Michael Ring (Mayo, Fine Gael)
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281. To ask the Minister for Finance if he will reconsider the BIK rate change coming into effect in January 2023, in view of the impact that it will have on employees who have no choice but to use a company car, particularly in view of the current cost-of-living crisis; and if he will make a statement on the matter. [54934/22]

Gino Kenny (Dublin Mid West, People Before Profit Alliance)
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282. To ask the Minister for Finance if he will review tax increases for BIK tax on company cars (details supplied). [54986/22]

Neale Richmond (Dublin Rathdown, Fine Gael)
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293. To ask the Minister for Finance his views on whether the benefit-in-kind for electric vehicles category A should be for cars with zero emissions, category B should be 1-59g/km and so on, in order to encourage more electric vehicles on the road; and if he will make a statement on the matter. [55445/22]

Duncan Smith (Dublin Fingal, Labour)
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294. To ask the Minister for Finance if his Department has carried-out an impact assessment of the financial implications of introducing BIK for electric vehicles; and if he will make a statement on the matter. [55456/22]

Duncan Smith (Dublin Fingal, Labour)
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295. To ask the Minister for Finance if his Department has carried-out an impact assessment of the financial implications of increasing interest rates on BIK, in view of the current inflation and fuel crises; and if he will make a statement on the matter. [55457/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 281, 282, 286 and 293 to 295, inclusive, together.

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%. In terms of impacts, broadly speaking this means that higher emission vehicles will experience BIK increases versus the 2022 year of assessment, while lower emission vehicles will experience a lower BIK liability depending on mileage levels. This new structure with CO2-based discounts and surcharges is designed to incentivise employers to provide employees with low-emission cars. 

The rationale behind the mileage bands in the new BIK structure is to acknowledge 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.

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.