Denis Naughten (Roscommon-Galway, Independent)
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112. To ask the Minister for Finance if he will review section 38 of the Finance Act 2018, which removed the VAT on the VRT repayment scheme for the car hire industry; and if he will make a statement on the matter. [54959/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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Vehicle Registration Tax (VRT) was introduced by the Finance Act 1992 with effect from 1 January 1993. Unlike its predecessor – Motor Vehicle Excise Duty, which was charged on the VAT-exclusive value of a vehicle – the new VRT on a passenger car was chargeable on its Open Market Selling Price, which, in effect, is a VAT-inclusive value.

Under the rules for Value-Added Tax (VAT), certain businesses can recover the input VAT on their cars. The introduction of the new VRT in 1993 meant that such businesses would incur VRT on the VAT-inclusive value of cars they acquired, although they were entitled to recover the VAT itself under the VAT code. To mitigate this situation, Section 134(7) of the VRT legislation provided a relief to allow a partial repayment of VRT in relation to passenger cars acquired by vehicle leasing or hiring businesses or for providing driving lessons, which were entitled to a VAT deduction in respect of the cars. At the time of its introduction, the relief provided parity for such businesses with their pre-1993 cost of supplying a passenger car for hire or lease or driving instruction.

However, after 25 years, it was considered that there was no longer a compelling rationale for maintaining parity with the pre-1993 system for a small cohort of businesses who benefitted from the relief. Also, the VRT charging structure and rates had changed considerably over the period; following the introduction of emissions-related VRT rates in 2008, anyone registering a new car could hugely reduce their VRT charge by choosing to purchase a lower-emitting vehicle of the same value.

Therefore, section 38 of the Finance Act 2018 was introduced to amend section 134 of the Finance Act 1992 by ceasing to allow VRT repayments in respect of the VAT element of the charge for any cars registered after 1 January 2019, and by ceasing the repayment altogether from 1 April 2019.

I have no plans to review this provision.