Written answers

Tuesday, 24 May 2016

Department of Finance

Rural Transport Programme

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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95. To ask the Minister for Finance for the purpose of promoting rural public transport, to introduce tax incentives and legislate for the provision of a 100% capital tax allowance for the purchase of new buses; to remove road tax and vehicle registration tax on buses and value added tax on tyres for buses; and to introduce income tax incentives for the purchase of commuter bus passes. [11521/16]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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In terms of VAT, rural public transport is promoted in a number of respects. The transport of passengers and their accompanying baggage is exempt from VAT in Ireland under an historic derogation, while in the majority of other EU Member States VAT is charged on public transport. In this respect, rural public transport services are exempt from VAT, where VAT is not charged on the transport. This also includes the hiring of a bus or coach with a driver.

While persons who are VAT exempt cannot recover any VAT incurred on goods and services incurred in relation to their business such as, fuel, tyres and mechanic charges, there is a special provision within the VAT code to allow a refund of VAT incurred on the purchase of touring coaches. Under VAT Refund Order SI. 266 of 2012, coach operators who are exempt from VAT may, subject to the conditions in the Order, be entitled to a refund of the VAT paid on the purchase of touring coaches that are no more than 2 years old and are within specified dimensions.

With regard to removing VAT from bus tyres, the VAT rating of goods and services is subject to the requirements of EU VAT law with which Irish VAT law must comply. It is not possible under EU VAT law to remove VAT from the supply of tyres.

Buses are assigned to VRT category C (commercial vehicles, buses and mini-buses with a seat capacity above 10). This category currently enjoys a greatly reduced rate of VRT, at a flat rate of €200.  Category C vehicles are not subject to the carbon emissions-based graded scale of VRT, as applies to private cars. Private cars are subject to VRT rates ranging from 14% to 36% of the open market selling price of the vehicle. Therefore depending on the open market selling price of the car, and its carbon emissions grade, VRT can cost up to over 1/3 of the price of a new car. The current VRT rate applied to category C vehicles is therefore very significantly lower than that applied to private cars.

Motor tax rates applied to large public service vehicles are already subject to relatively favourable rates. The current rates are contained in the following table:

Seating CapacityAnnual €
9 - 20154
21 - 40202
41 - 60403
61 or more403

The policy in this area is a matter for the Minister for Environment, Community and Local Government.

I have also introduced a diesel rebate scheme which offers a partial refund of excise, depending on the price of fuel, for qualifying road transport operators including passenger transport operators.

Most vehicles (excluding cars) qualify for wear and tear allowances as plant and machinery under section 284 TCA 1997 at the rate of 12.5% per annum.  This allows 100% of the purchase cost to be written down over a period of 8 years.

As regards income tax incentives for the purchase of commuter bus passes, the Deputy may be aware of the Travel Pass (Taxsaver) 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.

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