Car dealers claim €200m via tax loophole

THE Revenue Commissioners have discovered a €200 million tax avoidance scheme involving a leading accountancy firm and motor dealers selling 4x4s.

The scheme, criticised by the country’s top revenue official as “repugnant”, relies on a purported ambiguity in the 1992 Finance Act that the accountancy firm promoting it, Deloitte, claims exempts 4x4s from vehicle registration tax (VRT).

Motor dealers involved in the scheme have so far lodged €170m in claims for repayment of VRT but Revenue chairman Frank Daly said more claims were expected.

“It has the potential to deprive the exchequer of €200m. It’s a try-on. It’s repugnant to me. Its intention is to get a windfall benefit for a very small group of motor dealers and the accountancy firm, at the general expense of the exchequer and every other taxpayer in the country.”

While not illegal, Mr Daly said it was “unacceptable behaviour”, which left him very disappointed. “This is a type of behaviour by accountancy firms that makes me wonder how I can be positive about this profession,” he said. “I can assure you we will fight it,” he continued, later adding: “Nobody will get a penny out of this.”

The scheme was revealed when Mr Daly appeared before the Public Accounts Committee yesterday.

He did not name Deloitte, whose consulting arm carries out extensive business for government departments and agencies, but the firm later acknowledged it recently filed repayment claims for “taxes overpaid by motor dealers that resulted from an ambiguity in the VRT legislation”.

It said it filed such claims in the same way it filed claims for clients for overpayment of income tax, VAT, PAYE and corporation tax. “These refund claims are now with Revenue for consideration by them in the normal way,” the statement said.

The claims are based on part of a sentence in the 1992 Finance Act that defines vehicles eligible for VRT as “not including a tramcar or other vehicle running on permanent rails or a vehicle as respects which the commissioners are satisfied that it is designed or constructed for off-road use”.

4x4s were virtually unheard of in Ireland in 1992 and the wording of the law was tightened up last April in the 2007 Finance Act but Mr Daly told the committee he was confident the earlier act was sound. “The reality is that these vehicles would not be entitled to be on the public road in the first place if they were not registered. VRT was built into the price of them.”

VRT adds an extra 30% to the price of an average 4x4. While motor dealers have to pay the tax when importing the vehicles, the cost is added into the retail price, hiking up the bill to the buyer by anything from €7,000 upwards. Even if motor dealers were successful in reclaiming the VRT, buyers would still be out of pocket unless the dealers passed on the refund.

Dozens of motor dealers took up Deloitte’s offer to make claims on their behalf but many others opted out.

“In fairness to motor dealers, there are quite a number who have not signed up to his deal and SIMI (Society of the Irish Motor Industry) refused to get involved,” said Mr Daly.