The Department of Finance says there are no plans to change the method by which company car drivers are assessed for Benefit-in-Kind (BIK) tax, despite a Fine Gael claim that taxing company car drivers on the basis of mileage instead of carbon emissions is pushing up Ireland's carbon emissions, contrary to the Kyoto agreement.
Under the current BIK system, the more miles company car drivers cover in the course of their work, the less BIK tax they pay. Fine Gael's Transport spokesperson Olivia Mitchell says that system needs to be overhauled.
"Using overall mileage is only a very crude attempt to calculate private benefit," she says. "It militates against city drivers and precludes any attempt by company car drivers to minimise mileage. At the very least this method of calculating should only be a part of how benefit is calclulated.
"There should be some attempt to encourage fuel efficiency and carbon tax reduction in calculating the benefit to be paid."
Basing the tax on mileage rather than emissions has a further negative effect, in that it discriminates against urban drivers particularly those in Dublin says Paul Kavanagh, sales director for a major pharmaceutical company in Ireland which runs a fleet of company cars. He claims congestion in Dublin means drivers in the capital are paying between two and four thousand euro a year more from their net salaries in BIK.
"For a Mercedes C180 costing €42,720 an employee travelling over 30,000 miles pays €1,107 net in BIK. A Dublin sales rep travelling half that mileage pays €4,429 BIK out of net salary.
"The two reps might spend the same amount of time in their cars for work, but because of the traffic in Dublin the difference in BIK could be up to €3,300. For a Mazda 626 costing €29,500 the difference between the two drivers BIK is nearly €2,300."
Shane Dowling is general manager for J&P Fleet Management, one of the biggest vehicle leasing companies in the country. He says switching to a carbon emissions-based system won't take the pain out of paying benefit-in-kind for company car drivers, but it will at least allow them to have a say in how much they pay: "Benefit-in-kind is unfair in that it is tax paid upon a tax. Already the government has taken huge amounts of the price of the car in the form of VRT and VAT.
"However, BIK is not based on the original price of the car, but on the open market selling price. The government is already giving concessions to run hybrid cars that run on both petrol and electricity. Why not move the whole process towards a carbon emissions-based system?"