Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I propose to take Questions Nos. 97, 146 and 159 together.

This new charging mechanism was legislated for in 2019. It is not a result of anything that was contained in this budget or the current Finance Bill. We indicated in 2019 that these changes were to come in. I appreciate why the Deputy is raising this matter and the impact it may have on some of his constituents. I recognise that. However, this is a change that has been very clearly flagged over a number of years now, recognising that it could well create a cost, in particular to company car users who are using their cars as a very important part of their daily business, for example, sales representatives or people who need to use their cars to visit customers. This measure has been indicated now for a number of years and is not due to any changes that are contained in this budget.

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, BIK, regime was unusual in that there was no overall CO₂rationale in the regime. This is despite the fact that a CO₂-based vehicle BIK regime was legislated for as far back as 2008.

In the Finance Act 2019, I legislated for a CO₂-based 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 and the annual business kilometres driven, while new CO₂emissions-based bands will determine whether a standard, discounted or surcharged rate is taxable. The number of mileage bands has been reduced from five to four.

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, and the more the car depreciates in value, the less of a benefit it is to the employee 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.

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 what I have outlined and in light of Government commitments on climate change, budget 2022 extended the preferential BIK treatment for electric vehicles to the end of 2025 with a tapering mechanism on the vehicle value threshold. This BIK exemption forms part of a broader series of very generous measures to support the uptake of EVs, including a reduced rate of 7% vehicle registration tax, VRT, a VRT relief of up to €5,000, low motor tax of €120 per annum, Sustainable Energy Authority of Ireland grants, discounted toll fees, and 0% BIK on electric charging.

I appreciate the importance of the point the Deputy is making but I ask him to consider that this measure has been flagged over a number of years. My concern, given the importance of this measure in changing the carbon emissions from our private car fleet, is that if we were to indicate at this point that it is not going to happen, I am not sure whether or when it would happen. I believe many other companies have now made investment decisions in anticipation of these changes coming in.

See this speech in context