Richard O'Donoghue (Limerick County, Independent)
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61. To ask the Minister for Finance the plans, if any, he has regarding the issue of affordability of cars for young families who are dependent on the second-hand car market for transport to schools, third-level institutions and work (details supplied). [10765/23]

Richard O'Donoghue (Limerick County, Independent)
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What plans, if any, does the Minister have with regard to the issue of the affordability of cars for young families who are dependent on the second-hand car market for transport to schools, third-level institutions and work? The latest figures from the Central Statistics Office, CSO, show that 2.2 million licensed cars, 64% of vehicles in the country, are six years old or older.

Michael McGrath (Cork South Central, Fianna Fail)
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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.

Richard O'Donoghue (Limerick County, Independent)
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That speaks to my exact point. Any vehicle that comes in from the UK is subject to VRT and other taxes. Let us look at electric vehicles. The Minister has said that he is not responsible for taxation on second-hand vehicles but he is. If you go to any garage in the UK, you will see four-year-old electric vehicles. There are loads of them in the UK that cannot be sold. Why is that? It is because, after four years, an electric vehicle is no longer under warranty. It also costs €8,000 to replace the battery in an electric vehicle. What has been done? All the vehicles coming in from the UK are diesel or petrol-powered and they come in at an inflated price. People cannot buy second-hand electric vehicles because there is no warranty after four years and it is too expensive to replace the battery. On the other hand, a petrol or diesel-powered car that has done 100,000 km is worth money. An electric vehicle with 100,000 km on it is worth €8,000 less than what you pay for it because the battery cannot be replaced. The Minister is responsible for the tax, the VRT, on second-hand vehicles coming into the country. It should be remembered that 64% of vehicles in this country are six years old or older.

Michael McGrath (Cork South Central, Fianna Fail)
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I absolutely accept that the Government and I are responsible for taxation policy in respect of motor vehicles. While the second-hand market for electric vehicles is in the relatively early stages of development, it is happening and we are seeing more and more second-hand electric vehicles available in the market and being bought. That is why it is so important that we continue with the range of supports we have for new electric vehicles because they will become the second-hand vehicles made available on the market. I do not need to go through all of the different incentives and supports available because the Deputy is familiar with them. We do have a role to play in the development of a second-hand market. The Department of Transport has convened a working group on an electric vehicle policy pathway. Meeting the 2030 targets will be a real challenge. It will require us supporting and facilitating more people purchasing second-hand electric vehicles, which depends on such vehicles being available in the first place.

Richard O'Donoghue (Limerick County, Independent)
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I will go back to my point again. If you buy an electric vehicle at the moment, you are buying at a loss because you cannot change it.

The Government's decision not to proceed with a ban on fossil fuel car sales from 2030 has been criticised by the Irish Electric Vehicle Owners Association. I wonder why that would be. I could not believe the Government was even more zealous than the EU, which stated it could not bring in the ban in 2030 but had to wait until 2035 due to a breach of competition rules. The Government, however, decided to force the sale of fossil fuel vehicles to stop in 2030. The EU has told the Government it cannot do so until 2035 because of competition rules, yet it forcing the ban down the throats of people here who can only barely afford to keep the cars they have on the road.

Michael McGrath (Cork South Central, Fianna Fail)
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There is no escaping the fact that we have to undergo this transition to using more environmentally-friendly vehicles. It is not easy. We recognise the costs involved in the purchase of electric vehicles. That is why we have a range of supports in place. The technology is getting better all the time. Battery life is improving, as is the range of electric vehicles.

The transport sector will have to play its part in reducing emissions. Unfortunately, that means everyone in society must work towards this transition. We recognise that the Government has a leading role to play through taxation policy to try to nudge behaviour in a certain direction. This is dependent on the availability of stock in supply chains. We will play our part to make sure there is an adequate supply in Ireland to help people make the transition which I know most of them want to make.