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When buying a new car in Ireland, the VRT is normally included in the price of the vehicles. Motor dealers are responsible for collecting the tax and registering the vehicle with the Revenue Commissioners before selling it on to consumers. On buying a new car from a dealership, the registration plates should already be fitted onto the vehicle before you drive it off the lot.
How does this affect me? When importing a new or second-hand car from another EU member states, the owner must register it and pay VRT before the end of the next working day of its arrival in Ireland. If the vehicle is new, being less than six months old, Value Added Tax (VAT) is also chargeable at 21%. This VAT is payable even if there is evidence that VAT was paid in the country of purchase. When importing a new or second-hand car from non-EU countries, VAT is chargeable at importation, as is Customs Common Tariff (CCT). Added pressure
This current form of taxation has come under pressure from a number of areas. The fact that both VAT and VRT are charged on newly registered vehicles in Ireland has been the bone of much contention, both locally and at a European level. The European Commissioner for Customs and Excise has expressed concerns to the Irish Government, over the VRT on new and second-hand imported vehicles, commenting on the excessive levels of motor taxation on Irish citizens. Article 25 of the Treaty of Rome, which governs the European Union, prohibits customs and excise duties and charges having equivalent effect.
Ireland joined the European Union (then known as the European Economic Community) in 1973. On doing so, our Government agreed that EU law would supersede our own constitutional law. Therefore, it agreed that Article 25 was applicable to us. This article calls for the free movement of goods between member states. Some believe that the implementation of VRT is against Article 25, and therefore illegal and an infringement of our European rights. Trade between member states should be conducted in a single open market, where borders and customs duties do not exist. Some believe that VRT is just a customs duty under a different name.
VRT is also seen as a double tax by some, as it is charged over and above the standard rate of 21% VAT. On cars that are imported into the country from other member states, the owner may incur the cost of two VAT charges; one in the country of origin and another on arriving into Ireland. The implementation of both taxes creates an expensive motor market in the country.
The current VRT system has also come under criticism from those in favour of climate change measures. A number of EU member states have converted their motor tax system to a carbon dioxide (CO2) emissions-based model, and demands have been made for the same to transpire in Ireland. Under Kyoto Protocols (Also here), Ireland must reduce its CO2 emissions to a 13% rise by 2012. The European Commission has called on our Government to introduce further CO2 cutting measures to reduce our national emission. According to a report published by the European Environment Agency (EEA), the Irish transport sector has been emitting nearly six times the European average in greenhouse gas emissions since 1990. A 20% rise in the volume of passenger vehicles on Irish roads has lead to this increase.
These reasons compounded to stir change within Government ranks, and from 1st July 2008, Ireland will implement a new system of Vehicle Registration Tax that is based on the amount of CO2 a vehicle emits.
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