Flexible incentive for the return of the office commute

The new proposals for the upgrade to the road between Cork and Limerick include the notion of promoting “active travel” – cycling and walking. Nudging people towards options which don’t involve the use of fossil fuels is no longer just politically correct. 

In an era of climate change, it is imperative. We have to be prompted to take wider considerations such as the good of the environment into the decision-making process.

Irish people are fond of tax incentives, and tax incentives of various types have been used over many years to change our decisions about travel and especially how we choose to commute. 

The annual motor tax and the system of vehicle registration tax are regularly adjusted to favour less polluting vehicles.

Even the ban within the tax system to “salary sacrifice”, the practice of substituting cash wages for some other less readily taxable benefit, is suspended when it comes to options for commuting. 

Under the Cycle to Work scheme, employers are allowed to provide bicycles and e-bikes to their employees paid from the gross wages of their workers, which can result in substantial tax savings for some employees.

Travel vouchers

 Employees are also permitted to use travel vouchers paid out of their gross salary under the Tax Saver Commuter ticket scheme, again with tax savings.

It is not clear how effective these incentives have been in changing commuting behaviour in the past. 

A detailed study carried out by the Department of Transport late last year on the Cycle to Work scheme examined the shift in commuting habits as reported in census figures. The report concluded that the increase in commuting by bicycle was not in direct proportion to the number of claimants under the Cycle to Work scheme. 

However, the report found that the estimated exchequer cost of running the scheme at some €4m per annum is tiny relative to the overall tax take. It’s a socially useful benefit at a modest cost.

The impact of the Tax Saver commuter tickets is even harder to judge given the distortions of the pandemic. 

Many workers no longer had to commute to their office jobs, and therefore the Tax Saver system ceased to be of any benefit. 

As people now return to their workplaces perhaps for only a few days a week, should there be cheaper, more flexible, and tax efficient commuter tickets available?

I gather that the Department of Transport is examining the situation, and for once the problem does not lie with inflexibility in the tax system. The Tax Acts don’t insist that travel vouchers have to be for everyday use to be effective in reducing the person’s tax bill. Instead, the issue seems to lie with the logistics of developing readily usable and enforceable two-day or three-day weekly passes.

It is understandable if there is some official reluctance to commit significant time and resources to developing a solution for what may only be a temporary phase of partial return to offices and other workplaces. There is also an argument that if commuting is only required one or two days a week, it might not be an efficient use of public funds to subsidise these relatively modest costs, particularly as a temporary 20% reduction in all public transport fares is being introduced to help counter the inflationary pinch.

However it would be unwise to overlook any opportunity to reinforce the importance of the public transport system in addressing climate change. An efficient and tax subsidised flexible commuter ticket could be very effective in doing that.

  • Brian Keegan is director of public policy at Chartered Accountants Ireland

Leave a Reply

Your email address will not be published. Required fields are marked *