Thursday, 4 February 2010

Lies, damned lies and statistics: car scrappage scheme

An Saoi: On Tuesday morning Alan Nolan of the Society of the Irish Motor Industry was on Morning Ireland and made reference to the increase in car sales in January of approx. 5%. He uttered some of the same phrases that were mentioned about shopping in the run up to Christmas, which as the January VAT returns showed did not conform to the facts. He said that there was “great footfall in dealerships and great interest”.

Car sales are a serious source of tax revenue and in the interest of commenting accurately on tax issues, I decided I had better have a look at the SIMI National Vehicle Statistics, which are provided from figures prepared by the Revenue Commissioners.

Right enough, there was a 5.04% increase in new car sales but a 9% decrease in new car registrations because the number of used imports had fallen by nearly 46%. Now when a used car is imported VRT and Vat must be paid, just as with a new car. SIMI have helpfully provided the number of new cars sold by marque and it is clear that sales of larger cars, Mercedes, Audi, BMW etc. have been particularly badly hit. It appears that most of the cars sold fall into the less polluting group, with much reduced VRT and possibly the scrappage grant payable also.

As all cars are imported, it makes little difference to the State whether the car a person buys is used or new when it is imported. The tax yield may be slightly higher on a new car - that is all. There seems to be little if any benefit to the country from the scrappage scheme, or am I missing something? It looks like a serious waste of money.


Rory O'Farrell said...

Does the figures relate to volumes of cars or value?

The scrappage scheme is a bad idea, and a surprising one from a 'Green' government.

Someone who has some spare cash could put it in a bank (boosting their terrible deposit base) or spend it.

If they spend it in restaurants and so on then they will boost jobs in Ireland. If they spend it on imports they boost jobs in Germany.

There is a non-sense idea that it makes money for the government. This is not true. Any money taken from deposit accounts will (indirectly) have to be paid by the state due the bad situation of the banks. If someone takes out a loan they are borrowing at about 7%, when the government can borrow at a fraction of this. Money is also being directed away from the domestic econonmy.

As with NAMA, and most of the government economic policy, feel free to be confused. If it is confusing it is because it makes no sense.

An Saoi said...

Purely volume.

I think however the real issue is as much the collapse in commercial investment.