Motorists using the East or West Link toll bridges in Dublin can expect to pay up to 21 per cent more from the New Year following a decision by the European Court of Justice (ECJ) yesterday.
The EU's Luxembourg-based court found against Ireland, the UK, and France in ruling that toll roads and bridges should be regarded as a "service" and must carry a VAT charge under the rules of the sixth VAT directive. It exempted toll roads or bridges run by public authorities.
The Government is now expected to use the Budget to levy VAT at 21 per cent, although commercial users, if registered for VAT, could claim the cash back.
A spokesman for the Commission, which took the case to protect EU revenues of which VAT receipts represent just more than a third, welcomed the decision. But because toll operators can now make savings by reclaiming VAT contributions on their operating and maintenance costs, he said the full 21 per cent should not have to be passed on to consumers.
But last night National Toll Roads was making no promises. A statement from the company said: "While the decision has been expected for some time, we are not in favour of any proposal that will increase costs to motorists in such a manner." It would study the ruling's implications.
The Commission has been in dispute with the Government over the issue since 1987 and yesterday the ECJ ordered the Government to pay it a sum equivalent to the losses from non-enforcement since 1994.
The figure will be agreed between the Government and the Commission and is difficult to gauge since it will have to estimate the likely, theoretical level of rebate claims by the commercial sector. Government sources said the net figure was unlikely to be more than £1 million (€1.27 million).
As this can hardly be levied on motorists retrospectively the cash will come from the Exchequer.
The court's decision confirmed the non-binding opinion of its German advocate-general, Mr Siegbert Alber, in January. The Government has unsuccessfully argued that the VAT regime should not apply to tolls because they represented "the letting of immovable property" which is exempt under the VAT directive.
In Britain the decision will affect only the Deptford Tunnel, and the Skye and Severn bridges, because other toll roads are run by local authorities. But it will have a far wider effect in France where much of the motorway system is in private hands.
