Funny thing, isn’t it? ... if anyone asked us what are the things that define what we are, we’d answer by our profession or work, or by our leisure interests, or by our personal philosophy.

The definition ‘motorist’ would be well down the list, if there at all. Even though around a third of the whole population is a motorist. Probably considerably more if you count those who don’t run their own cars, but drive their parents’ or spouse’s, or company’s vehicles.

Michael Howe, recently appointed managing director of Fiat Auto Ireland, is acutely aware of how uncoordinated is the potentially largest lobby group in the country. A group whose purchases of new cars alone provide some 1.2 billion euro to the Exchequer in VAT and VRT taxes. A group whose total motor-related purchases provides double the percentage of the total tax ‘take’ than our nearest European neighbour.

“In the coming general election, it should be a big issue,” Howe says. “Not that there should be no taxes on cars, because a Government must have revenue to provide all the social needs of a people, but that such taxes should be fair and equitable.”

And Vehicle Registration Tax, imposed in Ireland when the EU abolished Excise duties between member countries, is one of the inequitables which should exercise the voting motorist. Without going into the labyrinthine (and they are absolutely Machiavellian) Revenue technicalities, the fact is that with VRT between 20-30% and 21% VAT tax, a tax is being imposed ON another tax. Resulting in that between 53-60% of the total price of a new car is tax, a strong proportion of it being a taxed tax.

And remember also that the money being paid for that car has already been subject to income tax averaging around a third of income.

If we really go further into it, it represents ‘an appaling vista’. So let’s just stop here. And take a step forward to the other reason why Michael Howe of Fiat Auto Ireland is currently concerned that VRT should be an election issue on every motorist’s doorstep.

It is because the base price of cars in Ireland is set to rise by anything up to 20%, maybe even more, in the period following a planned end to a partial exemption from EU competition law for motor manufacturers. Again, without going into the technicalities, what’s known as ‘block exemption’ will end on 30 September next.

After that, any car dealer or dealer group, in any EU country, will be able to source cars in the EU country where the pre-tax prices are cheapest. And Ireland, among a small group of other high-tax countries, is one of the cheapest places in Europe to buy a car before tax. This is because local distributors have been able to negotiate better deals so as to keep the after-tax prices at a ‘reasonable’ level.

In essence, the international manufacturers have been taking a smaller margin in countries such as Ireland so the actual tax content wouldn’t be even bigger than it is. And they were protected from this undercutting their margins in their major markets - Germany, France, the UK, Italy and Spain - because under block exemption, local resellers could be refused supply in a ‘cheaper pre-tax’ country.

That protection will no longer be available from 1 October. So manufacturers will be ‘harmonising’ their pre-tax prices across all EU countries in order to do their own protecting. And since it would be unreasonable to expect them to ‘harmonise down’ 85% of their business, they will be ‘harmonising up’ the 15% of which Ireland is a part.

Michael Howe has been flagging the consequences of this for the last month or so. The figures are simple: for example, the Fiat Punto ELX could be increased in price from 12,125 euro to 13,340 euro; or the price of a small family car such as the Corolla or Focus could become 1,500 euro or more dearer.

“There’s a notion around that the new system will have 12 months to settle down,” Howe notes. “But that’s like telling us that the speed limit will be reduced to 50mph from 1 October, but there would be no prosecutions for exceeding it for a year. Would people adhere to the new limits from the beginning?”

There’s another side to such an increase at pre-tax level: the Government’s actual take would increase also, in a ‘windfall’ effect. So of that extra 1,215 euro for the Punto above, the state would garner 644 euro. And the local distributor would be getting NOTHING extra.

It is tempting for the Government to take that ‘windfall’. Which could be at least an EXTRA 103 million euro if the current car market forecasts for next year held up. Finance minister Charlie McCreevy is already telling the industry that he can’t afford to cut the VRT rates because the money is needed for state expenditure. But his expenditure forecasts are not based on the upcoming ‘windfall’ extra tax. He could, in conscience, agree to waive the extra money by reducing VRT to a level where there would be no end-user increase.

That’s where the doorstep canvasser needs to be tackled. Candidates should be asked where they stand on VRT reduction, even reminded that inaction on the matter could mean ‘killing the goose’ that lays so many golden VRT eggs in the state coffers.

“Increases in car prices of the level envisaged could mean that people will rethink changing their cars and holding on for another year or more,” Michael Howe says. “It could mean that the decreased pollution and increased safety we have developed in our national car park over recent years of healthy car sales will be retreated to another ageing fleet of cars on our roads.

“High taxes are disincentives to buy, lower taxes are incentives. The Scrappage Scheme, where the Government effectively relieved some of the tax burden and the motor industry here matched that incentive, was the engine for the subsequent take-off in new car sales. Lowering taxes by abolishing VRT can deliver greater revenue to the Government, can help the Irish motorist, and can save the Irish motor industry from an unnecessary decline back to the bad old days.”

But we have to define ourselves as motorists first, in numbers which have substantial clout, if we’re prepared to use it.

©2002irishcar.com