Pat Gallagher (Donegal South West, Fianna Fail)

The origins of this Bill were established with the passing in the Dáil on 12 December last of a financial resolution which essentially amended the Finance (Excise Duties) (Vehicles) Act 1952 and the Finance (No. 2) Act 1992 in respect of rates of motor taxation and trade plate licences. However, the resolution has only a limited life and to continue its effect, it needs to be replaced by a Bill which provides a permanent legal base.

The primary purpose of the Bill is to give that permanent legislative basis to the new motor tax rates set out in the resolution. These rates apply to tax discs taken out for periods commencing on and after 1 January 2003. A standard, across the board increase of 12% is provided. The Bill also contains two technical amendments to motor tax law and an enabling power to the Minister to facilitate the processing of on-line motor tax applications. The technical changes relate to extending the national vehicle file records to include vehicles prior to first taxing or vehicles never taxed and to remove an Irish punt amount, the euro equivalent of which is already in place.

Why is the Government proposing to increase motor tax? To set a context for our discussion, it is important to make it clear that motor tax is not paid into the Exchequer. In this regard, it is very different from other taxes. Motor tax is paid directly into the local government fund established under the Local Government Act of 1998. All the money in the fund is ring-fenced specifically for local government. This means it can only be spent on local government and cannot be dipped into and used by the Exchequer for any other purposes. To underline the independence of the fund from the Exchequer, we maintain its account in a local bank close to the Custom House. In addition to motor taxation, the fund is augmented by an annual contribution from the Exchequer.

The fund is used primarily for two purposes – to enhance non-national road grants to local authorities and to finance the general purpose block grants allocated to authorities each year to assist them in their day-to-day current expenditure. With the increases in motor tax provided for in this Bill, we have been able to increase the amounts available in general purpose grants to local authorities in 2003 and maintain the provision for the non-national roads at the record levels set in 2002.