Written Answers. - Benefit in Kind Tax Yields.
Ivor Callely
Question:
37
Mr. Callely
asked the
Minister for Finance
the total revenue generated from benefit-in-kind on company cars in each of the tax years ending April 1990 to April 1994; if he has received submissions on this matter; and if he will review this matter prior to the next 1995 Budget.
I am informed by the Revenue Commissioners that to determine accurately the precise information requested by the Deputy would require identification of the cases involved and an individual examination of all the income tax returns of such cases. Such an examination could be carried out only at a disproportionate cost.
It is tentatively estimated that the yield from taxing the benefit associated with the availability for private use of an employer-provided car had been of the order of £30 million to £35 million annually in the years 1990 and 1991. In 1992 the rate of tax was increased from 20 per cent to 30 per cent of the market value of the car and tapering relief was curtailed. Following these changes the yield in 1992 was of the order of £45 million to £50 million and in 1993 was £55 million to £60 million.
I have received representations from individuals and from various representative bodies about the changes introduced in 1992. 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 which will benefit all taxpayers to a very significant extent.
The previous rates of taxable benefits, 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. 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.
This issue has been considered at some length and the Government is satisfied that the current charge to tax of benefit-in-kind on company cars is fully justified.
