Phil Hogan (Carlow-Kilkenny, Fine Gael)

The primary purpose of this Bill is to give legislative effect to the increases in motor tax rates and trade plate licences contained in the financial resolution on motor tax passed by the Dáil on budget day, 6 December 2011. The new rates apply to motor tax discs and trade licences taken out for periods beginning on or after 1 January 2012.

The Bill provides for the same increases in motor tax as contained in the financial resolution, namely, an increase of 7.5% applied across most categories of vehicle and to trade licences. As set out in the financial resolution, there was an exception for private vehicles in the lower CO2 bands A - C with the higher flat rate increases as follows: band A rises from €104 to €160; band B rises from €156 to €225; and band C rises from €302 to €330.

While the levels of increase announced for the lower CO2 bands are higher in percentage terms than the rest of the fleet, they must be viewed against a structure that left the bottom rates very low. It is also important to note that the underlying structure of the banding system has not been changed, and there remains a positive incentive to purchase low CO2 cars.

There has been a significant loss of motor tax income in recent years, as the number of vehicles taxed on the basis of CO2 emissions has increased by about 5% year on year. While this is very welcome from an environmental perspective, it has represented an increasing loss to the local government fund. Receipts have been reduced from €1,060 million in 2008 to €1,010 million last year. Once older cars are replaced by cars taxed on the basis of CO2 over the next 15 years or so, it is estimated that total motor tax from cars will fall by more than 40%. In the current economic circumstances, and given the need to maintain a diversified and stable taxation system, this loss of income represents an opportunity cost that must be rectified.

The Bill contains eight sections and a Schedule. Sections 1 and 8 are procedural. Section 2 sets out that the rates apply to licences taken out for periods commencing on or after 1 January 2012. Section 3 provides for the Schedule to the Bill, with the new rates, to replace the existing Schedule in motor tax legislation. Section 4 provides for the increase to apply to vintage or veteran vehicles. It also contains a minor amendment to the definition of "CO2 emissions". Section 5 provides for the increases that apply to trade plates and replacement trade plates. Section 6 provides for the income from the increases in respect of 2012 to be transferred from the local government fund to the Exchequer. This is a once-off necessary measure towards the reduction of the national debt. It is estimated that the income from the increases will be €46.5 million over the course of the year. Section 7 is intended to correct an inequity in the system whereby a specific and very small number of vehicles which were registered outside the State between January and June 2008 and subsequently imported can currently switch back and forth between the two systems of charging - CO2 or engine capacity - depending on whichever of the prevailing rates pertaining to the vehicle is lower. From 1 May 2012, these vehicles will be fixed on the system of charging that carried the lower rates prior to the budgetary increases. The Schedule sets out the new annual motor tax rates for all other vehicles.

Three minor technical amendments are also contained in the Bill. All three relate to changes in definition to ensure uniformity with definitions used for VRT purposes. Section 4 of the Bill contains a minor technical change to the definition of "CO2 emissions". Part 4 of the Schedule provides for an amended definition of "motor caravan". The final amendment relates to the change in classification of passenger vehicles from category A to the EU defined category M1.

To summarise and conclude, this is a short Bill with the purpose of giving permanent legal standing to the increases in motor tax introduced by the Financial Resolution passed by Dáil Éireann on 6 December 2011. I commend the Bill to the House.