Michael Healy-Rae
Question:256. Deputy Michael Healy-Rae asked the Minister for Finance his views on matters raised in correspondence (details supplied); and if he will make a statement on the matter. [42738/23]
View answerTuesday, 3 October 2023
Questions (256)
Written answers
Regarding taxation, recent policy has been focused on strengthening the environmental rationale behind company car taxation. From 1 January 2023, the amount taxable as BIK continues to be determined by the car’s Original Market Value (OMV) and the annual business kilometres driven, while new CO2 emissions-based bands determine whether a standard, discounted, or surcharged rate is taxable. Battery Electric vehicles (BEVs) now benefit from a preferential rate of BIK, ranging from 9 – 22.5% depending on mileage while fossil-fuel vehicles will be subject to higher BIK rates, up to 37.5%. This new structure with CO2-based discounts and surcharges is designed to incentivise employers to provide employees with low-emission cars.
However, as the new regime resulted in significant BIK increases for many high mileage and/or above average emission vehicles, given the broader inflationary context, temporary changes to BIK for the current year were introduced as part of Finance Act 2023. This temporary change comprised of a universal relief of €10,000 being applied to the Original Market Value (OMV) of vehicles in Category A-D in order to reduce the amount of BIK payable. This was introduced as a temporary measure for 2023 that is due to remain in place until 31 December 2023.
In addition to the favourable treatment for low emission vehicles in this new structure, there is currently also a BIK exemption for BEVs with an OMV up to €45,000 (€35,000 plus €10,000 OMV deduction). This ensures BEVs with an OMV of less than €45,000 have no BIK liability, while those with a higher OMV can reduce the taxable amount by €45,000. In Budget 2022, this preferential BIK treatment for electric vehicles was extended to end-2025, with a tapering mechanism on the vehicle value threshold. The tapering mechanism serves to reduce the OMV of the vehicle, for the purposes of determining the taxable cash equivalent, by €20,000 in 2024 and €10,000 in 2025. Any surplus OMV is subject to BIK in accordance with the standard rates, which incorporates the vehicle’s emissions and mileage. A flat rate of 8 per cent applies for van, irrespective of business mileage.
The BIK exemption was intended as a temporary measure and forms part of a broader series of generous tax related measures for EVs, including a reduced rate of 7% VRT, a VRT relief of up to €5,000 (to end 2023), low motor tax of €120 per annum, and 0% BIK on electric charging. The relief is extended in support of Government policy to incentivise EV uptake, while the tapering mechanism represents a value for money consideration and serves to indicate the removing of the relief altogether in 2025.
Regarding any future decisions on EV relief, it is a longstanding practice of the Minister for Finance not to comment further, in advance of the Budget, on any tax matters that might be the subject of Budget decisions.
Regarding EV supports and EV charging infrastructure, the Department of Transport have advised that the Government has committed significant funding to support zero and low emitting vehicles through the National Development Plan, which currently includes an allocation of almost €500 million for the period 2021-2025 and additional support from the Climate Action Fund, the Shared Island Fund and the EU Just Transition Fund. €110m has been allocated in 2023, with an additional €19m of funding in carryover, to ensure the continued transition to electric vehicles which includes funding for EV grants and EV charging infrastructure. This underpins the Government’s commitment to making electric vehicles accessible to all.
In addition to the taxation supports outlined above, there are also a range of current financial supports from Zero Emission Vehicles Ireland (ZEVI), a dedicated office of the Department of Transport, and where applicable with support from the Department of Finance, for the transition to electric vehicles and for the rollout of electric vehicle charging infrastructure including:
• A purchase grant for battery electric vehicles (BEVs);
• A Home Charger purchase grant scheme - up to €600;
• An apartment charger scheme;
• eSPSV grant scheme – a grant for taxi drivers to make the switch to an EV;
• AFHDV grant scheme – a grant for HDVs to bridge the gap between a low emission vehicle and a fossil fuel vehicle;and
• Tolling reductions of 50% for battery electric vehicles and 25% for plug-in hybrid electric vehicles.
The Government's investment strategy for electric vehicles over the next few years will see a rebalance towards supporting EV charging infrastructure. This change aligns with similar polices in other European nations, where countries have begun to curb their vehicle subsidies and refocus their investments in this sector towards provision of charging infrastructure.
In relation to EV charging, ZEVI launched the National En-Route EV Charging Network Plan on the 25 September 2023. This is the first element of the National EV Charging Network Plan which, will cover all publicly accessible EV charging in the country. In addition to En-Route charging infrastructure, ZEVI is also working with local authorities to develop the other elements of this national plan which will include destination and neighbourhood charging.
The National En-Route EV Charging Network Plan and associated initiatives will drive the delivery of charging infrastructure on the National Road Network. The Plan sets out ambitious targets for the level and coverage needed for En-Route charging on our national roads network. We are already seeing significant increased capacity of EV charging on our national roads, and this plan provides additional reassurance and certainty for EV drivers and those thinking of making the switch to EVs that they will be able to find high powered, fast and convenient EV charge-points where and when they need them.
The Plan sets out a provision of EV charging that will be ahead of demand and meet European requirements for charging electric cars, LGVs and HGVs by 2025 and 2030. The implementation of this Plan through enhanced grid connections, funding interventions and enabling measures will remove barriers and accelerate the delivery of high-powered EV charging.