Teleworkers may soon be exempt from BIK

16 Feb 2004

The Government has decided to use tax strategy as a means of encouraging the spread of computers and broadband, has learned. A section in the forthcoming Finance Bill provides for the exemption of benefit in kind taxes on equipment like computers, mobile phones and internet connections given by employers to employees engaging in teleworking.

Section 8 of the Finance Bill currently being worked through Dail Eireann provides for the exemption from income tax of benefits in kind (BIK) provided by employers to employees using computers, mobile phones and high-speed internet connections at home.

It is understood that by encouraging the adoption of these devices by employees will drive further use of teleworking and will have other knock-on benefits such as enabling the transfer of older computer equipment to local schools, libraries and community centres, as well as aggregating demand in urban and rural areas for faster and better broadband connectivity and services.

In addition, it is believed that the move towards exempting BIK among teleworkers in the Finance Bill will lead to eventual full tax credits for businesspeople and consumers who adopt broadband in order to drive up demand and encourage roll-out. If the BIK exemption is introduced as early as the next budget, it won’t be unlikely that in subsequent budgets the move could evolve to include tax credits for citizens as well as raising the BIK exemption bar for adopters of more advanced technologies and even faster connection services.

It is understood that the Finance Bill provides for BIK exemptions on connections of 250kb per second or higher – faster than existing dial-up connections and most ISDN connections.

However, it is believed that a report on broadband that is about to be published over the next fortnight by the Oireachtas sub-Committee on Communications and IT has called for the bar to be raised higher for high-speed connections, recognising that anything below 512kb per second is not broadband.

Speaking at a Dail debate on the Finance Bill last week, Cork Fine Gael TD Simon Coveney, who sits on the Oireachtas sub-committee, said of Section 8 of the Finance Bill: “This is a positive recognition by the Department [of Finance] that we should be using tax strategy as one of our tools to encourage increased use of IT equipment and upgrading of that equipment.”

He added: “The provision of computers with high-speed access in both business and households is essential. The key factors are availability, affordability and capacity of high-speed Internet connection. We are moving from an analogue society to a broadband one. That move has been slow and frustrated. As a result, Ireland has fallen behind some key competitors inside and outside Europe. We need to address that in the short term. We are doing so to some extent, albeit slowly. Section 8 of the Finance Bill is helping, but we should go further.”

First amongst Coveney’s concerns about Section 8 was the 250kb per second minimum that businesses must install for their employees to allow individuals to avail of the BIK exemption. “The Oireachtas sub-committee on IT has concluded deliberations and will produce a report in the next few weeks. It is no secret that we have concluded that anything less than 512 kilobytes is not broadband, and that 124 kilobytes to 256 kilobytes is DSL, with anything below that being ISDN or else analog. We need to constantly raise the bar in terms of broadband capacity. In Japan, which I am aware is an extreme example, 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-up to their employees’ houses, rather than an ISDN or DSL link.”

Coveney also argued that the exemptions should be spread further into Irish society. He said: “Though there is a good level of acceptance in this Bill of the need to provide, again through benefit in kind exemptions, computer equipment and high-speed Internet link-ups to people’s houses, we should perhaps go further. Telecommunications infrastructure and IT upgrade is so important to the Irish economy that we should look at more ambitious ways of offering tax incentives to households and communities as well as to business, in order to provide up-to-date IT equipment as well as broadband link-ups. I would like the Department to take a radical approach towards encouraging business, for example, to provide computers to local communities, schools and so on.

“I would like a tax system that would encourage computer scrappage schemes which could provide for the upgrading of computer equipment in schools, libraries, community associations and so on. With a little imaginative thinking, we could provide worthwhile incentives to businesses to do that and also close loopholes to prevent people abusing it.

“I would support giving tax breaks for specific reasons rather than taking a blanket approach. I do not buy into the concept that any tax breaks given will be abused by big business. I welcome the fact that the Minister has gone this far but I encourage him to be more ambitious in terms of assisting the Minister of Communications, Marine and Natural Resources in rolling out broadband by upgrading IT facilities for people, encouraging businesses to invest in their communities and offering them a tax break to do so,” Coveney concluded.

By John Kennedy