Dáil Éireann - Volume 537 - 31 May, 2001

Written Answers. - Tax Reliefs.

85. Mr. N. Ahern asked the Minister for Finance if he will list and explain details of the tax concessions for taxi plate holders as included in the Finance Bill; if he will list the total value which can be claimed back in tax refund for each category of plate holder who bought a plate in recent years for the figures £80,000, £60,000, £50,000, £40,000, £30,000, £20,000 and £10,000; if he is disposed to allow taxi plate holders to purchase cars free of VRT for all taxis including wheelchair accessible taxis; and if he will enter into discussions with taxi groups in this regard. [16494/01]

Minister for Finance (Mr. McCreevy): Section 51 of the Finance Act, 2001, provides for the new scheme of capital allowances for expenditure incurred on the cost of taxi licences acquired on or before 21 November 2000. The allowances are effectively backdated with the cost being deemed to have been incurred on 21 November 1997 where the licence was purchased prior to that date.

The actual cost of the licence can be written off over five years at the rate of 20% per annum. The write-off will be allowed against the trading income only of the licence owner who drives the taxi. However, if additionally, the same vehicle is rented out on a part-time basis, then the cost can be written off against both the trading income and the rental income from the vehicle in question.

On the Committee Stage of the Finance Bill 2001, I introduced some further refinements to the provision as it then stood and these are now also reflected in section 51 of the Act. The objective was to address certain ‘hardship' cases that had been brought to my attention. Accordingly, section 51 also provides that: where a licence was inherited from a deceased spouse who carried on a taxi trade the licence holder may offset the capital expenditure incurred on the original acquisition of the licence against the rental income from the licence, even if there is no trading income from the licence. This measure will only be available in respect of one licence; in cases where inheritance tax or probate tax was paid in respect of a taxi licence, the value used for such tax purposes may be used instead of the actual capital expenditure cost, if that value is higher.

On Report Stage I further extended the provisions of section 51 to cater for the situation where a widow or widower, who has inherited the licence from his or her spouse, lets the licence to a third party who provides the associated vehicle.

The allowances for the tax year are deducted [975] from the profits of the taxi trade for that year. Where the allowances exceed the profits in a year, the excess is carried forward to the following year. Claims for the relief should be made to the individual's tax office. A claim should include the date the licence was acquired, the date the trade commenced and the cost of the licence. If a return of income has already been submitted in respect of any of the years the above details can be forwarded in support of a claim. Otherwise the details should be included with the return of income.

The value of the tax refund in respect of each of the amounts of expenditure mentioned will depend on a person's marginal rate of tax for each of the five tax years over which the allowance is claimed and the amount of income exposed to tax at that rate. The following table gives the refund of income tax available for the marginal rates of tax 22% and 44%, respectively, for 2000-01. A similar approach would apply for other relevant years up to the total of five years.

Expenditure

Allowance

@ 20%

Marginal rate

@ 22%

Marginal rate

@ 44%

80,000

16,000

3,520

7,040

60,000

12,000

2,640

5,280

50,000

10,000

2,200

4,400

40,000

8,000

1,760

3,520

30,000

6,000

1,320

2,640

20,000

4,000

880

1,760

10,000

2,000

440

880

It must be borne in mind that marginal rates of tax will vary with the particular year and the individual's circumstances. These refunds only apply where the full amount of the allowance is relieved at the marginal rate.

In relation to taxi plate holders being allowed to purchase cars free of vehicle registration tax, VRT – VRT is an important source of revenue for the Exchequer, especially given this Government's strategy of reducing other taxes – I have no plans to allow taxi plate holders to purchase cars free of VRT. There is the substantive problem in that any VRT concessions for taxis and hackneys would itself be costly and could lead to further revenue losses in respect of private cars, as vehicles could be passed through the taxi/hackney fleet to avail of any tax concession. VRT is paid on initial registration and does not require the retention of a vehicle for any time period.