MOTORING organisations have given a mixed reaction to yesterday’s Budget as drivers face increases in the cost of motor insurance and diesel but not petrol, while car dealers were also granted some VAT relief on the sale of second-hand cars.
However, they also expressed disappointment that the Government had failed to support their demand for a new scrappage scheme to assist a sector that has seen a 65% reduction in new car sales this year.
The Society of the Irish Motor Industry (SIMI) voiced regret that a major opportunity to generate extra revenue for the state and stall large-scale job losses in the industry had been missed.
Energy Minister Eamon Ryan admitted last night that the two Green Party ministers in the Cabinet had opposed the introduction of a new scrappage scheme.
Meanwhile, Finance Minister Brian Lenihan announced an immediate 5c increase in the price of a litre of diesel, which will raise an additional e70 million in excise duties this year and an extra e100m in a full year.
However, Mr Lenihan said there was no scope to raise excise duties on petrol because of the substantial risk of a loss of revenue through motorists travelling to Northern Ireland to buy fuel.
An immediate increase in the government levy on motor insurance policies as well as other forms of non-life insurance from 2% to 3% will also raise motoring costs for all road users.
Mr Lenihan said he would introduce a new VAT margin scheme, which will allow car dealers some tax relief arising out of trading in second-hand cars. Details of the measure, which will cost the Exchequer an estimated e20m, will be contained in the Finance Bill.
The SIMI had called for such a scheme to reduce the anomaly whereby the motor trade was the only industry required to pay VAT on losses that were increasing across the industry due to falling values of second-hand cars.
SIMI director general, Alan Nolan, said dealers would welcome the scheme if it addressed the problem of clawback VAT on losses.
However, Mr Nolan said the Government’s failure to introduce a scrappage scheme would result in significant job losses as well as lost revenues of e100m for the state.
Mr Nolan said none of the benefits meant to have derived from the change in the motor tax system from one based on engine size to CO2 emissions had been realised because older cars were not being replaced at a sustainable rate.
Reacting to the Budget, AA Ireland said the increases in insurance and diesel were disappointing but overall it “could have been worse”.
AA spokesperson, Conor Faughnan, said the increase in diesel prices would affect 17% of drivers but would hit commercial road users particularly hard. Rising fuel prices affected every household either directly or indirectly, he warned, as they added to the cost of every product and service.
He estimated that the average car driver with a diesel vehicle would pay an extra e90 per annum in fuel bills as a result of the latest increase.
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