Dáil Éireann Debate, Tuesday - 1 March 2022
240. Deputy Noel Grealish asked the Minister for Finance the plans he has for providing tax credits to purchasers of electric vehicles considering the significant carbon savings achieved by the switch from fossil-fuelled vehicles; and if he will make a statement on the matter. [10847/22]
View answerThe Government is committed to incentivising electric vehicles (EVs) as has been reflected in the wide suite of measures which have facilitated an exponential growth in EV registrations over the past number of years. The Programme for Government 2020 outlined a commitment to an average 7% per annum reduction in overall greenhouse gas emissions from 2021 to 2030 (a 51% reduction over the decade) and to achieving net zero emissions by 2050. The need to make significant emissions reductions in the transport sector is fundamental to Ireland’s policy around Vehicle Registration Tax (VRT) and Motor Tax; the systems are designed to facilitate the uptake of EVs and to address the increasingly harmful environmental and public health effects of vehicle emissions.
Vehicles registered after July 2008 are charged motor tax according to their emissions profile; the rate for EVs is €120 and scales up to €2400 for the most pollutant vehicles. The VRT system has been modified in recent Budgets to strengthen the environmental rationale of the regime, and is structured to provide a reduced rate for EVs of 7% of open-market selling price (OMSP), while vehicles falling into the highest emissions band are liable to a rate of 41%. The €5,000 VRT relief for electric cars and vans were due to end on 31st December 2021 but was extended for two years in Finance Act 2021 to end in 2023. As the rate of VRT charged for EVs is already very low, many purchased in the next two years will pay no VRT at all.
In Finance Act 2019 I legislated for a CO2-based benefit-in-kind (BIK) regime for company cars from 1/1/2023. From that date the amount taxable as BIK remains determined by the car’s original market value (OMV) and the annual business kilometres driven, while new CO2 emissions-based bands will determine whether a standard, discounted, or surcharged rate is taxable. EVs will benefit from a preferential rate of BIK, ranging from 9 – 22% depending on mileage. Fossil-fuel vehicles will be subject to higher BIK rates, up to 37.5%. This new structure with CO2-based discounts and surcharges will incentivise employers to provide employees with low-emission cars.
The current €50,000 BIK exemption was extended in Finance Act 2021 with a tapering mechanism that represents a value for money consideration. This forms part of a broader series of generous measures including the preferential rates of VRT and Motor Tax, the VRT relief, SEAI grants, discounted tolls fees, and 0% BIK on electric charging.
I am satisfied that this Government continues to provide a generous set of supports to encourage the transition to low and zero emission vehicles.
