Nicky McFadden (Fine Gael)

I welcome the Minister of State, Deputy Mansergh. I ask the Minister for Finance to introduce the VAT margin scheme that operates in the rest of Europe for Irish car dealerships. New car sales for 2009 have fallen by 63% when compared to sales in January 2008 and the motor industry is losing jobs rapidly. Dealerships are closing by the week and I am aware of one that closed recently with debts amounting to €26 million. Moreover, such dealerships had been obliged to invest heavily in their premises to retain their dealerships. Prices of new cars have plummeted in recent months as dealers increasingly come under pressure to maintain their businesses. There are a number of reasons for prices to be at such a level. One is that they are not helped by the number of non-Irish registered cars in this State. I ask the Minister of State to discuss with the Minister for Justice, Equality and Law Reform ways in which the law might be upheld in respect of those people who are breaking the law. There should be Garda checkpoints etc. to prevent such people from riding roughshod over the law by driving unregistered cars in this State.

While this problem exists beyond Ireland and the industry is in trouble globally, a competitive market is needed. Competition is not all one-sided and Ireland cannot expect simultaneously to raise the level of VAT and incentivise the car industry. I believe the Government's increase in the VAT rate is killing the market. This morning, the Tánaiste stated on the radio that it is only, I emphasise the word, "only", an increase of one half of one percent. That certainly personified the measure of proficiency and adeptness she brings to her portfolio. While I hate to be so critical, the Tánaiste appears to have failed to grasp that so much of Ireland's business depends on the global market and that in particular, the policies and practices initiated by our closest neighbours in Britain seriously affect us. Consequently, it is Britain's reduction in its VAT rate from 17.5% to 15% and Ireland's increase in the rate of VAT that is causing much of the problem for our small and medium sized businesses. As for the car industry, Ireland's VAT rate is 21.5%. The reason this has not yet dawned on the Tánaiste is unfathomable.

There are other contributing factors, such as the weakening of sterling against the euro. People have realised it is cheaper and better value to buy the equivalent in Northern Ireland or in Britain. It is incumbent on the Government to find ways to encourage competitiveness. However, less is being said in respect of the car industry and just as much damage is being done. By saying nothing, it simply is being left almost to fester. It has been paralysed and while I do not wish to talk down the industry, I merely am being truthful. Were logic and common sense to dictate, in the absence of something being done, the car industry would be shattered. Moreover, jobs must be saved now. Consumers also must be able to realise they can get value for money if they buy in the Republic. As I noted, car prices must be adjusted in line with our neighbours. There is no alternative if we wish to be competitive. Consequently, we must create the correct economic conditions for this to be viable and which balances competitiveness for consumers and profits for retailers in the car industry. The focus must be on maintaining current jobs and looking to the future for new ways of creating employment.

A major problem car dealers are experiencing and on which I particularly wish to focus pertains to VRT. Members are aware that significant changes in this regard were introduced in July 2008. Dealers had purchased and had received their orders for huge numbers of cars but car sales have fallen and consequently, dealers are being forced to cut prices. However, the biggest sin is that dealers are obliged to pay VAT on their losses. My request to the Minister of State is that they simply should be obliged to pay VAT on their profits. This is a highly reasonable request. After all, were increased numbers of people in the car industry to lose their jobs, which is happening, we would be obliged to provide social welfare payments for them, which in the long term will cost a great deal more. Consequently, the focus of my motion is to ensure car dealers only pay VAT on their profits.