Wednesday, 3 November 2021
Department of Finance
90. To ask the Minister for Finance if changes in the benefit-in-kind tax treatment of electric vehicles now make it attractive for those availing of that relief to switch back to diesel cars; and if he will make a statement on the matter. [53543/21]
In Finance Act 2019 I legislated for a CO2-based BIK regime for company cars from 1/1/2023. From that date the amount taxable as BIK remains determined by the car’s original market value (OMV) and the annual business kilometres driven, while new CO2 emissions-based bands will determine whether a standard, discounted, or surcharged rate is taxable. The number of mileage bands is reduced from five to four.
I believe that better value for money for the taxpayer is achieved by curtailing the amount of subsidies available and building an environmental rationale directly into the BIK regime. It was determined in this context that reforming the BIK system to include emissions bands provides for a more sustainable environmental rationale than the continuation of the current system with exemptions for electric vehicles (EVs). However, in light of government commitments on climate change, Budget 2022 extended the preferential BIK treatment for EVs to end 2025 with a tapering mechanism on the vehicle value threshold.
The BIK exemption forms part of a broader series of very generous measures to support the uptake of EVs, including a reduced rate of 7% VRT, a VRT relief of up to €5,000, low motor tax of €120 per annum, SEAI grants, discounted tolls fees, and 0% BIK on electric charging. The new BIK regime will commence on 1/1/2023 and from that date EVs will benefit from a preferential rate of BIK, ranging from 9 – 22% depending on mileage. ICE vehicles will be subject to higher BIK rates, up to 37.5%. This new structure with CO2-based discounts and surcharges will incentivise employers to provide employees with low-emission cars.