Dáil Éireann Debate, Tuesday - 25 October 2022
250. Deputy Brendan Griffin asked the Minister for Finance if he will provide clarification in relation to benefit-in-kind on company cars (details supplied); and if he will make a statement on the matter. [53028/22]
Amharc ar fhreagraRecent Government policy has focused on strengthening the environmental rationale behind company car taxation. Until the changes I brought in as part of the Finance Act 2019, Ireland’s vehicle benefit-in-kind regime was unusual in that there was no overall CO2 rationale in the regime. This is despite a CO2 based vehicle BIK regime being legislated for as far back as 2008 (but never having been commenced).
In Finance Act 2019, I legislated for a CO2-based BIK regime for company cars from 1 January 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. The number of mileage bands is reduced from five to four. Detailed information on the taxation of employer-provided vehicles is included in Tax and Duty Manual Part 05-01-01b, which is available on the Revenue website.
EVs will benefit from a preferential rate of BIK, ranging from 9 – 22.5% 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 is designed to incentivise employers to provide employees with low-emission cars.
I am aware there have been arguments surrounding the mileage bands in the new BIK structure as they can be perceived as incentivising higher mileage to avail of lower rates, leading to higher levels of emissions. The rationale behind the mileage bands is that the greater the business mileage, the more the car is a benefit to the company rather than its employee (on average); and the more the car depreciates in value, the less of a benefit it is to the employee (in years 2 and 3) as the asset from which the benefit is derived is depreciating faster. Mileage bands also ensure that cars more integral to the conduct of business receive preferential tax treatment.
I believe that better value for money for the taxpayer is achieved by curtailing the amount of subsidies available and building an environmental rationale directly into the BIK regime. It was determined in this context that reforming the BIK system to include emissions bands provides for a more sustainable environmental rationale than the continuation of the current system with exemptions for electric vehicles (EVs). This will bring the taxation system around company cars into step with other CO2-based motor taxes as well as the long-established CO2-based vehicle BIK regimes in other member states. With significant Government commitments to decarbonise road transport, including a specific Climate Action Plan action to reform company car taxation, by 2023 an emissions-based rationale for vehicle BIK is overdue.
In relation to the comparison between the BIK calculation for employer provided vehicles with the calculation of Remote Working Relief, the Deputy should note that it is difficult to make such a comparison as the two regimes are dealing with different things. The legislation governing the provision of an employer provided car regards it as a benefit to an employee and is taxable as notional income, whereas Remote Working Relief legislation, contained in section 114A TCA 1997, seeks to provide a measure of relief to employees who incur certain expenditure while working from home. It should be pointed out that where an employer makes good any expenditure incurred by an employee, this amount reduces the employee’s Remote Working Relief claim.
