Michael McGrath (Cork South Central, Fianna Fail)
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Question 150: To ask the Minister for Finance his views on the proposals made by the Society of the Irish Motor Industry to support the industry at the present time, with particular regard to the VAT issues raised and the introduction of a scrappage scheme in view of the importance of the motor industry to the Irish economy. [24944/09]

Denis Naughten (Roscommon-South Leitrim, Fine Gael)
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Question 162: To ask the Minister for Finance his views on the impact of the VAT clawback on the motor trade; and if he will make a statement on the matter. [25211/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I propose to take Questions Nos. 150 and 162 together.

As the Deputies will be aware the Supplementary Budget announced the introduction of a Margin Scheme for second-hand cars, with effect from 1 July 2009. Under the scheme, dealers would be taxed for VAT purposes on their margin (i.e. the difference between the prices at which the dealer purchased and subsequently resold a vehicle) in regard to second-hand cars they acquired and resold after that date. In conjunction with the introduction of the Margin Scheme, special transitional arrangements were to be put in place regarding second-hand cars in stock on the introduction of the Scheme.

The Margin Scheme would have replaced the existing Special Scheme for second-hand cars, under which dealers/garages are entitled to immediate input credit for the residual VAT included in the price of a second-hand car acquired either through purchase or trade-in. Under the Special Scheme, dealers, when they resell the car, are required to repay this VAT input credit or VAT based on the resale price of the car, whichever is the greater.

Further discussions on the matter took place with SIMI and the motor industry decided, on balance, that it would not be in its overall best interest for the Margin Scheme to be introduced at that time. Consequently, the proposed Margin Scheme and transitional arrangements regarding existing stock of second-hand cars was not introduced in the 2009 Finance Act. There will be ongoing dialogue over the coming months with SIMI as to what measures might be introduced to assist the motor industry, particularly with regard to reducing the stock of second-hand cars held by dealers. I have no plans to introduce a car scrappage scheme.