Tax on company cars causes increased carbon emissions!

I was speaking to a sales rep yesterday who was driving a company car. He told me about the Irish government’s scheme to tax people for receipt of company cars. It is called Benefit in Kind (BiK).

Basically, if your employer gives you a company car, you are liable to pay 30% of the original market value of the car in tax (the original market value includes the amount the government already collects in VRT!).

However, if you do more than 15,000 per annum, the amount of BiK you have to pay drops. The more mileage you do, the less BiK you have to pay (up to a ceiling at 30,000 miles).

Sounds fair, you might say. These people are using the cars the company gave them.

Possibly, until you realise that what this law does is incentivise company car owners to use their cars more to drive to meetings (for example) where they might otherwise have taken a more carbon friendly alternative (telecon anyone?). The rep I was talking to said he will preferentially drive anywhere to get his mileage up!

If you want to tax company cars, why not do it on the basis of their carbon footprint (or engine size if that rating isn’t easy to come by). Something like €500 for cars 1.6L and less; €2,500 for 1.6L to 2L; €6,000 for 2L to 3L and €12,000 for 3L and above index linked.

7 thoughts on “Tax on company cars causes increased carbon emissions!”

  1. If you really wanted to use tax in relation to company cars to reduce carbon, you would get rid of any allowance for company cars altogether. This would encourage minimal use, and would discourage people from using cars more than they really need to.

    As a replacement, you would have an allowance of 65 cents/km for land transport, regardless of the means used (public transport, walking, etc.). You would also be allowed for tolls and parking.

    For extra points, I would reduce the cost of the initial NCT test, to encourage car owners to retain their cars for longer.

  2. It’s not really that simple guys. It tends to cloud the issue when one only talks about company cars but BIK affects people with company vans also – people like field engineers who really don’t have a choice about whether or not they can drive. Granted the BIK on a company van (as long as it is a commercial vehicle) is a relatively small amount but still it is a tax on the individual irrespective of whether or not the decide to use the vehicle for personal use also. The BIK on “cars” is far steeper and as you rightly point out Tom it encourages folk to drive more to extract maximum benefit from the tax. However, yet again, people like sales reps, etc don’t get a choice in whether or not they can drive and are forced to use said company vehicles, again irrespective of whether or not they gain personal mileage also.

    Antoin, I like the suggestion of free tolls and such in return for low mileage but it’s a bit idealistic for Ireland I think. The government in this country has constantly shown that it is more concerned with additional taxation rather than carbon footprint reduction. People will always find a way to pay a tax but reducing emissions is not always so easy.

    Tom, taxing cars in general on carbon footprint is a fantastic idea and I have often suggested it in the past to local politicians but you know who these things go if they require effort (sigh). I’d stay away from the whole engine size thing as we all know that it’s not an accurate indicator of carbon emissions depending on the state of the engine. Plus remember the comparable madness of Dublin City council wanting to charge for parking based on engine size initially.

    In general, BIK is a disaster. As usual, something that was brought in to prevent a few from reaping invisible benefits from companies outside of the tax loop is penalising so many ordinary folk who really don’t have a choice in accepting a company vehicle for their work. For vehicles, there’s no way to accurately determine the benefit if any to employees: mileage figures can be fiddled, personal usage is very subjective, if somebody has a two-seater commercial car-van then their not really going to be using it to bring the family on a road trip. As you said already Tom, this tax is on top of VRT, an illegally enforced tax if you ask me. There were EU bills approved that stated taxes such as VRT should not be allowed as they prevented cross-border/open-markets and Ireland was granted a derogation at a time of poor economic climate. Sadly as the economy improved the derogation was never removed. 🙁 We need another “axe the tax” campaign.

    Sorry for eating so much of your page space Tom, you just caught me on a hobby horse topic. 😉

  3. I think thats an excellent idea. I have just finished reading “The Weather Makers” by Tim Flannery while on holiday and am suddenly much more aware of the number of SUVs on the road and wondering what can be done. A tax on Carbon Footprint seems like an option that should be explored.

  4. A Carbon Tax is a Joke all round in my opinion, i just penalises people for the governments lack of public services, for instance an carbon tax on a car will only hurt the person how can’t afford to buy a house in the city but has to drive the 20-50 miles each way to work.

    As Jonathan has said the government is not interested in reducing carbon emmissions, only in the taxes it can impose on the people.
    The main pollutors are the commercial industry and if anything these are the only sector that should be Taxed.

    If the government really wanted people to have a smaller carbon footprint then they should but insentives (i.e tax cuts) in place for car manufacturers and other manufacturers to use greener technology instead of taxing the people who in general can’t afford it!

  5. If you want to encourage politicians to lead from the front, then put a ceiling on the expenses reimbursed as a function of engine size. At the moment, the govt pays you more per mile based on the displacement of your motor. Why not tell all elected politicians and civil servants that the expenses paid for mileage will be at the 1.2 litre reimbursement rate? I think a lot of benefit would accrue from that regulation.

  6. Yeah thats a good idea, But can you see politicians voting that in!!! Politicians much rather voting for pay rises and such!

  7. Really good idea and usually something that would be used on a election trail and then promptly forgotten after they win power.

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