Dáil debates
Tuesday, 7 December 2010
Financial Resolution No. 4: Excise (Vehicle Registration Tax)
The taking together of Financial Resolutions Nos. 1 to 4, inclusive, was agreed by the House in the vote on the allocation of time motion. Financial Resolution No. 1, relating to mineral oils, petrol and diesel, provides for an increase with effect from midnight tonight to the rates of mineral oil tax on petrol and auto diesel which, when VAT is included, amounts to 4 cent on a litre of petrol and 2 cent on a litre of auto diesel. The rate of aviation gasoline, which is aligned to the petrol rate, and the rates for heavy oil use for non-commercial navigation and flying, which are aligned to the auto diesel rate, are increased accordingly. The expected yield from these increases, inclusive of VAT, is approximately €106 million in a full year. These measures will increase the consumer price index by approximately 0.13%.
It should also be noted that the UK is due to increase its standard VAT rate by 2.5% from 17.5% to 20% with effect from 4 January 2011. In addition, excise on petrol and auto diesel is due to increase by slightly under 1% from 1 January 2011. The overall effect of these changes will be to increase the price of petrol and auto diesel in the UK and Northern Ireland by around 4 cent per litre in early 2011.
It is estimated this measure will cost the Exchequer approximately €56 million in taxation next year. Ireland is not unique in applying a tax on air travel and a number of countries within the EU apply similar taxes, including the UK and France. Going further afield, both Australia and New Zealand apply similar taxes. The US has introduced a tourist tax on tourists travelling there by air and furthermore, Germany and Austria are currently in the process of introducing an air travel tax to apply from January next year. The rates of tax applied by many of those countries are higher than Irish rates, and substantially so in some cases. The trend in Europe is towards applying a tax on air travel.
There have been calls to abolish the tax on the basis that it adversely affects the number of people travelling to Ireland. I have difficulty in accepting that proposition and consider that the impact of the air travel tax is being overstated. The numbers travelling appear to be more closely related to other factors, including the level of economic activity.
Notwithstanding reservations, it has been decided that a single revised rate of air travel tax of €3 will come into effect on 1 March 2011. Let me be clear that this is being applied on a temporary basis until the end of 2011 and the position will be reviewed next year; the rate will be increased unless there is clear and decisive evidence of an appropriate response from the airlines through increasing capacity and numbers travelling to Ireland by air. As the Minister for Finance stated in his Budget Statement, in conjunction with this initiative the Dublin Airport Authority is prepared to introduce an incentive scheme for 2011 whereby it will provide, subject to certain conditions, a full rebate of airport charges for additional traffic delivered above a certain threshold based on 2010 passenger levels. The DAA will provide further details of that scheme.
Financial Resolution No. 3 regards the car scrappage scheme and the vehicle registration tax, VRT, relief for hybrid and flexible fuel vehicles. This resolution amends sections 135(b) and 135(c) of the Finance Act 1992 to provide for an extension of the car scrappage scheme introduced in the 2010 budget until 30 June 2011, and to extend to 31 December 2012 the vehicle registration tax available with a lower threshold for certain hybrid and flexible fuel vehicles.
The key features of the extended scrappage scheme include it taking effect from 1 January next and running to 30 June 2011. Up to €1250 VRT relief will be provided and it is available against the VRT liability on the registration of new category A vehicles, or passenger vehicles, with a level of CO2 emissions of not more than 140 g/kg. This takes in bands A and B in motor tax. A passenger car over ten years old must be scrapped at an authorised treatment facility in the State and a certificate of destruction issued.
The scrappage scheme introduced in last year's budget has been successful in contributing towards a large increase in new car sales in 2010, as they have increased 57% on the same period the previous year. It has contributed to the maintenance of jobs in the motor industry. Approximately 16,500 low-emission cars have been sold under the scheme up to the end of November, and the scheme is being extended to allow the industry to get the maximum benefit from its traditionally busiest period for new car sales in the first half of the year.
The resolution also extends the VRT relief available against the purchase of serious production hybrid and flexible fuel vehicles which is due to expire at the end of the December. It is being extended for a further two years until 31 December 2012, with the maximum VRT relief available in that period of €1,500. To the end of November 2010, approximately 3,000 flexible fuel and 1,200 hybrid vehicles have been purchased.
Financial Resolution No. 4 addresses an unanticipated consequence of a provision introduced in the Finance Act 2010 which was to amend section 130 of the Finance Act 1992, whereby a small number of light commercial vehicles which would previously have been charged at the category C VRT rate of €50 will from 1 January 2011 without this amendment be charged the category B rate of 13.3% of the open market selling price. In order to rectify this anomaly and ensure that these vehicles will continue to retain the low VRT rate, it is necessary to amend the charging provisions for category C vehicles to ensure that such light commercial vehicles remain within that category.
The revised classification for vehicles introduced in the Finance Act 2010, with effect from 1 January 2011, was introduced as an anti-avoidance measure, as in some cases people were altering the specifications of vehicles; for example, extra body weight may have been added to the vehicle so as to change the classification and thereby considerably reducing the VRT liability. Many such alterations are also seen to be a safety risk.
7:00 am
Simon Coveney (Cork South Central, Fine Gael)
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On the point on which we voted, it is unfortunate-----
Séamus Kirk (Louth, Ceann Comhairle)
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I advise the House that we will have limited time to discuss these resolutions and there are many hands reaching towards me.
Damien English (Meath West, Fine Gael)
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The Ceann Comhairle should have said that to the Taoiseach while he was at it.
Enda Kenny (Mayo, Fine Gael)
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If the Taoiseach is going to read out a ten-minute script at the start of each one of these, the 20 minutes will not be long being used.
Séamus Kirk (Louth, Ceann Comhairle)
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The order of the House is quite specific.
Brian Cowen (Laois-Offaly, Fianna Fail)
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I had to explain the matters. I am only being helpful.
Enda Kenny (Mayo, Fine Gael)
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I know the Taoiseach was doing the best he could to get through the speech.
Brian Hayes (Dublin South West, Fine Gael)
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It helps the debate.
Simon Coveney (Cork South Central, Fine Gael)
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I will try to be as concise as possible.
Simon Coveney (Cork South Central, Fine Gael)
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It is unfortunate that we must debate four resolutions at the same time because we support some but disagree with others. We must vote against all four as a result of the way this is structured. On the mineral oil excise, I do not understand why the cost of fuel is not being increased by applying an increase in carbon tax.. Perhaps the Taoiseach will explain why this is so. In the past number of budgets we have made a deliberate effort to introduce carbon taxation to Ireland to provide a cost for carbon and change the mindset towards carbon and its impact on the environment in terms of emissions.
There is no extra carbon taxation in the budget but there are increases in excises, and I do not understand why we are pursuing an excise increase when we could have raised the same amount of money by applying an increase in carbon taxation on fuel and by continuing to pursue the carbon strategy, which has now stalled. Perhaps I could get a response from one of the Government spokespersons on that issue.
The measure relating to air travel tax is the reason we are voting against this grouping. Fine Gael believes it is insane to charge people for the privilege of coming to Ireland on their holidays or on business while we are trying to stimulate activity in the Irish tourism sector. We raised approximately €105 million this year by charging people €10 to leave this island and next year we will continue to charge them €10 until March, although we know the measure does not work and is reducing passenger numbers through Irish airports. Even after this we will continue with the folly of charging people for the privilege of coming here while we spend considerable sums marketing Ireland abroad to get them here in the first place. It is a disincentive to people coming through Irish airports if we charge for the privilege, although it is difficult to calculate exact figures. Fine Gael has long made the case that we should abolish the air travel tax because it has not worked and is not working. The damage being done in terms of the tourist industry and visitor numbers to Ireland far outweighs the revenue stream provided for the Government.
The Taoiseach mentioned the incentive which the Dublin Airport Authority announced today, which is also flawed. If passenger numbers travelling through Cork, Dublin and Shannon airports next year go above a value of €23.5 million, the DAA will give a rebate to the effect of what it would have cost those extra passengers to travel through Irish airport. This will go to all the airlines, depending on the percentage of passengers attributable to different airlines. In other words they are not incentivising airlines to increase passenger numbers because even if that does not happen, an airline will get the benefit. If, for example, Ryanair provides extra passengers to get us past the €23.5 million value, all the airlines will get the benefit rather than the airline which provided the extra passengers. That makes no sense.
Simon Coveney (Cork South Central, Fine Gael)
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Each individual airport, whether Cork, Dublin or Shannon airport, should incentivise airlines.
Simon Coveney (Cork South Central, Fine Gael)
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Today's announcement by the Dublin Airport Authority relates to Dublin, Cork and Shannon airports. The same position applies to Knock Airport.
Beverley Flynn (Mayo, Fianna Fail)
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The Deputy is discriminating against Knock Airport.
Simon Coveney (Cork South Central, Fine Gael)
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I am not discriminating against anybody.
Séamus Kirk (Louth, Ceann Comhairle)
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I ask Deputies to refrain from engaging across the floor.
Simon Coveney (Cork South Central, Fine Gael)
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The Deputy's Government will shut down regional airports in the second half of 2011.
Damien English (Meath West, Fine Gael)
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Will Deputy Flynn vote against the motion?
Simon Coveney (Cork South Central, Fine Gael)
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The public service obligation for regional airports will be cut by 50% next year. Deputy Flynn should read what her Government is proposing.
Beverley Flynn (Mayo, Fianna Fail)
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I know what I am proposing.
Simon Coveney (Cork South Central, Fine Gael)
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We need to have an aviation strategy that allows airports to incentivise airlines to increase passenger numbers.
I welcome the extension of VRT relief for electric transport, in particular, plug-in vehicles. I encourage the Government to be more proactive and aggressive in having a charging infrastructure established that such vehicles can use.
Eamon Gilmore (Dún Laoghaire, Labour)
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I will focus on two aspects of this group of proposals. Like the Fine Gael Party, the Labour Party proposed the abolition of the air travel tax. While I acknowledge that the Government has made a move in that direction by reducing the tax and has applied some conditionality to its application, this is one of the taxes, the disincentive effect of which is as much the fact that it is in place as it is the level at which it applies. While I understand that when the budget was being framed and calculations were being made, the Minister examined the amount and arrived at the proposal before us, in terms of its impact on passenger numbers and tourism leaving the tax in place means there is still a difficulty.
If the Government was moving in the direction of increasing excise on petrol and diesel, I, like Deputy Coveney, do not understand the reason this was not done by way of the carbon tax or carbon levy. This would have had a more general application than the use of the excise method. While I expected the budget to include an excise package - it is an understandable measure - I am puzzled as to the reason the excise measure is focused on petrol. Why, for example, was the Irish Cancer Society's recommendation on excise on cigarettes not taken up? Why were the various recommendations to increase excise on alcohol for health reasons not taken up? There were expectations and a certain amount of speculation that the budget would include increases on excise in these areas.
Increasing excise on petrol and diesel affects the one area where costs have increased significantly in recent times. Even in recent days, the price of petrol and diesel has increased on the forecourt. Such increases impact directly on working people. The cost of travelling to work, doing business or running a van or vehicle associated with work will increase as a result of this measure. The proposal is misplaced. If excise was to be increased, other options were available. If the Government wanted to focus on carbon, it should have increased the carbon levy.
Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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On behalf of the Sinn Féin Deputies, I oppose outright the proposed increase in excise duties on petrol and automotive diesel. It is incredible that the Government has made this choice. There is no question that this is a further tax on work and business. When one considers that those fortunate enough to have work must travel ever greater distances to access their employment one realises the net impact of what is involved here. People no longer use their cars for social purposes. The bulk of car use is directly related to accessing employment or the furtherance of specific business pursuits. The level of car use for social activities and such like is limited.
The proposition will have a hugely detrimental impact in the Border counties where we already have evidence of retail petrol and diesel outlets closing or significantly curtailing their business throughput because of the exodus north of the Border across a variety of attractions. We are putting another nail in the coffin of business outlets throughout the Border region, from Donegal through Sligo, Leitrim, Cavan and Monaghan to Louth and for a significant distance beyond these counties. That is one of the most certain outworkings of what is proposed. The measure is anti-business and anti-employment and the Government has again made a very bad choice.
On the air travel tax, while the reduction from €10 to €3 is welcome, the abolition of the tax would have had a much more imaginative impact in terms of the tourism sector and tourism market overseas. For the sake of €3, the Government could have gone the whole hog and had a major impact on the consciousness of tourism providers and organisers globally in terms of Ireland as a more keen destination for tourist traffic. A golden opportunity was lost by applying the brake in reducing the tax from €10 to €3. The Government should have gone the whole way and abolished the tax. This would have given a valuable fillip to the tourism industry, one of the most important sectors in terms of having any prospect of rejuvenated economic activity over the short time ahead.
John O'Donoghue (Kerry South, Fianna Fail)
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I greatly welcome the Government's decision to reduce the travel tax for international flights to €3. While there is no hard evidence to show this measure will result in an increase in the number of visitors to the country, there is, nevertheless, a perception that this is the case. The air travel tax, allied to airport charges, has been advocated by the chief executive of Ryanair as one of the principal reasons we are unable to attract the number of visitors we should attract. It is also cited as a reason Mr. O'Leary and his company should abandon PSOs. The proof of the pudding is in the eating and it is now a matter for Mr. O'Leary, Ryanair and other low charge airlines to establish the fruit of their words by increasing the number of visitors coming to Ireland in response to these changes.
I was interested in Deputy Ó Caoláin's intervention. The old Sinn Féin philosophy of "only our rivers run free" has been extended to having our petrol and diesel and even our drink run free.
Arthur MorganJohn O'Donoghue (Kerry South, Fianna Fail)
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The world, as we are probably all aware, does not work like that. I wish we could go to utopia and have a utopian time. Unfortunately, the Deputy Ó Caoláin appears to be stranded at a crossroads somewhere between paradise lost and utopia, from which he has not returned.
With regard to Deputy Coveney's response to Deputy Flynn's legitimate intervention to the effect that she should read her brief, I resent that imputation. Deputy Flynn is one of our brightest young Deputies. Then again, coming from one of the few Cork men I know who does not know the difference between a pint of Guinness and a pint of Murphy's, his comment does not come as a surprise.
Simon Coveney (Cork South Central, Fine Gael)
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Deputy O'Donoghue should bear in mind what will happen to the PSO for Kerry airport.
Pat Breen (Clare, Fine Gael)
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Speaking as a Deputy who represents a constituency that is deeply affected by the air travel tax, it is clear the Government does not understand the aviation business.
Séamus Kirk (Louth, Ceann Comhairle)
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The Deputy has made his point. I must call the mover of the motion.
Pat Breen (Clare, Fine Gael)
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The cost of administering the tourism tax greatly outweighs the likely income from the tax. The Government has been selective in referring to countries which apply a similar tax. The Netherlands, for example, which has one of the busiest airports in Europe, Schiphol, abandoned its travel tax last year. It is one of the busiest airports around. There was a golden opportunity here but it has been missed. It is a sad reflection of how the Government-----
Pat Breen (Clare, Fine Gael)
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-----treats the third largest tourism industry in the country.
Séamus Kirk (Louth, Ceann Comhairle)
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I would love to accommodate every Member in the House but I do not have the time. I must call the Taoiseach and I am affording him ten seconds to reply.
Joe Carey (Clare, Fine Gael)
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This is an issue I have raised many times in the House.
Joe Carey (Clare, Fine Gael)
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There was a golden opportunity-----
Séamus Kirk (Louth, Ceann Comhairle)
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The Finance Bill will be debated in the new year and Deputies will have plenty of opportunities.
Joe Costello (Dublin Central, Labour)
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May I ask the Taoiseach a question?
Joe Carey (Clare, Fine Gael)
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What the Government has done in this regard does not make sense. It has actually increased the tax by one euro.
Séamus Kirk (Louth, Ceann Comhairle)
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Deputy, I have to implement the order of the House for today, as was agreed. Resume your seat.
Joe Costello (Dublin Central, Labour)
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I have one question for the Taoiseach that has not been asked. What right does the Dublin Airport Authority have to provide an incentive scheme in regard to a Government tax? Surely it is the function of the Revenue Commissioners to collect the tax, which cannot be foregone by the DAA. Surely that matter is not appropriate to the authority.
Beverley Flynn (Mayo, Fianna Fail)
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On the same issue, a Cheann Comhairle-----
Séamus Kirk (Louth, Ceann Comhairle)
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The Deputy has 20 seconds.
Jimmy Deenihan (Kerry North, Fine Gael)
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What about the rest of the country?
Beverley Flynn (Mayo, Fianna Fail)
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I, too, am concerned about this. I mentioned it to Deputy Coveney because I thought he would be interested given that his party leader occupies the same constituency as I do. I would like to know about the impact of this decision. Has it been considered in terms of Knock Airport-----
Beverley Flynn (Mayo, Fianna Fail)
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-----which is targeting the same core business as Shannon, Cork and Dublin Airports? I appreciate incentives must be provided but there should be a level playing field-----
Beverley Flynn (Mayo, Fianna Fail)
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-----and I would like to see the issue addressed later in the week.
Joanna Tuffy (Dublin Mid West, Labour)
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May I ask why there is not-----
Pat Breen (Clare, Fine Gael)
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This is a very emotive issue for everybody.
Séamus Kirk (Louth, Ceann Comhairle)
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Deputy Carey, you have been on your feet but the House has picked up the issue. I call the Taoiseach.
Brian Cowen (Laois-Offaly, Fianna Fail)
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I say to Deputy Carey, fair is fair. We have to move on.
Joanna Tuffy (Dublin Mid West, Labour)
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What is the Taoiseach talking about?
Brian Cowen (Laois-Offaly, Fianna Fail)
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If we were to go the carbon tax route that would increase green diesel, home heating oil, etc. Under the programme, carbon tax increases are due in 2012 and 2014 and for that reason the excise duty was brought in as a route that would avoid increasing the price of other fuels. Advocating further increases on other fuels would not be a very sensible way to go and that is why we are not taking the carbon tax route on this issue.
We will see an increase in VAT rates from the British Exchequer. This is to keep the differential. What we are doing is presaging a change that is happening in the United Kingdom. Deputies will know that the price of diesel and petrol at filling stations is much less on the Republic side of the Border. I do not know what way it is with other operations.
It is important that we ensure this measure for the DAA where there is an increase in overall numbers. As an airport authority, it is entitled to incentivise airlines and has often done so.
Brian Cowen (Laois-Offaly, Fianna Fail)
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The Government tax is separate. This is about increasing numbers. We must find a public-private arrangement that will help taxpayers generally by bringing more tourists to the country, perhaps even sending them down to parts of the county from where the Deputy comes. If we are to do that we must provide some incentivisation. The European Union is opposed to different rates or amounts being charged for different journeys. We can bring this to a uniform rate, to €3.
Deputy Flynn raised a very important question which needs to be addressed in the Finance Bill, namely, that we ensure airports that are not within the DAA remit but which have services available to the UK and elsewhere and would have attracted the higher rate heretofore are not be disadvantaged as they seek to innovate and prosper.
Séamus Kirk (Louth, Ceann Comhairle)
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As it is now 7.40 p.m. I am required to put the following question in accordance with the order of the Dáil of this day.
The Dail Divided:
For the motion: 82 (Bertie Ahern, Dermot Ahern, Michael Ahern, Noel Ahern, Barry Andrews, Chris Andrews, Seán Ardagh, Bobby Aylward, Joe Behan, Niall Blaney, Áine Brady, Cyprian Brady, Johnny Brady, John Browne, Thomas Byrne, Dara Calleary, Pat Carey, Niall Collins, Margaret Conlon, Seán Connick, Mary Coughlan, Brian Cowen, John Cregan, Ciarán Cuffe, John Curran, Noel Dempsey, Jimmy Devins, Timmy Dooley, Frank Fahey, Michael Finneran, Michael Fitzpatrick, Seán Fleming, Beverley Flynn, Paul Gogarty, John Gormley, Mary Hanafin, Mary Harney, Seán Haughey, Jackie Healy-Rae, Máire Hoctor, Billy Kelleher, Peter Kelly, Brendan Kenneally, Michael Kennedy, Tony Killeen, Michael Kitt, Tom Kitt, Conor Lenihan, Michael Lowry, Tom McEllistrim, Mattie McGrath, Michael McGrath, John McGuinness, Martin Mansergh, Micheál Martin, John Moloney, Michael Moynihan, Michael Mulcahy, M J Nolan, Éamon Ó Cuív, Seán Ó Fearghaíl, Darragh O'Brien, Charlie O'Connor, Willie O'Dea, John O'Donoghue, Noel O'Flynn, Rory O'Hanlon, Batt O'Keeffe, Ned O'Keeffe, Mary O'Rourke, Christy O'Sullivan, Peter Power, Seán Power, Dick Roche, Eamon Ryan, Trevor Sargent, Eamon Scanlon, Brendan Smith, Noel Treacy, Mary Wallace, Mary White, Michael Woods)
Against the motion: 77 (Bernard Allen, James Bannon, Seán Barrett, Pat Breen, Tommy Broughan, Richard Bruton, Ulick Burke, Joan Burton, Catherine Byrne, Joe Carey, Deirdre Clune, Paul Connaughton, Noel Coonan, Joe Costello, Simon Coveney, Seymour Crawford, Michael Creed, Lucinda Creighton, Michael D'Arcy, John Deasy, Jimmy Deenihan, Pearse Doherty, Andrew Doyle, Bernard Durkan, Damien English, Olwyn Enright, Frank Feighan, Martin Ferris, Charles Flanagan, Terence Flanagan, Eamon Gilmore, Brian Hayes, Tom Hayes, Michael D Higgins, Phil Hogan, Brendan Howlin, Enda Kenny, Ciarán Lynch, Kathleen Lynch, Pádraic McCormack, Shane McEntee, Dinny McGinley, Finian McGrath, Joe McHugh, Liz McManus, Olivia Mitchell, Arthur Morgan, Denis Naughten, Dan Neville, Michael Noonan, Caoimhghín Ó Caoláin, Aengus Ó Snodaigh, Kieran O'Donnell, Fergus O'Dowd, Jim O'Keeffe, John O'Mahony, Brian O'Shea, Jan O'Sullivan, Maureen O'Sullivan, Willie Penrose, John Perry, Ruairi Quinn, Pat Rabbitte, James Reilly, Michael Ring, Alan Shatter, Tom Sheahan, P J Sheehan, Seán Sherlock, Róisín Shortall, Emmet Stagg, David Stanton, Billy Timmins, Joanna Tuffy, Mary Upton, Leo Varadkar, Jack Wall)
Tellers: Tá, Deputies John Cregan and John Curran ; Níl, Deputies Paul Kehoe and Emmet Stagg
Question declared carried
8:00 am
Mary Coughlan (Donegal South West, Fianna Fail)
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I move the following Financial Resolutions: