Tom Parlon (Laois-Offaly, Progressive Democrats)

I assume the Senator is referring to the announcement by the Minister for Finance in Budget 2003 in connection with benefits-in-kind. In this regard, the Finance Act 2003, together with corresponding provisions in the Social Welfare Act 2003, provides for the direct application of PAYE and PRSI to benefits-in-kind with effect from 1 January 2004. The effect of this measure is that employer-provided benefits such as cars, loan accommodations, subscriptions to health insurance schemes and sports clubs and vouchers – including luncheon vouchers, bonus bonds, etc. – which are all currently liable to income tax, will, from next year, be brought within the PAYE system and, therefore, be subject to employer and employee PRSI and health levies as well as income tax. The application of PAYE and PRSI to benefits-in-kind is the norm in most EU countries.

This treatment of benefits-in-kind from 1 January 2004 will be in line with the procedures for charging tax, PRSI and levies on normal wages and salaries. The measure will serve to reduce the effect of salary substitution schemes which may be introduced to avoid or reduce the payment of tax or PRSI. Evidence that this practice was growing was part of the reason the Minister for Finance announced this change in the budget. It will make the system fairer because it will ensure that remuneration, from whatever source, will be treated the same way for the purpose of income tax, PRSI and levies.

The Revenue Commissioners will draft the necessary administrative regulations for employers in respect of the practical implementation of this change. Publication of these regulations will occur well in advance of the January 2004 introductory date and will, therefore, facilitate those involved in updating payroll systems.

Regarding the issue raised by the Senator, the strict legal position is that the value of luncheon and other meal vouchers is chargeable to tax. However, an administrative concession was agreed in 1965 to exempt the value of luncheon and other meal vouchers provided by an employer for his or her employees where the value of the vouchers did not exceed three shillings for each workday. For all years up to and including 1986-87, where the value of the voucher exceeded that amount per day, the full value of the voucher was chargeable to tax and not just the excess. Following representation made in 1987, the concession was extended to provide that where the value of the voucher exceeded that amount per day, then only the excess was to be regarded as taxable in the hands of the employee.

Representations have been made over the years to increase the amount, now 19 cent in euro terms. However, it was not considered desirable to extend the concession any further because to do so would give employees in receipt of luncheon vouchers an unfair advantage over employees without such benefits. It should be noted that the benefit for the employee of not taxing such vouchers fully is, at most, 8 cent per day.

With the application of PAYE to all benefits-in-kind from 1 January 2004, it may be necessary to review this particular concession as part of the detailed consideration and discussion with employers and others on implementation measures. Whereas the use of vouchers in 1965 was limited, their usage today is widespread and covers a broader range of items. Any extension of the concession in respect of luncheon vouchers could lead to request for similar concessional treatment for other vouchers.