Lenihan to press for scrap deal on old cars
Wednesday April 01 2009
MOTORISTS face a Budget boost which would make it cheaper to buy a new car and get rid of their old bangers.
In what would be a massive shot in the arm for the ailing motor industry, which employs 45,000, Finance Minister Brian Lenihan has put a car scrappage scheme before his colleagues for the emergency Budget.
However, it’s not yet clear if the Government will proceed with the plan as there are doubts over its potential impact and the cost to the exchequer.
Taoiseach Brian Cowen yesterday reiterated that the tax take will be €3bn lower than was thought in January and the trend of a decline in taxes has continued in March. The industry wants a scrappage scheme introduced to encourage owners of old cars to get a cash sum of €2,000 for scrapping an old car, and possibly an emissionslinked VRT reduction.
More than 3,000 jobs were lost in the last three months of 2008 and around one car dealer is closing each week.
New figures to be published later today will show that the 66pc plunge in sales during January and February continued in March. The motor industry claims a scrappage scheme would cost the Government nothing and could generate added revenues for the State in additional VRT and VAT.
The previous scrappage scheme was introduced in 1995 and ran to 1997. It created increased tax revenue from new cars and had environmental benefits through the introduction of safer vehicles with lower CO2 emissions. Yet there are concerns in Government that such a scheme won’t have the desired effect this time and nothing has been finalised.
Politically, giving a tax incentive to buy a car, at a time when taxes are being increased, is believed to be difficult. The scheme was due to be announced a month ago, but then the need for an emergency Budget meant it was kicked into touch, according to Government sources.
“They weren’t convinced it would have an effect.
“The amount of sales to break even would be an awful lot,” a source said.
The Green Party isn’t keen on the measure either, as its preference is to give any available money and incentives to public transport. But the scheme would be limited to fuel efficient and environmentally friendly as models, so the junior coalition partners are not the obstacle.
Owners of cars over 10 years old would be entitled to avail of the scheme, thereby reducing the carbon emissions. Mr Lenihan’s officials are not that keen on the plan.
“Finance are wary of it. You could end up losing money at a time when you’re trying to bring in extra taxes. If there’s an enemy in this, it’s the Department of Finance,” another source said.
Car sales for March will be in line with the previous months of this year, which are two thirds down. If the downward trend in car sales continues – and the majority of sales come in the first quarter – the number of new purchases could end up below 50,000, down from the 156,000 sold last year.
But more significantly, it would represent a plunge of VRT and VAT receipts from €1.5bn last year to €500m this year.
Car dealers reckon a scrappage scheme would boost sales to 60,000 or 65,000 cars.
The number of old cars replaced by new in 2007 represented 10pc of the market, but this year it will be just 2pc. EU countries like France, Spain and Germany have already introduced car scrappage schemes for older cars.
Lobbied
The Society of the Irish Motor Industry has lobbied Mr Lenihan heavily, seeking an impetus for their industry.
In the first two months of the year, there were just 24,835 new-car sales, compared with 71,569 in the same period last year.
The sales of commercial vehicles also plummeted by nearly 85pc.
Also in the emergency budget, public servants face being taxed on the lump sum they receive when they retire, in a shock move for workers rocked by the pensions levy.
Civil servants and gardai, teachers, nurses and others, currently get a gratuity of oneand- a-half times their salary when they retire after full pensionable service.
