Dáil Éireann Debate, Wednesday - 8 February 2023
100. Deputy Duncan Smith asked the Minister for Finance his views on the policy of removing the 0% benefit-in-kind rate on electric vehicles; his views on whether this policy will remove an incentive to switch to electric vehicles; and if he will make a statement on the matter. [6158/23]
Amharc ar fhreagraRecent Government policy has focused on strengthening the environmental rationale behind company car taxation. 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.
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%. In terms of impacts, broadly speaking this means that higher emission vehicles will experience BIK increases versus the 2022 year of assessment, while lower emission vehicles will experience a lower BIK liability depending on mileage levels. This new structure with CO2-based discounts and surcharges is designed to incentivise employers to provide employees with low-emission cars.
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.
In addition to the above and in light of government commitments on climate change, Budget 2022 extended the preferential BIK treatment for EVs to end 2025 with a tapering mechanism on the vehicle value threshold. This means that the quantum of the relief is phased down from €50,000 in 2022, to €35,000 in 2023, €20,000 in 2024, and €10,000 in 2025.
It should also be noted that this BIK relief forms part of a broader series of very generous measures to support the uptake of EVs, including
- Vehicle Registration Tax relief of up to €5,000 for battery electric vehicles (BEVs). From January 2021, this relief is no longer available for BEVs with an Open market Selling Price of >€50,000. This is in addition to a base VRT rate of 7%, reduced from 14% in 2021.
- Home Charger Grant - Up to €600 towards the installation cost of a domestic charge point for new and second-hand BEVs or PHEVs.
- Low Motor Tax - BEVs qualify for the lowest tax band of motor tax at €120 per annum, while a plug-in hybrid vehicle (PHEV) is typically taxed at circa €170 per annum.
- BEV and PHEVs qualify for 50% and 25% toll reductions respectively up to a maximum €500 annual threshold for private vehicles and a maximum annual threshold of €1,000 for commercial vehicles
- A grant of up to €10,000 to support the purchase of a BEV in the taxi/hackney/limousine sector with an additional €2,500 available for those choosing to make their vehicle wheelchair accessible. Those scrapping older, more polluting, or high mileage vehicles are now eligible for double the normal grant if they make the switch to electric with up to €20K available for a new BEV, €25K for a new wheelchair accessible BEV and €15K for a new wheelchair accessible PHEV.
- Alternatively Fuelled Heavy-Duty Vehicle (AFHDV) Purchase Grant Scheme - grant levels under the Scheme are calculated as a percentage of the difference in price between a conventionally-fuelled diesel HDV and its alternatively-fuelled equivalent.
In summary, I am satisfied that the Government has provided a broad suite of supports for the uptake of EVs.
