Mary O'Rourke (Fianna Fail)
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We welcome Deputy Cowen to the House as Minister for Finance and congratulate him on his appointment. He will look after all of the nation but those of us from the midlands are particularly proud of him.

Michael Finucane (Fine Gael)
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I too welcome the Minister to the Seanad and congratulate him on his appointment.

Tom Morrissey (Progressive Democrats)
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I also welcome Deputy Cowen to the House for the first time as Minister for Finance and congratulate him wholeheartedly on his elevation to that challenging Department.

Public transport is an issue the Government must address. There is currently a travel pass scheme marketed by Dublin Bus which is widely used by companies, particularly in Dublin. It was first introduced as a benefit-in-kind scheme and comes under that heading in the Department of Finance. Consequently, it has been the practice that the pass is purchased through the employer and the employee then receives tax back on it.

It has worked well but there are a few anomalies. The Civil Service will only purchase a pass for permanent employees. The 12-month pass can be issued in any month of the year. However, a temporary staff member in Dublin must buy a monthly ticket costing €96, which does not offer any tax rebate, while the Civil Service employer is happy to purchase the full pass for a permanent employee and deduct the cost and compute the tax allowance on a monthly basis.

There is also a restriction in that the scheme is only available through employers and it is up to an employer to decide to extend it to his or her staff. We should make it more widely available as an incentive to any person who wants to use public transport. He or she should be able to purchase the ticket directly and claim the tax credit in the annual computation of tax. When this matter is examined annually by the Department of Finance, the principal concern is the cost of the scheme by way of benefit-in-kind. I suggest there should be a change in mindset in this regard. Dublin Bus has received significant investment but buses are operating at approximately 23% capacity over a 12 or 14 hour operational day and the streets continue to be congested.

The system is in place to extend this travel saver pass scheme to every motorist and now is the time to consider this option. I suggest the system should be examined by the new Minister for Transport to see how people can be given the incentive and how restrictions can be lifted. I ask for a root and branch review of the system to see if it can be extended. I ask the Minister to consider this scheme in the next budget in a few weeks time and I await his reply.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I thank Senator Morrissey for raising this matter and I am pleased to have the opportunity to address the House. In the context of budget 1999, an exemption from taxation as a benefit-in-kind was provided for certain commuter travel passes given to employees by employers. This allowed employers to incur the expense of providing an employee with a monthly or annual bus or rail pass without the employee being liable for benefit-in-kind taxation. The exemption only applies to passes issued by CIE, its subsidiaries and operators licensed under the Road Traffic Act 1932, as well as Luas services. The Revenue Commissioners subsequently defined the conditions under which they would accept salary sacrifice arrangements, that is, where an employee agrees to forego or sacrifice part of his or her salary in lieu of the provision of the travel pass by the employer.

The main reason for introducing this exemption was to underpin Government policy on the wider use of public transport. It was hoped these exemptions would encourage commuters who travelled to and from work by car to switch to public transport, thereby easing traffic congestion at peak times.

From the point of view of both employees and employers, this scheme as it stands has provided significant benefits. The employee is not liable for tax, PRSI or health levy on the cost of the travel pass while the employer is not required to pay the employer PRSI contribution on the cost of the pass provided. Employers can realise PRSI savings of up to 10.75% while employees can save up to 48% of travel costs as a result of tax and PRSI and health levy savings.

While not related to the exemptions, it is also true that the use of annual or monthly tickets offered participants other advantages in that, as commuters, they did not need to queue on a daily basis for bus or rail tickets and prepaid tickets are cheaper than paying by cash. Overall, the scheme has proved very popular both in the public and private sectors.

I am aware there are certain arrangements which are necessary to ensure that salary sacrifice arrangements are genuine. Employees are only eligible to participate in the scheme so long as their commuter tickets are applied for and provided by the employer. Furthermore, employers and employees must sign a contract setting out the terms under which they will participate in the scheme. To ensure the company is not acting without an employee's knowledge, the employee must agree to the terms of the contract and sign it. All contracts between the employer and employee must be secured before the employer applies for tickets.

As regards the proposition that the scheme should be expanded to a wider public in the forthcoming budget, it is the long-standing policy of successive Ministers for Finance not to comment in advance of the budget on possible decisions. Overall, the existing exemption as it stands is both generous and flexible. There are no restrictions in respect of the particular classes of employees, such as permanent or temporary employees, to whom the exemption can be applied. For example, I am aware that in the Civil Service, the salary sacrifice arrangements can be applied for by staff on probation or staff on fixed contract and other temporary staff, provided the salary sacrifice agreement meets the requirement of the Revenue Commissioners that employees participating in the scheme commit themselves to an annual salary sacrifice to cover the cost of the ticket. For the sake of administrative convenience, most Departments would generally operate the scheme only in respect of annual tickets. In other employments, however, in the case of a temporary employee whose employer pays for a tax saver commuter ticket directly for him or her, no tax or PRSI would be payable by the employee in respect of this cost.

If the exemption were extended to allow employees buy tickets directly, this would suggest the introduction of some form of direct tax relief for all. The extension of the scheme in this way would have serious cost implications for the Exchequer. It would also place a significant administrative burden on the local offices of the Revenue Commissioners which would be required to process the reliefs or credits for each employee.

One of the advantages of the scheme as it currently stands is that it is well controlled, easily administered and reasonably well targeted. The widening of the exemption in the manner suggested would dilute these advantages and go significantly beyond the original policy intention of the scheme. I will bear in mind the points raised by the Senator in my consideration of the annual budget and Finance Bill matters and I thank him for raising the matter