Seán Sherlock (Cork East, Labour)
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227. To ask the Minister for Finance the audit that has been carried out since 2019, 2020, 2021 and 2022 on the impact of benefit-in-kind changes in the Finance Act 2019 on notional pay and the subsequent knock-on taxation implications for workers in pay ranges (details supplied), in tabular form. [5279/23]

Seán Sherlock (Cork East, Labour)
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228. To ask the Minister for Finance the number of workers that have been impacted on changes in benefit-in-kind made in the Finance Act 2019, per county, in tabular form. [5280/23]

Seán Sherlock (Cork East, Labour)
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229. To ask the Minister for Finance if data is available on whether workers who avail of benefit-in-kind are better or worse off due to the changes introduced in the Finance Act 2019; and if emissions are up or down as a result of that change. [5281/23]

Seán Sherlock (Cork East, Labour)
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230. To ask the Minister for Finance if he plans to re-examine the benefit-in-kind changes introduced in the Finance Act 2019 due to higher emissions and costs to those workers. [5282/23]

Michael McGrath (Cork South Central, Fianna Fail)
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I propose to take Questions Nos. 227, 228, 229 and 230 together.

The Deputy should note at the outset that it is not possible from the data submitted to Revenue in respect of benefit-in-kind to identify specific statistics solely in relation to BIK on employer-provided vehicles, as the information submitted is not itemised based on the type of benefit granted.

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.

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 am aware that 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 that are 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 number 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 means that the quantum of the relief is phased down from €50,000 in 2022, to €35,000 in 2023, €20,000 in 2024, and €10,000 in 2025. 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 recent implementation.