Dáil debates

Thursday, 19 January 2023

Saincheisteanna Tráthúla - Topical Issue Debate

Electric Vehicles

4:35 pm

Photo of Jennifer Carroll MacNeillJennifer Carroll MacNeill (Dún Laoghaire, Fine Gael) | Oireachtas source

I thank Deputy Murnane O'Connor for her comments. I will do everything I can to address all the points she has raised. Where I do not have the information, I will get it and come back to her with more detail. The important point to set out is that Government policy has focused on strengthening the environmental rationale behind all company car taxation. In the 2021 Climate Action Plan - and I am conscious that the Dáil was debating the 2023 plan the other day - the Government committed to introducing an emission-based taxation regime for company cars across the board.

Until the changes that were originally brought in as part of the Finance Act 2019, Ireland's vehicle benefit-in-kind regime was unusual in that there was no overall carbon dioxide basis in the regime. I know Deputy Murnane O’Connor is aware of the environmental reasons that underpin the other vehicle taxes that are in place, such as vehicle registration tax and motor tax, as well as their structure. In those taxes, higher-emission vehicles are subject to higher rates of tax. The measure coming into effect this month regarding vehicle benefit-in-kind extends that rationale, bringing it into step with other vehicle taxes, which are emission based.

In the Finance Act 2019, a CO2-based benefit-in-kind regime for company cars was introduced to commence on 1 January 2023. From the beginning of this year, the amount taxable as benefit-in-kind is still determined by the car's original market value and the annual business kilometres driven. Now, however, new CO2 emissions-based bands determine whether a standard, discounted or surcharged rate is also taxable. In certain instances, the new regime will provide for higher benefit-in-kind rates, for example, for above average emissions and higher-mileage cars. It should be noted that the taxable rates remain largely the same in the lower- to mid-mileage ranges for the average lower-emission car. Of course, EVs benefit from a preferential rate of benefit-in-kind, ranging from 9% to 22.5% depending on mileage, whereas fossil-fuel vehicles are subject to much higher benefit-in-kind rates, up to 37.5%. This new structure with CO2-based discounts and surcharges is designed to incentivise lower-emission cars.

In the new regime, the number of mileage bands has been reduced from five to four, and indeed the Deputy has raised that. I am aware that there are discussions around the mileage bands in the new benefit-in-kind structure, as they can be perceived as incentivising higher mileage to avail of the 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 to its employee, and the more the car depreciates in value, the less of a benefit it is to the employee.

I believe that better value for money for the taxpayer is achieved by curtailing the number of subsidies available and building an environmental rationale directly into the benefit-in-kind regime. It was therefore determined that reforming the benefit-in-kind system to include emission bands provides for a more sustainable environmental rationale, rather than continuing the current system with exemptions for EVs. That brings the taxation system around company cars into step with other CO2-based motor taxes in Ireland as well as the long-established CO2-based vehicle benefit-in-kind regimes in other member states in the EU.

In addition to that and in light of the crucial Government commitments on climate change, budget 2022 extended the preferential benefit-in-kind treatment to EVs to end 2025 with a tapering mechanism on the vehicle value threshold. That 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. This exemption forms part of a broader series of generous measures to support the faster uptake of EVs by companies and facilitate their fleet planning. I can come back to this in my closing remarks, but it is important to say that this is an important part of our collective climate transition. The benefit-in-kind charging mechanism was introduced in legislation in 2019 and we have deliberately given that three-year lead-in time to allow for fleet planning as well as to allow for companies to transition to this measure.

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