VRT - better than the alternative?

Spit62500

Maybe someone can explain this to me because I seem to be missing something.....

If VRT was to be abolished, the price of new cars would drop. Probably not as much as the VRT amount as pre tax prices are among the lowest in Europe and they'd probably rise a bit as manufacturers 'normalise' their margins.

Problem is that the price of secondhand cars would also drop by more or less the same amount. As most of us already have a car, what concerns us most is the cost to change, not the list price of the new car.

So, if the cost to change remains more or less the same when VRT goes, then where is the benefit to the average motorist? The loss of VRT revenue wil have to be made up from somewhere. The SIMI is campaigning for replacement of VRT with a useage tax and if the above is true then it'd result in us paying the same to change our cars and paying an additional tax. VRT is extremely lucrative for the government and that revenue isn't going to just disappear.

So what am I missing?

(The above assumes that not everyone wants to sell their car privately and import a new one from another country...)

Seth Brundle

If VRT was to go then it would need to be phased out.
It should however, go because of the following:
* its against the spirit of the EU - Irish consumers cannot travel across borders and buy a car without difficulty
* it results in lower spec cars on the Irish market (often affecting safety features e.g. with the golf)

I do think you are confusing the replacement tax with a replacment for the annual motor tax. VRT should be gone and not replaced with any other form of direct motor tax. Annual tax should be consumption based using the polluter pays principle.

As for the drop in values, if it was phased in (over say 5 years) then IMO it would not severly affect the market. However, even if VRT was dropped overnight, the value of everyone's asset will have gone down - new and used!

Mc-BigE

I do see the OP's point, but VRT shouldn't be there in the first place, its pi$$es in the face of the Irish car buyer and its anti open market.

But if the government are going to get rid of it, it will have to be done overnight with no warning, I suspect on the "recommendation" of the motor trade.
Because there will be panic selling of second hand cars and no new cars would be sold.

So, beat the rush now! Sell you car privately now and get public transport/taxi.:D
(A bit like the property bubble we have here at the moment!)

It will be worth it in the end:D

After all the government have enough money and won't miss the VRT:D

Yah right!


Bottom line. VRT is here to stay....no government new or old is going to get rid of it. Its easy money.

smcgiff

Spit62500 wrote:

Problem is that the price of secondhand cars would also drop by more or less the same amount.

This would be good for the purchasers of second hand cars. It would also be a once off hit to current owners, and every car in the future you buy would be cheaper. Short term pain long term gain.

Spit62500 wrote:

So, if the cost to change remains more or less the same when VRT goes, then where is the benefit to the average motorist?

How would it remain the same (and you're contradicting your opening argument) - In the UK the cost of a higher spec car is far cheaper than in Ireland - and the UK would not be considered the cheapest place in Europe.

Basically we pay for a lower spec 2 year old car what continentals pay for a brand new, safer car. And as for prices in the US of A :rolleyes:

Now, you do have a point in that the government raises a lot of money from VRT, but should the government raise money to build hospitals etc based on the Revenue from car sales? Maybe, I don't know.

Anan1

smcgiff wrote:

Now, you do have a point in that the government raises a lot of money from VRT, but should the government raise money to build hospitals etc based on the Revenue from car sales? Maybe, I don't know.

I'd say yes.

smcgiff

Anan1 wrote:

I'd say yes.

Why from Car sales? Why not from a higher rate of CGT? Why not a higher tax rate for Income tax or less wide tax bands. Heck, why not try something as wild as effective use of resources. Why hit cars exactly?:(

Tipsy Mac

Spit62500 wrote:

Problem is that the price of secondhand cars would also drop by more or less the same amount. As most of us already have a car, what concerns us most is the cost to change, not the list price of the new car.

Unless you plan on retiring from driving or buying a car worth about half the price of the one you are trading in it will make no difference as the next car you are buring will be 20-30% cheaper.

SIMI love VRT and have made no attempt whatsover at EU level to have it removed, it suits them as it acts as an import control restricting consumer choice in importing cars from outside Ireland, this increases sales within their own market as most people think importing will be too much hassle.

As regards where does the money come from to replace it, who cares not for us to decide. The Mafia are not offered grants to make up for shortfalls when their practices are found to be illegal. The fairest system would be to lob extra tax onto petrol and also abolish road tax, that way the polluter and use is taxed and not the original purchase of the car.

galwaytt

smcgiff wrote:

Why from Car sales? Why not from a higher rate of CGT? Why not a higher tax rate for Income tax or less wide tax bands. Heck, why not try something as wild as effective use of resources. Why hit cars exactly?:(

...becuase they can. It's that simple.

This discussion document the Govt has on the subject, and which they're open to submissions on, makes it very clear - the replacement will be 'revenue neutral'.

IOW - same pain, different mechanism, so is it worth getting wound up about it?.........

Anan1

smcgiff wrote:

Why from Car sales? Why not from a higher rate of CGT? Why not a higher tax rate for Income tax or less wide tax bands. Heck, why not try something as wild as effective use of resources. Why hit cars exactly?:(

Because the above mentioned are taxes on productivity, which is to be encouraged. I can think of no good reason to reduce VRT in an environment where so much is being spent on new cars anyway.

galwaytt

Anan- I can.

Taxation should be based on consumption, not ownership. The current system is a disincentive to non-car use, in fact, it promotes car use. If you'd hoiked up 10k VRT and a big annual tax bill, you'd use the car at every opportunity.

If, on the other hand, tax was based on your usage, you'd only use it when you really wanted/needed to, and consider alternatives the rest of the time.

So, gentlemen - start your engines...........and carry on!!

Anan1

galwaytt wrote:

Anan- I can.

Taxation should be based on consumption, not ownership. The current system is a disincentive to non-car use, in fact, it promotes car use. If you'd hoiked up 10k VRT and a big annual tax bill, you'd use the car at every opportunity.

If, on the other hand, tax was based on your usage, you'd only use it when you really wanted/needed to, and consider alternatives the rest of the time.

You're completely right, which is why I am also in favour of higher taxes on usage. Taxes on usage should however be in addition to, rather than instead of, taxes on ownership.

Spit62500

smcgiff wrote:

How would it remain the same (and you're contradicting your opening argument) - In the UK the cost of a higher spec car is far cheaper than in Ireland - and the UK would not be considered the cheapest place in Europe.

What I meant was that the drop in price of a new car will be matched, approximately, by the value of secondhand cars. The cost to change will remain in and around the same and the government will have a large hole in their revenues that needs filling. If a useage-based tax in introduced then it'll be an extra tax on the motorist with no benefit from the removal of VRT.

The assumption from a lot of the above posts seems to be that there will be no additional cost. I'm not convinced that this'll be the case.

smcgiff

Spit62500 wrote:

What I meant was that the drop in price of a new car will be matched, approximately, by the value of secondhand cars. The cost to change will remain in and around the same and the government will have a large hole in their revenues that needs filling. If a useage-based tax in introduced then it'll be an extra tax on the motorist with no benefit from the removal of VRT.

The assumption from a lot of the above posts seems to be that there will be no additional cost. I'm not convinced that this'll be the case.

The drop in the cost of second hand cars will be a once off hit and this once off drop would be proportionate, so even this hit will not be as big as gain from initial drop in VRT.

The same could be said about any drop in taxes. If there's not a surplus it has to be made up elsewhere. Besides, as has been pointed out above, it'd make much more sense to charge for use i.e. through petrol costs.

However, we (as voters) shouldn't be thinking, 'oh, if the governement lose revenue they'll have to pick it up elsewhere' - We should be demanding better use of resources.

galwaytt

Anan1 wrote:

You're completely right, which is why I am also in favour of higher taxes on usage. Taxes on usage should however be in addition to, rather than instead of, taxes on ownership.

Why on earth should there be both ? There is no justification for double taxation - we already have that in healthcare - your PRSI, and VHI. Anyone who thinks otherwise is only codding themselves.........

If you double tax it, you will lose. People will either won't buy, buy older, import older, or go without - remember the '80's?? Ever since personal direct taxes were lowered, has Revenue's income increased. VRT - or whatever - will be likewise.

Anyone for a bus tour to Latvia to buy a rake of A4 Tdi's?? You just watch..........if you can't beat 'em, join 'em........

Anan1

galwaytt wrote:

Why on earth should there be both ? There is no justification for double taxation - we already have that in healthcare - your PRSI, and VHI. Anyone who thinks otherwise is only codding themselves......

Of course, we have double taxation in many areas. Why shouldn't we?

galwaytt wrote:

If you double tax it, you will lose. People will either won't buy, buy older, import older, or go without - remember the '80's?? Ever since personal direct taxes were lowered, has Revenue's income increased. VRT - or whatever - will be likewise.

The reality is that new cars are walking out of the showrooms at the moment.

Don't get me wrong, I love cars. I just can't see the case for lowering taxation on them.

Spit62500

galwaytt wrote:

If you double tax it, you will lose. People will either won't buy, buy older, import older, or go without - remember the '80's?? Ever since personal direct taxes were lowered, has Revenue's income increased. VRT - or whatever - will be likewise.

Anyone for a bus tour to Latvia to buy a rake of A4 Tdi's?? You just watch..........if you can't beat 'em, join 'em........

Road tax, VRT, excise on fuel, road tolling - is there any part of running a car that isn't taxed? From one perspective, its not double or triple taxation as all are different aspects of motoring. From another perspective, its all applied on the same activity. If only it was used to make driving a safer and more enjoyable activity.

VRT was raised on cars over 1900 cc a few years back and this sector of the market did not shrink. In fact its booming at the moment. As the Irish motorist doesn't seem to respond in a negative way to increased taxation what hope do we have that the burden won't increase in this area in the future. You might say that we have no choice but we do. We can buy cars that are cheaper to run in every way, from engine size to fuel consumption to initial purchase price, but the trend seems to be in the opposite direction with little or no price sensitivity.