I have received representations from employers, employees and from various representative bodies about the changes which I announced in the budget in relation to the taxation of the benefit from the availability for private use of company cars.
The Deputy will appreciate that this aspect of income tax cannot be seen in isolation from the totality of the measures taken in the income tax area in the budget — both their underlying rationale, and the fact that the budget effected substantial mainstream income tax reliefs — which will benefit taxpayers to the extent of £168 million this year.
The current rates of taxable benefit i.e., 20 per cent of original market value where all the costs are met by the employer falling to 12½ per cent where the car only is provided, are very lenient when compared with the costs of private ownership. When the sliding scale was originally introduced in 1982, it was intended that these rates would double to 40 per cent and 25 per cent for 1983-84 and subsequent years but this change never took place. There is no doubt that the annual cost to an individual of providing and running a new car is over 40 per cent of the purchase price. This being the case the increase in the BIK rate to 30 per cent, announced in the budget, is seen as being fair. Equally the Government consider that the curtailment of tapering relief, so as to impose a charge in all cases where a company car is available for private use, is not unreasonable.