Dáil Éireann debate -
Thursday, 3 Mar 1994

Vol. 439 No. 7

Written Answers. - Benefit-in-Kind Taxation.

Ivan Yates

Question:

44 Mr. Yates asked the Minister for Finance if his attention has been drawn to the ongoing effect of the changes of the tax treatment of benefit-in-kind on motor vehicles, particularly for sales representatives, through the changes in the scale of assessment; and if he will consider modifying this regime so that the provision of company cars will not incur such a tax penalty.

Minister for Finance (Mr. B. Ahern)

It is assumed that the Deputy is referring to the changes in the benefit-in-kind on company cars introduced in the 1992 Finance Act. I have received representations from employers, employees and from various representative bodies about these changes.

Firstly, I want to point out 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 last few budgets — both their underlying rationale, and the fact that these measures effected substantial mainstream income tax reliefs — which will benefit all taxpayers to a very significant extent.

The previous 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 — were clearly 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 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.

It should be noted that the benefit-in-kind charge does not apply where an employee arranges with his employer that he will not have the use of the car other than for business purposes; therefore, the provision of cars exclusively for business purposes is not being taxed. Alternatively, no charge will arise where an employee uses his own car for work and subject to Revenue approval, is recouped the cost involved by his employer.

I do not therefore agree that there is a particular tax penalty involved in this charge and do not propose to make any changes in this area.