Job fears as VAT hike to hit sales
Published 24/11/2011 | 06:00
THE 2pc Budget VAT increase -- on top of a hike in road tax -- will have a 'devastating' impact on the motoring business.
Motor industry organisation SIMI fears thousands of jobs could be lost if the VAT hike drives down new-car sales next year.
Its director general, Alan Nolan, said motoring shared the deep concern of other sectors about the impact the increase would have.
He also revealed that the industry already has €500m worth of new cars ordered for the new year.
Of that amount, more than €200m will go to the Exchequer in tax (VRT and VAT) if and when these cars are sold.
But there are fears that the VAT hike will frighten buyers -- especially as sales have fallen since the scrappage scheme ended.
Compared with non-scrappage sales last year, SIMI reckons purchases are down 20pc.
Mr Nolan said that orders for next year had already been taken and deals agreed based on current prices.
"Any increase, particularly in a falling market, at the start of our key peak sales period could be disastrous as we cannot recover from a bad start to the year," he said.
The timing of the VAT increase is such that the potential sale of the ordered cars could be undermined.
If sales were hit, he forecast that there would be "no possibility" of recovery because of the seasonal nature of the business.
A VAT rate increase introduced before the end of March would endanger both the tax take and jobs in the industry, Mr Nolan added.
On that basis, SIMI is appealing to Finance Minister Michael Noonan not to bring in the increase until the end of the first quarter.
But even that would not remove all the potential pitfalls as it would almost certainly herald a severe second-quarter slump in new-car sales.
Such would be the impact of the VAT increase that SIMI fears the overall number of new-car sales in 2012 could dip to 60,000 -- as many as 20,000 down on previous forecasts.
That would represent a plunge of €220m in government revenue and the potential loss of up to 10,000 motor industry jobs.
That number on the dole would, in turn, cost the Exchequer another €200m in unemployment benefits.