DESPITE pointed encouragement from the European Commission to shop around to find cheaper cars in other EU countries, Irish mo- torists can only watch with envy as bargains are snapped up by car buyers across the conti- nent which do not charge Vehicle Registration Tax (VRT).
The very latest European Commission report on the variance in new car prices across the 25 member states of the Union has found that substantial savings can be made by shopping abroad for new cars.
Savings of almost 30 per cent can be made by buying a car in a country which charges its residents VRT and exporting it to one that does not. This has come about because some car- makers are still effectively subsidising prices in countries with high VRT, such as Denmark and Finland.
Ireland, which also suffers from an escalated VRT rate, has seen its subsidies eroded since the latest motor industry EU competition rules which came into force in 2002. This has effec- tively meant that the EU’s goal of seeing car prices reduced in the Republic has not been achieved.
Countries like Denmark and Finland still en- joy significantly lower pre-tax prices on their new cars. But because these countries charge the highest levels of VRT, their residents do not Tey ated Om
Motorists from other member states can sim- ply purchase their new car in Denmark or Fin- land and export them back to their country of residence. This way they benefit from the lower pre-tax cost of the cars there. It’s a practice which is actually encouraged by the European Commission.
The Irish motorist who attempts this, howev- er, will see any potential savings wiped out by the Revenue Commissioners when they come to register the car here and are presented with a bloated VRT bill.
Regardless of EU calls for alterations to this
policy, the Department of Finance, which is responsible for the levy has confirmed that, for the moment, it is not considering scrapping VRT.
It’s understandable why the Irish Goverment would resist such a change. VRT yielded close to a whopping €900 million (an increase of €114 million on 2003) for the exchequer dur- ing the last calendar year alone. Considering that figure it is likely that Ireland will oppose any re-draft proposals for the immediate fu- ture.
16 of the European Union’s 25 member states levy a similar registration tax, while nine coun- tries have no such registration tax.
For Irish motorists the EU proposals could bring an end to many of the motor taxation anomalies faced here, such as the double-taxa- tion penalty faced when Irish residents import a used car from another member state.
EU tax commissioner Laszlo Kovacs hopes to prevent governments from charging a Ve- hicle Registration Tax on imported vehicles which have already been registered in another EU country. Kovacs also plans that within a decade the 16 EU countries, including Ireland, which now apply VRT, will replace it with an emissions-based tax.
Kovacs will now undoubtedly face staunch resistance from the Irish Government, which has resolutely and consistently refused to en- tertain any ideas of scrapping VRT.
The Department of Finance explain that VRT provides significant revenue to the economy which is used to fund vital public projects and services. The Department is concerned that if this registration tax was removed, it would then be necessary to locate these same funds by other means. For example, it could mean a 2 per cent increase in the standard rate of income tax to balance the books.
With the Government determined not to in- crease personal tax levels, Kovacs will have to endure an uphill struggle for implementation in Ireland.
Such developments will disappoint the Irish
motor industry, which has long campaigned for this tax to be abolished.
Under Kovacs’ proposals, VRT could be scrapped by 2015.
Across the EU at present vast differences ex- ist in the sums which can be paid to register a vehicle. It’s these differences which Kovacs hopes to wipe out within a decade. For exam- ple, Britain charge a minimal fixed sum, while Ireland charges a hefty percentage of the VAT- inclusive open market price of a vehicle.
Kovacs’ proposal however, if it is to suc- ceed, requires the approval of countries such as Ireland. Nevertheless, the tax commissioner remains hopeful that his plan to scrap VRT and link a replacement levy to either fuel or emis- sions will go ahead.
For years resourceful Irish motorists have tried to take advantage of Sterling currency fluctuations and land a bargain in the second hand car market in Northern Ireland.
Of course, once the vehicle is brought into the Republic the new owner is legally required to re-register the vehicle.
Under current legislation, imported cars must be taken to a vehicle registration office not later than the next working day after their arrival.
They are then assessed and the owner in- structed how much VRT is due. After paying the VRT, a receipt is issued which shows the Irish registration number assigned to the car.
The new registration plates must then be fit- ted to the car within three days.
Failure to follow this strict timescale can lead to the imported vehicle being impounded and the owners lable for substantial financial pen- alties.
It goes without saying that motorists, consid- ering the VRT cost involved, take their chances and attempt to use vehicles with British plates in Ireland.
Custom and Excise officials began a clamp- down in January on motorists driving foreign registered cars.
Customs and Excise officials have taken pos- session of millions of Euro worth of cars as
part of this major Revenue operation against motorists trying to evade VRT.
Penalties are directly linked to the length of time it takes a motorist to register an imported vehicle. For example, if a car is not registered within 30 days of arrival, a penalty of 10 per cent of its open market value is due in addi- tion to the VRT and VAT. This can amount to a significant sum.
Nevertheless, an increasing number of mo- torists are looking outside the state for second- hand bargains. In fact, so many used cars have been brought into the Republic during the first eight months of 2005, that they now account for one in every eight vehicles registered.
Despite this increase in the number of used vehicles being brought into the state the figure is still a long way off the levels experienced in the mid-1990s. In 1996 for example a massive 57,000 used vehicles were imported, almost one in three vehicles registered at the time.
The reasons behind the current rise are var- ied. High registration taxes are of course to blame, while manufacturers are also often forced to take items such as satellite navigation from the standard specification list and move them to the options list in order to keep Irish showroom prices down.
In Britain this does not occur and showrooms can afford to stock higher specification vehi- cles which then find their way into the second hand market.
Irish motorists can then take advantage by buying vehicles in Northern Ireland, and since the Euro is performing strongly they can then make significant savings even after they pay VRT here in the Republic.
The table of information below illustrates current second hand market trends in Northern Ireland and the Republic.
Three prestige vehicles are compared in terms of an average second hand market price, the cost involved in registering the car here and finally the potential savings a motorist could make.