A report by Dr. Peter Bacon recommended that the Government should reduce VRT by 25% in the forthcoming budget. Those are the salient facts and figures.

My assertion is that 15% of a smaller VAT amount is better than 21% of no sales. In 2007, 150,000 cars were sold in Ireland, but this year fewer than 60,000 will be sold. Of the 150,000 cars sold in 2007, 80% were bought with finance released from banks and other financial institutions. Last year, only 10% of the 60,000 sales were based on sales from banks. In other words, buyers had to have the money up front. What is needed now is a package of measures to help protect the thousands of jobs in the motor industry in Ireland. Eleven major dealerships have already gone to the wall in the west this year. Other countries have introduced scrappage schemes that have proved successful, so that could be one element of a solution. The VAT rate needs to be looked at also and finance needs to be released. If the Government continues to sit on its hands on this issue, some other company will suffer the fate of Casey's in Mayo next week. We need urgent action now.

Seán Haughey (Dublin North Central, Fianna Fail)
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I thank the Deputy for raising this matter. The Government is aware of the issues facing the motor industry, which are not just restricted to Ireland. The industry has suffered a serious downturn worldwide, which has resulted in catastrophic impacts on some of the world's largest automobile manufacturers and huge job losses in regions where the industry was a major source of employment in the past.

I was disappointed to learn of the job losses at the company. I am conscious of the effect that the job losses will have on the employees of Casey Garages in Castlebar and Ballina as well as the knock-on effect for their families and their communities. This is a distressing time for those who will lose what, up to the recent the past, had been very secure and rewarding employment. I assure the people concerned that the relevant State agencies will provide every support they can. The priority will be to find alternative employment or re-training for those involved at the earliest opportunity.

The role of FÁS, the State training agency, will be particularly important in assisting those who are to lose their jobs. All FÁS interventions and supports are aimed at assisting people to enhance their skills and enable them to secure employment in these difficult times. In this instance, the agency has been in contact with Casey Motors in Castlebar and Ballina. Seven apprentices are registered with this dealership with five based in Castlebar and two in Ballina. FÁS Services to Business has contacted the apprentices concerned and they have been advised of their position in the context of the continuation of their apprenticeships. Their on-the-job workplace assessment training records are being updated and every effort will be made by FÁS to progress their apprenticeships in the future. Assistance will also be offered by the agency to other employees of the company.

The Department of Enterprise, Trade and Employment has no specific role in the motor industry. Responsibility for the primary issues of concern to the industry at large fall within the remit of the Departments of Finance and the Environment, Heritage and Local Government, as the Deputy noted. The Minister for Finance confirmed on 14 September 2009 the replacement of the current special scheme governing the VAT treatment of second-hand cars with the new margin scheme on 1 January 2010. This was initially announced in the supplementary budget of April 2009. Under the margin scheme, dealers will account for VAT on their profit margin, that is, on the difference between the cost of acquiring a car and its selling price.

The introduction of the scheme, and changing over from the current special scheme, will bring Ireland into line with the other 25 EU member states that apply the scheme, which was introduced under the EU VAT Directive in 1994. The margin scheme, which will apply from 1 January 2010, is simple and straightforward in that a dealer accounts for VAT on his or her profit margin. If there is no margin, then no VAT liability arises; if there is a positive margin, VAT is charged based on that profit margin. The scheme will also apply in respect of second-hand agricultural machinery. Appropriate transitional arrangements will be introduced to take account of the fact that the move to the scheme will mean dealers will no longer be able to reclaim or deduct the amount of VAT that under the special scheme is taken to be included in the price of the second-hand car at the time of its acquisition by the dealer.

A number of other provisions designed to boost car sales have been introduced by the Department of Finance. These include the measure introduced in the Finance (No. 2) Act 2008 providing partial VAT deductibility - 20% - in respect of the purchase or leasing of business cars in the CO2 emission bands A, B and C registered for VRT purposes on or after 1 January 2009, should assist new car sales. In addition, under the engine size-based VRT system, the average VRT rate paid was 25% of the open market selling price, whereas under the CO2 emissions-related VRT system the average VRT rate paid is 20% to date. Under the new emissions-related VRT system ,the average VRT rate being paid has fallen. The Finance (No. 2) Act 2008 provides for the pre-examination of vehicles, including used car imports, as a condition of registration with effect from 1 January 2010 and it also provides for the temporary registration, without the payment of VRT, of vehicles brought into the State for a period greater than 42 days.

There has been speculation about the introduction of a scrappage scheme. Taxation issues are considered in the context of the budget, which will be announced on 9 December. As evidenced by the publication of the renewed programme for Government this week, the issue of jobs is at the top of the Government's agenda. The Government has two objectives for the next two years: to protect existing jobs in the economy of today and to build our capability for the economy of tomorrow. We will support viable but vulnerable businesses and employment in the difficult trading environment and international crisis. We will also assist those who lose their jobs during the downturn. I am confident the strategies being pursued by the Government will bring renewed growth and prosperity to the motor industry and all business sectors in Ireland.