irishcar.com

27 February 2002: Fiat is to absorb the 1% increase in VAT on cars due from 1 March for a month and then will ‘review its position’ for April, Fiat Auto Ireland MD Michael Howe announced last night.

The increase would mean another 100 euros on the price of an entry-level Punto.

Mr Howe was speaking at a Fiat briefing on the effects of deregulation of the car sales market across Europe, in which the current block exemption of the industry from the general EU competition laws will expire at the end of September.

The Fiat Ireland boss suggested that the move could result in price increases on cars in Ireland by up to 20% over a period of time, as carmakers harmonise their pre-tax prices across the union in order to protect their large markets from being undercut by cars sourced in lower-price countries.

Ireland’s pre-tax car prices have lower than most because our high-tax regime would otherwise have made the end price significantly higher than the market could easily handle.

Mr Howe said the changes could mean a 1,215 euros rise in the price of a Punto, some 54% of which would go to the Government in a ‘windfall’ extra tax lump. The balance would be extra profit for the parent manufacturing company while local distributors would gain nothing extra.

“Perhaps the Government would consider waiving that extra tax gain as part of a strategy to maintain overall cars sales here,” Mr Howe told irishcar.com. “History shows that increasing prices means less sales, and a drop in taxes on cars has resulted in much increased sales and consequent extra revenue for the state.”

VRT and VAT on cars is worth 1.2 million euros each year.