Dáil Éireann Debate, Wednesday - 18 September 2024
175. Deputy Mairéad Farrell asked the Minister for Finance the reason for higher earners receiving greater tax relief than lower earners on the cycle-to-work scheme; if he has any plans to amend the progressivity of the scheme; and if he will make a statement on the matter. [36335/24]
Amharc ar fhreagraSection 118(5G) of the Taxes Consolidation Act 1997 (TCA) provides for the Cycle to Work Scheme. This scheme offers an exemption from benefit-in-kind (BIK) where an employer purchases a bicycle and/or associated safety equipment for one of their employees (or directors) to use, in whole or in part, to travel to work. Associated safety equipment may include items such as helmets, lights, bells, mirrors and locks.
The amount of exempted expenditure depends on the type of bicycle purchased and includes related safety equipment. Since 1 January 2023, the scheme applies to the first:
• €3,000 of expenditure in relation to a cargo or e-cargo bike;
• €1,500 of expenditure in relation to a pedelec or e-bike; or
• €1,250 of expenditure in relation to any other type of bike.
Under section 118B TCA, the employer and employee may also enter into a Revenue-approved salary sacrifice arrangement under which the employee agrees to sacrifice part of his or her salary in exchange for a bicycle and/or related safety equipment.
The benefit-in-kind arising from the provision of a bicycle and associated safety equipment by an employer to an employee, is exempt from income tax, PRSI and USC under the Cycle to Work Scheme. Tax, at whichever rate the taxpayer would otherwise be liable to pay, is therefore not payable on the value of the bicycle and associated safety equipment. Although those individuals liable to tax at the higher rate will, as a result, effectively get tax relief at that rate, generally over the course of the tax year they will pay a significantly greater amount of income tax than individuals that are liable to the standard rate of tax. This is due to the progressivity of the Irish personal income tax system.
The Cycle to Work Scheme was implemented as a tax exempt benefit-in-kind in order to keep the implementation of the scheme as simple as possible and reducing administration on the part of employers. The scheme operates on a self-administration basis, and so relief is automatically available provided the employer is satisfied that the conditions of their particular scheme meet the requirements of the legislation.
While the Cycle to Work scheme is kept under review by officials, I have no plans at present to amend the scheme.
Finally, I would note that Ireland has among the most progressive systems of taxes and social transfers of any EU or OECD country. These systems contribute to the redistribution of income and to the reduction of income inequality in Ireland. Ireland’s progressive income tax system generally ensures that the burden of taxation falls most heavily on those with a higher ability to pay. This means that those on lower incomes pay less income tax as a share of their income than those on higher incomes. It is my view that a broad-based, progressive income tax system, where the majority of income earners make some contribution but according to their means, is the fairest and sustainable income tax system in the long term.
