Written answers

Wednesday, 11 January 2012

8:00 pm

Photo of Billy TimminsBilly Timmins (Wicklow, Fine Gael)
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Question 58: To ask the Minister for Finance if he will give consideration to the abolition of road tax and replace it with a [i]quid pro quo[/i] tax on fuel in view of the fact that this would cut the cost of administration of the current system, would require no policing and would ensure that the user pays principle would be implemented as all road users would have to pay a cost based on their road usage; and if he will make a statement on the matter. [1276/12]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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I do not intend to seek to replace the current system of motor tax with additional taxation on motor fuel.

Motor tax receipts for 2011 were in the order of €1bn. Maintenance of the tax base would require an increase in fuel excise rates of more than 20 cent per litre, with direct negative impacts on the rate of inflation and economic competitiveness. Goods vehicles and other high usage and high mileage vehicles, such as public service vehicles and buses, would have higher costs under a pay-as-you-drive system. There would be other distributional effects on, among others, those with longer distances to commute.

A significant increase in fuel duty would lead to an increase in cross-Border fuel purchasing, further depressing the tax base and requiring a compensatory adjustment to make up the shortfall. The potential for an increase in fuel laundering is also clear.

The benefits identified by the Deputy would have to be weighed against these issues, and many others, before the change proposed could be contemplated.

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