Irish Motorists Hit Out At Car Tax 'Cartel'

by Jason Gorringe, Tax-News.com, London

07 February 2002

Calls have increased for the Irish government to scrap the controversial Vehicle Registration Tax (VRT), as the European Union plans a massive shake-up of its car sales and distribution system.

VRT was introduced as a replacement for excise duty in 1993, and adds thousands of pounds to the low pretax prices of cars in Ireland. The government won a special derogation to impose it, and thanks to several increases over the years it has become a major revenue earner, although many experts believe that it is responsible for the relatively low level of car usage in the country.

Speaking about his plans to liberalise car sales throughout the European Union on Tuesday, Competition Commissioner Mario Monti pledged to harmonize pre-tax car prices throughout the EU, and predicted massive changes in the way that cars are sold. He also revealed that the Irish VRT would come under intense scrutiny as the real prices of cars and the true level of taxation is revealed by the levelling of the pre-tax prices.

The government has been roundly condemned over the tax, with opposition party Fine Gael promising changes as part of its tax policy for the next election. Transport Spokesman for the party, Jim Higgins, commented earlier this week that there is little point in the European Union liberalising the car sales system if any advantages for Irish consumers are immediately cancelled out by the punitive VRT levels.

Public Affairs Manager for the Automobile Association, Conor Faughnan, also hit out at the tax, claiming that a monopolistic 'cartel' is operating in the country at the moment: 'But it is not being operated by the car manufacturers, it is being operated by the government'.

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