Brian Cowen (Laois-Offaly, Fianna Fail)

The amendment proposes to exempt from tax all monthly travel passes for travel to and from work. To encourage the use of public transport, my predecessor, Charlie McCreevy, introduced legislation in 1999 to exempt from a charge to tax the resultant benefit-in-kind where an employer provides a free monthly or annual bus or rail pass for an employee. The bus or rail pass must be issued by CIE or its subsidiaries, a private bus operator or a person who provides a passenger transport service in accordance with the Transport Act 1950. In last year's Bill the exemption was extended to cover the Luas and other light rail or metro services. In this year's Bill I am extending the exemption further to cover ferry services within the State.

On the Committee Stage debate the Deputy appeared to be concerned that in order for the exemption to apply, employees had to be given annual travel passes and, therefore, the exemption would not be available to seasonal workers. As I already indicated, the exemption applies to a monthly or annual travel pass, but to qualify for the exemption the employer must incur the expense of the pass. It is not, however, sufficient for an employer to purchase a pass and recover the cost from the employee — in such circumstances the expense will have to be incurred by the employee. However, Revenue accepts, subject to conditions, that where an employee renegotiates his or her remuneration package, taking a travel pass in exchange for a reduction in salary, the employer can be regarded in that instance as having borne the cost of the travel pass and the exemption will apply.

Revenue requires the following conditions to be satisfied. There must be a bona fide and enforceable alternation to the terms and conditions of employment, exercising a choice of benefit instead of salary. The alteration must not be retrospective and must be evidenced in writing. There must be no entitlement to exchange the benefit for cash. The choice exercised, that is, the benefit instead of cash, cannot be made more frequently than once a year and then only with the consent of the employer.

The current system works well and seems to cover the scenario for which the Deputy wants to cater. There is no prohibition in the legislation on an employer giving an employee a monthly travel pass, once the employer and not the employee bears the cost. Accordingly, I do not see any need for the amendment and I am not in a position nor do I propose to accept it.

The advantages of the scheme, as it stands, are that it is subject to control, it is easily administered and reasonably well targeted. Widening of the exemption in the manner suggested would dilute these advantages and go significantly beyond the original policy intention of the scheme. It would also be much more costly than the existing scheme and would need to be fully considered in a budgetary context.

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