Written answers

Wednesday, 13 January 2016

Department of Finance

Tax Reliefs Availability

Photo of Seán FlemingSeán Fleming (Laois-Offaly, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

192. To ask the Minister for Finance to provide a tax break for low-paid workers who must pay for annual rail commuter tickets to get to and from work, given that the cost of the annual ticket from Portarlington to Dublin is €3,540 and employees on a reasonably high income can get a tax break whereas employees on low incomes can get no tax break, if he will correct this unfair situation; and if he will make a statement on the matter. [46476/15]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I understand the Deputy to be referring to the Travel Pass scheme. The scheme operates on the basis that an employer pays for the Travel Pass on behalf of an employee at the start of the year and the payment is deducted from the employee's emoluments over the course of the year.  The incentive operates on the basis that, although such a payment out of an employee's income should be made out of after-tax income, section 118B of the Taxes Consolidation Act 1997 provides that the remuneration foregone shall be exempt from tax. This has the effect of reducing the cost of the Travel Pass to the employee by the amount of tax that would have been paid on the equivalent amount of income at the employee's marginal rate (the highest rate of tax at which the employee is paying tax).  In this way the employee, over the course of a year, only suffers the net cost of the Travel Pass, deducted on a weekly, fortnightly or monthly basis, with the total initial cost met by his or her employer.

Where an employer provides a Travel Pass without charge to an employee, section 118(5A) of the Taxes Consolidation Act 1997 provides that there is no benefit-in-kind charge on the employee in relation to cost of the Pass.

It should be noted that where an individual's employer does not participate in the Travel Pass scheme, any benefits that could arise under the scheme will not be available to any employees of that employer.  Also, where an employee's income is exempt from income tax, no benefit will arise.

In general, employees do not pay income tax on the first €16,500 of their income because of the PAYE and personal tax credits, and in some cases, depending on eligibility for additional credits, they may be exempt from income tax at even higher levels of income.

In addition, individuals can earn up to €18,304 without becoming liable to PRSI. Furthermore, as a result of the changes introduced in  Budget 2016, a further 40,000 low earners will be exempt from the charge to USC from next year and the remainder within the scope of USC will have their liability reduced through the reductions in the three lowest rates of USC which have taken effect from 1 January.

Budget 2016 also introduced a new PRSI credit, available only to lower earners, in order to address the PRSI step effect which could act as a dis-incentive for low earners to earn additional income within a band of earnings at around €18,000 to €19,000 per year.

For the second Budget in a row, taxpayers within the charge to income tax and/or USC on their earnings should see a reduction in their tax liability in 2016, where income remains the same.

Comments

No comments

Log in or join to post a public comment.