West=On=Track - News

We're paying billions

Irish Independent 18th November 2004

Conor Faughnan - Public affairs manager, AA Ireland

His article may provide some insight into why Governments seem determined to keep as many people as possible on the roads. They can make money out of it!

The difference between death and taxes, American cowboy-philosopher Will Rogers once quipped, is that death doesn't get worse every time Congress meets. As Ireland's 1.6 million motorists wait for Brian Cowen's first budget it is easy to see what he meant.

Nobody likes paying taxes and motorists are no different. But I think motorists can genuinely feel aggrieved at the extent to which we are taxed and at the uses - or misuses - that our money is put to.

Firstly there is the sheer scale of motoring taxation. The Irish motorist collectively contributes a staggering euro4 billion into the coffers every year.

Consider a fairly typical family car like a Ford Focus. Of the euro24,500 that the consumer will pay to the dealer for the privilege of driving it away, some euro8,300 is tax. This is made up of VAT at 21 per cent on top of which is added the deplorable Vehicle Registration Tax.

VRT is an absolutely wicked tax. It dates from 1993 when the government of the day literally side-stepped the Single European Act and denied the Irish consumer one of the key benefits of the single market which we had lust voted for. This should have been prevented by the European Commission but shamefully it was not.

Theoretically a tax on the strip of embossed aluminium which is the number plate, VRT now raises over euro800 million per year from motorists.

Before the consumer can drive his new car away he needs a tax disc. In this case - with our sample car having a 1.6 litre engine - the annual cost is euro414. This tax was originally paid into a 'roads fund' but unfortunately for us the days when we could see where our tax money was going are lang gone.

All revenues these days are centralised and the Department of Finance is dead against any 'hypothecation', as the ring fencing of taxes is known. As a matter of fact the money from the tax discs - which comes to about euro700 million per year - is now used as the local government fund.

Our motorist also needs car insurance. Although young drivers especially will pay much more, an average premium figure is euro550. This is bad enough but what is galling is that the government skims 2 per cent off the premium as an 'insurance levy'. This was originally put in place in the 1980s to prop up the old PMPA. Long after the PMPA has disappeared, the levy now raises some euro70 million per year and it doesn't even get spent on road safety. This fund could easily establish and pay for the desperately needed Garda Traffic Corps but alas no.

Cars also need fuel. Petrol is expensive anyway but the tax component is enormous. As much as 67 per cent of the retail price is tax. Hence every time the consumer puts euro20 in the tank euro3.40 goes directly to the government. Don't be fooled when you hear OPEC and Iraq blamed for fuel costs: most of the cost that we pay is imposed by the Irish government. This was made worse by Charlie McCreevy last December when he raised the excise duty by five cent per litre. Fuel taxes alone now generate over euro2 billion in taxes.

The AA does, of course, accept that motoring is an activity, which can legitimately be taxed. I'm not expecting Brian Cowen to abolish car taxes, or to personally sign 1.6 million Christmas cards thanking us for our contribution. But we are entitled to expect that our money is well used and that the burden on us is proportionate.

Money is being spent on roads. euro1.2 billion per year is being spent on the roads aspect of the National Development Plan. Ireland definitely needs the new infrastructure but with such vast sums at stake we have to make sure that it is being spent wisely.

Between 2000 and 2003 the cost of the new road schemes went up by 31 per cent above the original forecasts. We just cannot lose track of hundreds of millions of euros in this way. Small wonder that the Comptroller and Auditor General's report earlier in the year was so critical of the project management in the NRA.

Likewise most people and certainly most motorists do not begrudge money spent on improving public transport. Investments in our railways and in urban bus services are to everybody's good. Especially for urban commuting, the population has no desire to be stuck in a massive traffic jam for want of transport alternatives.

And yet a system like Luas - wonderful though it is - costs far more to install in Ireland than almost anywhere else in the world. At euro780 million for just 24 kilometres of track you would think we could hove solid gold rails. These huge overspends do not get tolerated anywhere else. Any private person or private company, whether it's a chief executive controlling multi-millions or a working family buying the groceries, knows that you can't budget like that. Motorists are a captive market for taxation and as such we are vulnerable to abuse.

In fact the motorist is to the indirect tax sector what the PAYE worker was in the past: the easiest victim to hit and the handiest way to plug a hole in the finances. Short euro200 million? Pass me the pen: a few cents on petrol will get it back.

It is seductively easy for successive finance ministers in successive governments. But it comes from the pockets of ordinary people and its cumulative effect is to raise everybody's cost of living and to damage the economy by causing inflation. Hence the new finance minister would be better advised to ensure that he gets good value for our money rather than coming back to us for more. Gently does it, Minister Cowen.