THE Retail Motor Industry Federation has slammed Chancellor Kenneth Clarke's plans to raise insurance premium tax to 17.5% for insurance products sold by motor dealerships. These insurance policies include mechanical breakdown cover, extended warranties, credit protection and ordinary motor insurance.

Christopher McGowan, chief executive of the RMIF, said: 'Thousands of motor retailers' livelihoods could be seriously affected by government proposals to introduce a penal rate of tax on insurance products sold with motor vehicles. 'Consumers will be able to buy the same products from a broker down the road who will be taxed at a rate of 4%. This is a ludicrous situation which makes a mockery of the taxation system.'

McGowan said the proposed 17.5% IPT rate would have a harmful impact on consumers' convenience and protection, and that motor retailers would be forced to pass on the increased costs. The RMIF has made representations to the Treasury, Customs & Excise, and MPs to ensure the proposals, due to come into effect on April 1, are put on hold until consultation has taken place in every sector of the industry.