Finian McGrath (Dublin North Central, Independent)
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Question 247: To ask the Minister for Finance his views regarding the European Commission proposal of a Directive presented on 5 July 2005 that would require Member States to re-structure their passenger car VRT system. [37806/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The European Commission published a proposal for a directive in relation to car taxes in July 2005 which supports the gradual abolition of registration taxes which it believes are impacting on the functioning of the internal market. However, the aim of the proposal is that such registration taxes would be replaced by circulation taxes which would have a CO2 element.

At EU Council discussions, Ireland has pointed out that we regard VRT as a national tax that falls within the national competence — a position shared by several other Member States. Our view is that the mix of taxes, their levels and rates are matters for EU Member States based on legitimate choices.

Motor vehicle taxes have been a traditional source of revenue in Ireland for decades and provide significant revenue to the Exchequer which is used to fund vital public services. For example, VRT yielded approximately €1.15 billion or 2.9% of total net tax receipts for 2005. As regards the balance of taxation, Ireland has prioritised tax reductions on income earned by employees, in preference to other tax areas, and this policy has helped create record employment levels.

While we are open to considering environmental based measures, we again see this as an area for Member States to decide themselves. The Deputy will be aware that I provided in Finance Act 2006 for a significant excise relief scheme for Biofuels which we hope will yield significant benefits with respect to reduced emissions. Further initiatives will, of course, continue to be examined.