Gerry Horkan (Fianna Fail) | Oireachtas source

I move recommendation No. 11:

11. In page 134, between lines 15 and 16, to insert the following:

“Report on impact of ending VAT rebate on VRT

42. The Minister shall within three months of the passing of this Act, prepare and lay before the Oireachtas a report assessing the economic impact of ending the VAT rebate on VRT in section 38 on the car rental sector.”.

People who are not in the car rental sector may not be aware that the rebate was originally temporary. It has been in place since 1993 and I do not know if the Minister had to read up on the legislation from 1993 when he addressed the issue. There is an impact from the measure on the car rental sector, however, and most Members will have been alerted to it. When it came in, it was a rebate for car rentals in the vehicle sector, and for training schools, with the VRT charge for new cars being given back by way of a VAT refund.

The car rental sector is seasonal in nature. In the summer months, companies buy new cars but they sell them to dealers at the end of the summer, with the VRT refund mechanism helping that model. As a result, the number of cars that could be made available to the tourist market was much greater. The Finance Bill will end that refund. This was done without any consultation and was not even mentioned on budget day or in the budget documents. It may have been temporary in the beginning but 25 years is a long time for a temporary measure. Senator O'Reilly will remember a temporary student centre in UCD, which was there for 40 years before a permanent one was built. Temporary can mean different things to different people.

Abolishing the refund will bring in approximately €20 million in additional revenue, depending on the no-behavioural change scenario, but it will mean negative changes for the tourism sector. The constant car rental fleet will get older as companies will not want to buy the new cars because of the VRT. More important, the cost of the seasonal fleet will increase substantially. The cost to the tourist will be more than €5 per day and up to €23, depending on the car. It will make the industry less competitive, particularly for North American tourists who may want to go to areas where they need a car. These areas are probably the most vulnerable to a downturn in tourism. The Wild Atlantic Way has been a great success but one could not travel along it on public transport. A ten-day trip could cost €230 extra, depending on the vehicle. Companies could offer a smaller car model but overall it could damage tourism.

The industry has been in touch with me as I am sure it has been in touch with all Members. We have had representations from both Dublin Airport and Shannon Airport. The expertise these airports have in the tourism sector should not be ignored and Dublin Airport is a fantastic success, processing more than 31 million passengers this year. I take on board what the Minister says about the measure contributing additional revenue but it may not do so if the sector contracts. We might make more on car rental but if the tourists do not come because the product has become too expensive, we may be worse off overall. Tourism is going well but the VAT rate will increase from 9% to 13.5%. We need to be cognisant of the impact and this recommendation calls on the Minister to lay before the Houses an assessment of the economic impact of ending the rebate. Tourism is the reason for most of the car rental sector in any event.