Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

This recommendation seeks a report on the economic impact of section 38, which discontinues a provision in the 1992 Act whereby a partial repayment of vehicle registration tax is available to vehicle leasing businesses, hiring businesses or school of motoring businesses. This measure is part of an ongoing process where the Department reviews reliefs that have been in place for a long time. The repayment is a legacy from 1993 when vehicle excise duty was replaced by the VRT.It was introduced to ease the transition for car leasing and hire companies by ensuring their costs did not increase under the new VRT regime. However, at the time of its introduction a date was not given for its removal.

Since the introduction of the CO2-based charging model in 2008, the average VRT rate has fallen consistently, which has resulted in the vehicle leasing and hire sector benefitting from significantly lower VRT charges. The average VRT rate is now approximately 17% whereas the old motor vehicle excise duty was, at a minimum, 25.75%. Additionally, since the introduction of the export repayment scheme in 2013, car leasing and hire companies can and do receive VRT refunds when exporting a qualifying vehicle.

It is prudent to discontinue this repayment on the grounds that the original rationale for the scheme has passed and that the current application of the repayment scheme bears no relation to its original purpose. It was a transitional arrangement that has remained in place for 25 years and can no longer be justified as a tax expenditure which is not available to other sectors.

The Minister said on Committee Stage in the Dáil that an economic assessment had not been carried out on this issue because it is preferable to invest scarce resources in carrying out appraisals where much larger decisions, such as the VAT rate applied to the tourism sector, are involved. I cannot, therefore, accept the recommendation.