Government may offer tax incentives to broadband users

24 Feb 2004

As early as the next Budget, it may be possible that individuals that choose to work remotely or from home using the latest computers, mobile phones and high speed broadband connections could be exempt from benefit in kind taxation.

Its supporters in Government and politics are lauding the move as a “foot in the door” of a broader strategy that may see within the next few years all citizens that use computers and broadband connections at home enjoying tax free allowances on the equipment they have purchased and the cost of connectivity.

According to Section 8 of the Finance Bill 2004, which had its second stage reading by Finance Minister Charlie McCreevy TD in the Dail recently, workers using mobile phones, computers and high speed internet connections provided by an employer to an employee in their home for business use could be exempt from benefit in kind (BIK) within their PAYE tax payments.

The move follows years of lobbying by TDs and civil servants for the Government to come up with the kind of measures that will “aggregate demand” for faster and faster broadband services in urban and rural areas and forms the basis of one of the recommendations of a report due out by the Oireacthas sub-Committee on IT on how to drive broadband adoption in Ireland in the months and years ahead.

According to the chairman of the Oireachtas Committee on Communications, Cork Fianna Fail TD Noel O’Flynn, the idea is to ensure that a bar is raised in terms of the standard of broadband services available to people who want to work from home. “I’m glad that Minister McCreevy has recognised the importance of the need to grow the use of internet and computer usage in the home and included it in the Finance Bill. This is only the beginning and when our report is published I hope that the Minister will look at extending the scheme to include individuals who use broadband and computer at home in the form of tax breaks that would encourage people to buy equipment and connections,” O’Flynn said.

The strategy, it is believed, will also have other knock-on community benefits in the form of encouraging businesses and workers availing of the tax breaks to embark on scrappage schemes that would result in computers being donated to local schools, libraries and community centres. Supporters of the move believe that the advent of tax breaks on technology could spark the imagination of Government to offer worthwhile incentives to businesses that donate technology to the local community.

The strategy, it is believed, has been inspired by the example of Sweden, which in 2001 introduced a 50pc tax relief for broadband subscribers whose spend exceeds €871. For urban networks and property networks where spend on broadband networks exceeds €348,000, businesses and municipalities could obtain tax relief of 10-15pc of their investment.

However, locally there are problems looming on the horizon in terms of the effectiveness of the measures to drive demand for more and more sophisticated connection technologies. For example, under Section 8, BIK exemptions will not be available for teleworkers with connections less than 250Kb/s – that’s faster than existing dial-up connections and most DSL and ISDN connections. In the forthcoming report from the Oireachtas sub-Committee on IT, it has been concluded that anything less than 512 kilobytes per second is not broadband and that 124 kilobytes to 256 kilobytes is DSL, with anything below that being ISDN or analog.

Speaking on the issue in the Dail recently, another Cork TD and another member of the Oirechtas sub-Committee on IT, Fine Gael’s Simon Coveney remonstrated: “We need to constantly raise the bar in terms of broadband capacity. In Japan, consumers have 26 megabytes available should they choose to access that capacity.

“We should not be disadvantaging companies who provide employees with DSL links to their households, but we should try to grade it to encourage companies to provide a broadband link to their employees’ houses, rather than an ISDN or DSL link,” Coveney said.

Despite the looming debate about what constitutes broadband, going forward O’Flynn and his fellow committee members are nevertheless pleased to have succeeded in bringing the objective of tax breaks on computers and connectivity to a legislative level. “It’s essentially a toe in the door and it is obvious to me – through the attendance of the secretary general of the Department of Finance David Doyle at Oireachtas Committee meetings on the issue – that the Department is favourable to the idea of tax breaks for computers and broadband and is very much clued in to the importance of driving a knowledge-based economy.

“It will begin with BIK and we are confident that over time that exemptions and tax breaks will be created to private individuals also,” O’Flynn concluded.

By John Kennedy