Jennifer Murnane O'Connor (Carlow-Kilkenny, Fianna Fail)
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209. To ask the Minister for Finance if he will reconsider the benefit-in-kind changes introduced in budget 2023; if any separate arrangements or grants have been made available for those in the taxi industry; and if he will make a statement on the matter. [2644/23]

Michael McGrath (Cork South Central, Fianna Fail)
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Recent Government policy has focused on strengthening the environmental rationale behind company car taxation. Until the changes 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, a CO2-based BIK regime for company cars was legislated for from 1 January 2023. From the beginning of this year, the amount taxable as BIK is determined by the car’s original market value (OMV) and the annual business kilometres driven, while new CO2 emissions-based bands determines whether a standard, discounted, or surcharged rate is taxable. The number of mileage bands has reduced from five to four.

In certain instances, this new regime will provide for higher BIK rates, for example in relation to above average emissions and high mileage cars. It should be noted, however, that the rates remain largely the same in the lower to mid mileage ranges for the average lower emission car. Additionally, EVs benefit from a preferential rate of BIK, ranging from 9 – 22.5% depending on mileage. Fossil-fuel vehicles are subject to higher BIK rates, up to 37.5%. This new structure with CO2-based discounts and surcharges is designed to incentivise employers to provide employees with low-emission cars.

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 brings 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.

It is important to note 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 recent implementation.

Finally, on the issue of BIK and taxis, it should be noted that where a taxi driver is an employee and has an employer provided vehicle made available to him or her for private use he/she will be subject to BIK on the provision of same, as outlined above. Otherwise, it should be noted that the BIK regime does not apply to self-employed taxi drivers who operate their own taxi business.

Finally, I am advised by Revenue that further information on the taxation of employer-provided vehicles is included in Tax and Duty Manual Part 05- 01-01b, which is available online.

Pearse Doherty (Donegal, Sinn Fein)
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210. To ask the Minister for Finance if a special needs assistant is not a qualifying or eligible profession for flat-rate expense allowances; if so, the reason this is the case; and if he will make a statement on the matter. [2681/23]

Michael McGrath (Cork South Central, Fianna Fail)
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The legislation governing the deductibility of expenses incurred in employment is set out in section 114 of the Taxes Consolidation Act 1997 (TCA 1997), which provides that for an expense to qualify as a deduction against income from an office or employment, the expense must be wholly, exclusively and necessarily incurred in the performance of the duties of the office or employment.

I am advised by Revenue that the flat rate expense (FRE) regime it operates is done so on an administrative basis where both a specific commonality of expenditure exists across an employment category and the statutory requirement for the tax deduction as set out in section 114 of the TCA 1997 is satisfied, namely, that the expenses are wholly, exclusively and necessarily incurred in the performance of the duties of the office or employment by the employee concerned and that such expenses are not reimbursed by his or her employer.

The FRE regime was established to apply a uniformity of approach to tax deductibility for expenses of large groups of employees and to facilitate ease of administration for both Revenue and employees. The expense should apply to all employees in that category and not be discretionary.

Revenue has advised me that it will consider FRE applications where a large number of employees incur broadly identical qualifying expenses which are not reimbursed by their employer. Applications are generally made by the representative bodies in the employment sectors concerned and are considered by Revenue based on the specific commonality of expenses within the employment category and compliance with the strictly applied statutory requirement for a tax deduction.

As matters stand at present, Special Needs Assistants (SNA's) do not come within the scope of the FRE regime. Revenue has confirmed that a submission was received from a representative body for SNA's some time ago. However, it did not contain specific details of the expenses and costs incurred by SNA's and despite requests from Revenue to provide same, the details to assess such a claim in respect of a specific FRE category was never received. I am further advised, that should Revenue receive a submission from representatives for SNA’s, outlining details of expenses which satisfy the legislative conditions, that it will be considered.

Finally, Revenue advises me that it remains committed to the FRE regime and encourages all taxpayers to avail of their full tax relief entitlements. It should be noted that all employees retain their statutory right to claim a deduction under section 114 of the TCA 1997 in respect of an expense incurred wholly, exclusively and necessarily in the performance of the duties of their employment, to the extent to which such expenses are not reimbursed by the employer.