Fergus O'Dowd (Louth, Fine Gael)
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106. To ask the Minister for Finance to review as a matter of urgency the rates and tax relief changes that will commence on 1 January 2023 (details supplied); and if he will make a statement on the matter. [46098/22]

Alan Dillon (Mayo, Fine Gael)
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151. To ask the Minister for Finance the grants and benefit-in-kind rates that will take effect in 2023 for new battery electric vehicles; and if he will make a statement on the matter. [46360/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 106 and 151 together.

At the outset, the Deputy should note that recent Government policy has focused on strengthening the environmental rationale behind company car taxation. Until the changes I brought in as part of the Finance Act 2019, Ireland’s vehicle benefit-in-kind regime was unusual in that there was no overall CO2 rationale in the regime. This is despite a CO2 based vehicle BIK regime being legislated for as far back as 2008 (but never having been commenced). In Finance Act 2019, I legislated for a CO2-based BIK regime for company cars from 1 January 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. EVs will benefit from a preferential rate of BIK, ranging from 9 – 22.5% depending on mileage. Fossil-fuel 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.

I am aware, there have been arguments surrounding the mileage bands in the new BIK structure as they can be perceived as incentivising higher mileage to avail of lower rates, leading to higher levels of emissions. The rationale behind the mileage bands is that the greater the business mileage, the more the car is a benefit to the company rather than its employee (on average); and the more the car depreciates in value, the less of a benefit it is to the employee (in years 2 and 3) as the asset from which the benefit is derived is depreciating faster. Mileage bands also ensure that cars more integral to the conduct of business receive preferential tax treatment.

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). This will bring the taxation system around company cars into step with other CO2-based motor taxes as well as the long-established CO2-based vehicle BIK regimes in other member states.

In addition to the above and 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. This 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.

Finally, it should be noted that this new BIK charging mechanism was legislated for in 2019 and was announced as part of Budget 2020. I am satisfied that this has provided a sufficient lead in time to adapt to this new system before its implementation in 2023.

Neale Richmond (Dublin Rathdown, Fine Gael)
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107. To ask the Minister for Finance his views on the latest recommendations from the Commission on Taxation; and if he will make a statement on the matter. [46250/22]

Robert Troy (Longford-Westmeath, Fianna Fail)
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117. To ask the Minister for Finance his views on the taxation commission report; and if he will make a statement on the matter. [46048/22]

Mick Barry (Cork North Central, Solidarity)
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158. To ask the Minister for Finance the aspects of the recommendations of the recent Report on the Commission on Taxation which he supports; and if he will make a statement on the matter. [46197/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 107, 117 and 158 together.

The Commission on Taxation and Welfare was an independent group that was established in April 2021 as a result of a commitment in the Programme for Government. It was asked to independently consider how best the taxation and welfare systems can support economic activity, and promote increased employment and prosperity while ensuring that there are sufficient resources available to meet the costs of the public services and supports in the medium and longer term.

‘Foundations for the Future’, the Report of the Commission on Taxation and Welfare, was published on 14 September. It is a wide ranging report that contains over 500 pages and 116 recommendations relating to the future of our taxation and welfare systems.

The report poses serious questions that we as a society must carefully consider. The recommendations will foster real debate around how we reform our tax and welfare systems over the longer term in order to safeguard their sustainability and adapt to a rapidly changing environment. This important work is focused on the longer term and will contribute to debates on the optimal balance of taxation for many years to come.

It is clearly set out in the Commission’s report that the recommendations are not intended to be implemented all at once, but rather provide a clear direction of travel for this and future Governments around how the sustainability of the taxation and welfare systems may be improved in a fair and equitable manner.

The Commission’s recommendations are significant and wide ranging, and it is important to allow time for detailed consideration. As is acknowledged in the report, the recommendations come at a challenging time economically.

It is my intention to provide an initial response to some of the recommendations as part of the upcoming budget. It would not be appropriate for me to speculate on what specific elements of the report we might act on in advance of that process concluding over the coming weeks.