The Motor Industry and the motorist is facing the greatest change in taxation since 2009. The Industry is haunted by the taxation changes in 2009, which undermined both new and used car sales by being too ambitious and seeking to implement change too quickly. Overnight car values plummeted, new car sales declined and the Industry feel off a cliff. That together with a recession resulted in the closure of 150 family businesses, 14,700 job lost and over €1bn in lost revenue for the Exchequer.
The looming Budget 2020 brings a very concerning feeling of Déjà vu. The Society of the Irish Motor Industry (SIMI) continues to highlight the need for extreme caution in dealing with motor related taxation in the upcoming Budget, doubly so now that the Budget almost coincides with the Brexit date.
The Economic Statement issued by the Minister for Finance Paschal Donohoe yesterday outlined budgetary policy is not a one size fits all, and highlighted the huge difficulty in framing a Budget for next year.
“In this already fragile business environment for car retailers, it is vital that Budget 2020 recognises the importance of new cars; to the economy, in terms of local employment and in terms of tax revenues; and to the environment as the renewal of the Irish car fleet with new vehicles, is the only way to make a material and sustainable move to reducing emissions from the private car. Our Industry is very concerned and angry at the possibility of sleepwalking into another potential 2009.
The State must stop overburdening new cleaner cars with tax, while at the same time ignoring the problem of replacing older cars, which is where the real emissions problems lie. In fact, it’s even worse, the VRT system discriminates against new cars when compared to older used imports. It would appear from various publications that the new car is being lined up as the easy target as if new cars are the main issue. Newer cars have the most up-to-date emission technologies and are less environmentally damaging than older used cars. Uncertainty in the market leads to consumers holding onto their older car or importing an older car that is perceived to be good value.
With the full move to WLTP emissions testing on the horizon, Budget 2020 must make allowance for the difference between the new and old emission testing systems. Most other EU countries have followed the EU Commission view that consumers should not be faced with increased taxation due to the new emissions testing regime. Ireland should be no different. We should be selling 150,000 new cars each year, but with threats of Brexit this number has already fallen to 112,000. If a VRT increase is thrown into the mix for 2020, we will see a further fall; history, in particular 2009 tells us what can happen.
Last week the Government’s Climate Action Plan proposed a transition to zero emission transport, which the Industry fully supports and is proactively engaged in rolling out cleaner technologies. However, it is important to note that this transition is not deliverable in the short-term, as it will take a number of years to achieve, longer than is proposed in the Plan. We require the right measures that focus on gradual change and include sensible policies aimed at encouraging motorist to make the right choices that can lead to clean, affordable and convenient mobility solutions. This can only be achieved by allowing the new car market to flourish in 2020, which has clear environmental and economic benefits.
So let’s not make the mistakes of the past. Progressive changes to VRT should be focused at replacing older cars with new ones. This is the only way to start the transition to a low and ultimately zero-emission free fleet. In that way we will all win, the consumer, the Industry, the Environment, protecting the 47,000 jobs and businesses in our communities.”