Orders of the Day — Car Tax (Abolition) Bill

Part of the debate – in the House of Commons at 7:30 pm on 25th November 1992.

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Photo of Mr Anthony Nelson Mr Anthony Nelson , Chichester 7:30 pm, 25th November 1992

Yes, I hope and believe that there will be. The hon. Gentleman need not take my word for it. He need only reflect on the warm welcome that has been given to the abolition by the motor manufacturing and retail industries generally, about which more in a moment.

I shall explain in a little more detail what the Bill does. Clause 1 abolishes car tax with effect from midnight on 12 November 1992. Clause 2 contains a number of consequential amendments to the Car Tax Act 1983. These include allowing traders' car tax registration to be cancelled when Customs and Excise are satisfied that all the tax due has been paid. They restrict Customs' powers relating to car tax for the future by enabling them to be exercised only in respect of cars on which tax became due on or before 12 November, to ensure that such tax is properly accounted for. There are no new powers for Customs and Excise in the Bill.

Clause 3 provides two transitional reliefs. One relieves from car tax vehicles ordered by customers from retailers on or before 12 November. provided they were invoiced to, paid for in full and collected by customers after that date. The other relieves vehicles held by dealers as tax-paid stock and unsold to final consumers on 12 November.

Clause 4 deems never to have been enacted legislation which was due to take effect on 1 January 1993 to enable car tax to be collected on chargeable vehicles brought to the United Kingdom from other member states after that date under the single market transitional arrangements, which is now, of course, unnecessary.

Car tax was introduced in 1973 to compensate for the replacement of the then 25 per cent. rate of purchase tax by the imposition of VAT, which was then 10 per cent. Car tax receipts last year—I answer the question of the hon. Member for Newport, East (Mr. Hughes)—amounted to about £.1·24 billion. It is estimated that this year, following the reduction to 5 per cent. and now the abolition, it will amount to about £510 million. The cost of abolition for the rest of the year is estimated at £100 million within that figure and the £750 million for next year.

I am the first to acknowledge that forward estimates —it is to be hoped that they are good estimates—will inevitably be slightly "questimates". We have some indications from the industry of what turnover levels will be. As my right hon. Friend the Chancellor of the Exchequer has made clear, the cost of the measure after this year will have to be met by higher motoring taxes in the next Budget. Other motoring taxes include duties on petrol, both leaded and unleaded, and diesel. There is also vehicle excise duty. The House will understand that it would not be right for me to anticipate how the cost will be recouped in that Budget. That will be a matter for my right hon. Friend's Budget strategy.