Committee on Budgetary Oversight debate -
Wednesday, 21 Mar 2018

Tax Relief on Trade Union Subscriptions: Fórsa

Chairman

I remind members and witnesses to turn off mobile phones. Interference affects the sound quality. I welcome Mr. Joe O'Connor, Fórsa's lead organiser. He is accompanied by Mr. Jerry King, Ms Sarah Clarke and Mr. Shay Cody. The purpose of the meeting is to discuss the issue of tax relief for trade union subscriptions. I thank the witnesses for writing to the committee and for making themselves available to us. This matter was raised by Deputy Lisa Chambers and it is something that we are anxious to hear and talk to the witnesses about today. Evidence considered today will form part of the committee's broader discussion over the coming months of options for budget 2019.

I draw the attention of witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.

I ask Mr. O'Connor to make his opening statement.

Mr. Joe O'Connor

I thank the Chairman and the committee for the invitation. On behalf of Fórsa trade union, I will read our statement on this issue and then I will hand over to Ms Clarke and Mr. King, who are two members of our union from Mayo and Kildare, to summarise this issue.

The amalgamation to create Fórsa trade union came into effect on 2 January 2018, bringing together the 80,000 members of the former Irish Municipal, Public and Civil Trade Union, IMPACT, Public Service Executive Union, PSEU and Civil and Public Services Union, CPSU, unions to form the largest public service union in the State. We represent working people in the health service, the Civil Service, local authorities, the education sector, the community and voluntary sector, State and semi-State agencies, commercial services as well as private companies such as in aviation and telecommunications.

Although our union has been invited to present to the committee today on this issue, it is important to note that this campaign has been formally supported by the Irish Congress of Trade Unions, ICTU, as well as many individual unions, including the Services, Industrial, Professional and Technical Union, SIPTU, the Irish Nurses and Midwives Organisation, INMO, the Irish National Teachers' Organisation, INTO, the Irish Federation of University Teachers, IFUT and the Financial Services Union.

In 2001, in recognition of the key role trade unions play in Ireland in delivering economic and social cohesion for wider society and fair play for workers, the then Minister for Finance, Charlie McCreevy, introduced a flat rate tax relief on trade union subscriptions of £100 per year at the standard rate of tax. The introduction of this tax relief was only starting to bring union members into line with the position of those paying fees to professional bodies, who had long enjoyed full tax relief on their subscriptions at the marginal rate of tax. To more accurately reflect the cost in real terms of trade union membership, this relief was increased incrementally between 2001 and 2008, when it was €350 at the standard rate of tax. In effect, this was a tax credit of €70 for all trade union members in the country.

In budget 2011, the then Minister for Finance, Brian Lenihan, announced that he intended to abolish the tax reliefs on trade union subscriptions, as well as those to professional bodies. This was part of a review of all tax reliefs as part of the Government’s response to the economic crisis. Indeed, because of the very fact of that crisis, the trade union movement did not campaign on this matter. However, when the Finance Bill 2011 was published, it became very clear that while the tax relief on union subscriptions was to be abolished, the tax relief on subscriptions to professional bodies was not. This followed a sustained lobbying campaign after the budget by professional bodies and business organisations such as Irish Business and Employers' Confederation, IBEC, the Association of Chartered Certified Accountants, ACCA, the Institute of Banking, the Institute of Directors in Ireland, the Marketing Institute of Ireland and the Professional Insurance Brokers Association, among many others.

Instead, the then Minister decided to abolish the benefit-in-kind, BIK, exemption that allowed employers to pay the annual membership fee of a professional body where membership of that body by a director or employee was relevant to the business of the employer. This was a different decision from the original and was not the same as abolishing the tax relief on subscriptions to professional bodies generally. This proposal only applied to directors and employees but not to the self-employed.

Following the lobbying campaign, the decision to abolish the BIK exemption on subscriptions to professional bodies led to Revenue issuing a clarification as to how it would interpret the Finance Act 2011, the net result of which I will now outline.

Tax relief on expenses paid by the self-employed, including membership of professional bodies, continues as before and is granted at the individual's marginal tax rate. This also exempts income from the USC and PRSI. Professional fees paid by employers on behalf of their employees to many professional bodies may continue to be paid tax free. Businesses can receive full relief on subscriptions to bodies such as IBEC and ISME. However, subscriptions paid by trade union members do not qualify for tax relief anymore. Even when they did, the relief was only at the standard rate while PRSI and other levies applied to those payments. This situation, which still applies today, is clearly discriminatory, given that the existence of a tax relief on trade union membership is as relevant to us as tax relief on membership is to professional bodies. In addition, there is no justification for denying tax relief on trade union subscriptions when the self-employed and members of some professional bodies have this facility.

What is particularly galling is that this discrimination goes further than just membership of professional bodies. The Irish Farmers Association, IFA, which is the largest representative body for Irish farmers, advises its members on the basis of professional advice it has received that farmers, as self-employed traders, can claim tax relief on their IFA subscriptions as well as their subscriptions to the Irish Farmers' Journal because those are beneficial to their trade. This clearly does not meet the test provided by Revenue's clarifications, which justified the retention of tax relief for professional body members but not for members of trade unions by outlining that there should be a requirement for a practising certificate or licence, a statutory requirement or an indispensable condition of employment. If tax relief for the self-employed, such as farmers, is granted to their respective membership organisations on the basis that it is beneficial to the trade, tax relief for the thousands of working people whose trade union membership brings about a clear and tangible benefit to their professions should surely receive equal and fair consideration for tax purposes. For example, the training provided by our union to our more than 8,000 members working as special needs assistants, SNAs, is invaluable to their work. Health and social care professionals represented by Fórsa have access to legal advice and representation through their union in the event of a fitness-to-practise case that would be financially inaccessible otherwise. This is in addition to the practical training supports in areas as varied as job evaluation, interview skills and public speaking provided to our members as well as our core services of professional representation and collective bargaining and negotiation.

It is clear that farmers, the self-employed and employees of certain professions can get tax relief for their subscriptions while trade union members cannot. It is also worth pointing out that Ireland's position of not providing this relief to trade union members is out of step with the practice in many other countries. In Germany, a trade union membership fee is classified as a professional body fee and can be declared as a professional expense in a person's tax return. In Belgium and Holland, trade union members can get 50% of their union subscriptions back in tax relief. In Norway, tax relief of €400 per annum is allowed for union subscriptions and tax relief on union subscriptions applies in Australia and Canada. Many countries that we generally look to compare ourselves to recognise the importance of union membership to their societies and seek to create a level playing pitch in terms of tax relief for membership subscriptions. Why does Ireland not do so, too?

The trade union movement had decided to hold off on pursuing this issue in recognition of the economic crisis that had hit the country. In the run up to budget 2016, however, and given the much more favourable economic circumstances, congress worked to have this discrimination and anomaly addressed. That budget contained a commitment to conduct a review of, and a public consultation on, the appropriate treatment of tax reliefs for membership fees of trade unions and professional bodies. This process was supposed to take place in 2016. Unfortunately, no public consultation ever took place. What actually happened was that the Department of Finance, without any public input, undertook a review of tax reliefs. Due to the Department's innate hostility to tax reliefs, that review unsurprisingly did not support the reinstatement of the tax relief on union subscriptions. The Department concurred with the 2009 report of the Commission on Taxation, which recommended that the relief be discontinued on the basis that, since membership of a trade union was likely to be influenced by the benefits of membership, the value of a tax credit was unlikely to be a factor. We agree on that point. The trade union movement never pursued this matter on the basis that it would have any material effect on the levels of trade union membership, but because the existence of a tax relief on membership subscriptions was as relevant to trade union members as it was to professional bodies. We are seeking equity for our members.

Now that the economic crisis is over, the trade union movement is actively pursuing the restoration of the tax relief on union subscriptions and the ending of the obvious discrimination against union members compared with the position of self-employed people, members of certain professional organisations, farmers and businesses. Ireland is out of step on this issue with many of our friends and neighbours, who recognise in practical terms the important role that unions play in our societies. It is time for this discrimination to end and for tax relief on trade union membership to be restored.

We are seeking the committee's support on this issue in order to address the clear inequity and discrepancy created in 2011 in the taxation treatment of different groups in society. Nurses, SNAs and care workers should not be treated unfavourably in this manner compared with solicitors and accountants. The training, services and representation that are beneficial to the professional lives of many thousands of working people should not be held in less regard than similar benefits availed of by the self-employed through their membership organisations.

We are seeking the committee's support to put PAYE workers who are members of unions on an even keel with the self-employed and members of professional bodies as well as with their trade union compatriots in Australia, Canada and several European countries. Unlike those representing professional bodies, great restraint was shown by the trade union movement in Ireland on this issue in the teeth of the worst economic crisis to hit the country in generations. Reinstating this relief would be an important statement in recognition of the important role played by trade unions in Irish society and a small gesture to the members of trade unions who made significant sacrifices during the recent economic crash.

I will hand over to Mr. King and Ms Clarke, who would like to say a few words to conclude our opening statement.

Ms Sarah Clarke

I thank committee members for this opportunity. I am a member of the in-house committee in Institute of Technology, Carlow, as a Fórsa representative, so I am speaking on behalf of our members there, who are predominantly women.

Since 2011, we have taken significant pay cuts and have seen our sick leave halved, holidays reduced and working week extended, all of which has a financial cost for members, many of whom are the sole wage earners in their households and also have caring responsibilities in respect of small children or elderly parents. We are seeking parity of esteem. It is inconceivable that one can claim tax relief if one is a farmer and subscribed to the IFA, a member of a professional body or even a business with an IBEC or ISME subscription when a member of a trade union, which is the negotiating body for our sector and is valuable to us as the means through which we do our business, receives no recognition in that regard. I would put the case from that point of view and from the perspective of people on the ground who are not earning large salaries, are committed trade unionists and believe that their trade union is of significant benefit to them in their working lives, not just in terms of training, but also in terms of upskilling, which we are all being asked to do in these times.

Mr. Jerry King

Like Ms Clarke, I am a public servant. I work in the Castlebar library in County Mayo and in any other library within the county to which I am sent on a daily basis. I am also an activist with Fórsa. On behalf of the members who are covering for me today, I thank our Deputies who are on this committee - Deputies Calleary and Lisa Chambers - for their professional and courteous reception and hearings on this matter to date. The rest of the committee's members have been equally courteous and professional with those of our members who have approached them. I thank them for that.

From my point of view and that of those whom I represent in this and other unions, our business today is precisely what all of us and every committee member seeks, namely, equity and fairness. It is as simple as that. I ask that the committee consider the initial reason for the 2001 introduction of tax relief on trade union subscriptions. As the then Minister stated, it was done to recognise the key role that the trade unions played in delivering economic and social cohesion for the wider society and fair play for members.

We all know what happened after that eight years later and how ordinary people and workers, especially lower paid workers, suffered. It is easy, looking back, to forget the critical role that Irish trade unions played during the economic disaster and the subsequent recovery. There were many arguments within the trade union movement, but it decided ultimately to work with Government and not against it. Public servants continued to deliver excellence, and new innovations were brought in that in many ways are far ahead of the public services in other countries. That is certainly the case in the library service I work in.

The then Minister for Finance was entirely correct. The trade unions have a key role. Another Minister for Finance abolished the relief in 2011. We all know why that happened, and we had to accept that in the interests of the greater good at the time. This hurt workers, on top of all the other cuts, but we understood and were patient, and we waited our turn. We waited eight years, and we made submissions through the Irish Congress of Trade Unions, ICTU. Our members are now energised about this, and it is gaining traction. They are saying that it is a matter of fairness in society and for workers, and it is about recognising their contribution. We now want the relief to be restored. It is a matter of fairness. We believe in fairness, and I am convinced that public representatives of every party actually believe in fairness too.

Deputy Michael McGrath

I welcome all our witnesses and thank them for their opening statements, and for providing the submission in advance. I want to clarify how the current system works. We are clear on the position of union subscriptions, the tax relief for which ended in 2011. The example of a self-employed person, a farmer, was given. A trade union subscription is a deductible expense for a farmer in his or her tax return. It is not an income issue because they pay themselves a salary, but rather is a deductible expense and so it is at the marginal rate in terms of the tax deductibility. For an employee working for a company, where the company pays for his or her subscription to an engineers' institute, a tax institute or an accountancy institute the employee is not subject to BIK on that. Is that the case currently?

Mr. Shay Cody

Yes.

Deputy Michael McGrath

Does the employer also get a tax deduction? Is it a deductible expense?

Mr. Jerry King

Effectively, it is a deductible expense.

Deputy Michael McGrath

It is a deductible expense for the employer on its own financial statements, and the employee does not pay BIK. A Revenue guidance note was issued in January of this year that tightened up on the test that has to be applied in terms of the wholly, exclusively, necessarily test. Is the witness familiar with that?

Mr. Shay Cody

I am familiar with that test.

Deputy Michael McGrath

What was the effect of that change in practice? My understanding is that it must be a condition of an employee's employment that he or she is a member of a professional body for this BIK exemption to apply.

Mr. Shay Cody

If we take the institute of engineers, for example, all that is required is for the employer to say that it is a requirement for a person to be a member of the institute so that he or she can do his or her job. The employer can pay the subscription and everyone is happy, because-----

Deputy Michael McGrath

It is tax free for the employer.

Mr. Shay Cody

It is a tax free benefit for the employer. The traditional distinction between the tax treatment of self-employed versus PAYE workers was that it had to be wholly, exclusively and necessarily a requirement for a PAYE worker. "Necessarily" was never a requirement for the self-employed. In a business situation, however, it can be easily agreed that it is necessary. If a company was pitching for business it would use the fact that somebody was a member of the professional body as part of its pitch for business, which then meets the "necessarily" camp, and it can be written off as an expense.

Deputy Michael McGrath

Now, in March 2018, Mr. Cody is saying that the requirement is really only that the employer sign off that the membership of a body is necessary and that the exemption then applies.

Mr. Shay Cody

That is correct.

Deputy Michael McGrath

What is the position for an employee where the employer does not pay the subscription and the employee is paying his or her own subscription?

Mr. Shay Cody

If, for example, one is a social worker and has to pay a professional registration fee in order to practice the profession - in other words, if it is a requirement - that can be written off against tax. However, unless one has a closed shop for a trade union the same does not apply; no tax is claimable in those circumstances. Ironically, given the approach of the Revenue, if it was a mandatory trade union membership situation - which is very rare - a person could legitimately claim it because it is necessary for the purposes of working in one's employment.

Deputy Michael McGrath

The witness has outlined the existing legal position.

Mr. Shay Cody

All we are seeking to do is to go back to the position that existed from 2001 to 2011, through various Governments. There was a recognition that this was a social good and that a relatively modest sum of money was taken as a strain on the part of the Revenue and the State.

Deputy Michael McGrath

Is it the case that there are many thousands of employees out there who are paying a professional subscription themselves instead of having it paid by their employers? It may not be absolutely necessary for these employees to be a member of an institution but it certainly enhances their professional qualifications and experience - they might benefit from continuing professional development, CPD - and they are currently not getting any tax relief on that. It has to be an absolute requirement of his or her employment.

Mr. Shay Cody

It also applies if the person is a self-employed professional. It is entirely claimable against tax in those circumstances.

Deputy Michael McGrath

The differential is between employed and self-employed people at present.

Mr. Shay Cody

If a professional was an employed worker on a voluntary basis and making a contribution towards a professional organisation he or she cannot claim that against tax in the ordinary course unless he or she comes to an arrangement whereby his or her employer deems it to be necessary. If the person is self-employed there is no such hurdle; it is just claimed against one's tax.

Deputy Michael McGrath

In the review of what the Department of Finance did in 2016 a cost of €40 million was put on the reintroduction of the tax relief. Does the witness accept that figure? Is there a solid basis for that figure?

Mr. Joe O'Connor

On the question of costings, the most this ever cost the State was €26.6 million in 2008. The following year, which is the final year for which records exist, it cost €26 million. That was on the basis that, even at its height, this relief was only claimed by approximately two thirds of trade union members across the country. One third of trade union members did not actually claim the relief. The estimate the Deputy is referring to comes from a Revenue estimate based on a 100% uptake of this relief by trade union members. We do not dispute those figures. The likelihood is that, given the fact that since the relief was ended in 2011 a number of trade union members on lower incomes have come in and people on higher incomes have retired, we believe it would cost slightly less. However, it will cost approximately that figure to reintroduce it.

Deputy Michael McGrath

This really comes down to a question of the best use of resources. There are many competing demands, not least from trade union members. They are quite legitimate. We have a current pay agreement, for example, but there will be future pay agreements as well. Many public services remain under huge pressure and certainly have not been restored following the economic crisis. Where does this issue rank in terms of the level of priorities that the witnesses believe are appropriate and that their members would be advocating for? The figure of €30 million to €40 million is still a lot of money, and it is being competed for by many other parts of the public service and across the area of public expenditure. It is a valuable resource.

Mr. Shay Cody

We took it on the chin when it was abolished. We would not be here if we did not have the financial crisis because it would have continued.

That is the practical reality of the matter. We did not press the issue at all in the dark days on the grounds of the trade union's social responsibility, unlike others who went in the back door and in effect saved the relief for themselves. We just chose to resurrect the issue when there were options as far as State expenditure was concerned. Is this more important than houses or health? No, it is not, but it is an irritation because people feel a sense of grievance about the fact that we took it on the chin and no one else in society did so in a similar set of circumstances. Now that we are back to there being budget equilibrium, perhaps budget surpluses, we believe the €26 million practical cost of this, in the overall scheme of things, is probably worth more psychologically to trade union members than the overall €50 billion, €60 billion or €70 billion State budgets. We see it as an issue of fairness. It will not break the bank, and we have been patient about it because we did not believe it was an appropriate matter to be here talking to the committee about in the hard times. However, we are in a different situation now, and this is due in part to the sacrifices made and the retrenchments and difficult decisions taken by tens of thousands of members of our union and many others in those difficult times.

Deputy John Lahart

I have a number of brief questions on which I seek clarity. Deputy McGrath asked a number of them for me so I will not repeat those. I wish to begin by welcoming the witnesses, as my colleagues have done, and thanking them for their pretty passionate and very well-articulated presentations. I acknowledge the more than significant role of trades unions in the history of the State in securing groundbreaking rights for men and women, workers generally, over the past 70 or 80 years, some of which have been eroded slightly in the past two decades. I am hugely sympathetic towards the witnesses from that perspective and hugely sympathetic to the rights of unions to exist, thrive, encourage membership and provide the best services back-up to those members. I myself was a member of a public service teaching union for a number of years. However, I am here as a member of the Committee on Budgetary Oversight, and our job is to scrutinise the proposals the witnesses are making and to interrogate them with a small "i".

My first question concerns the Department's report and its review into the abolition and the analysis of the application of the relief. A professional membership fee has a very clear benefit. I was a self-employed professional and - this point is made in the Department's review - I could not practise without paying such a membership fee. I could not practise without accruing the continuous professional development requirements that allowed me to gain accreditation, for which the fee had to be paid. No one in any of the trades unions the witnesses represent cannot practise their profession without being a member of the trades union. That is the difference, and I would like the witnesses' response to that.

The second point in the Department's review concerns the regulatory function of accreditation bodies. I take Mr. O'Connor's point that IBEC is not a regulatory body but a professional body. However, in respect of accountants, professional solicitors and the range of self-employed people who pay fees, there is a regulatory function in professional bodies, but there is no regulatory function in a trades union. I ask the witnesses to respond to this point.

The review also points out the principal advantage that accrues to a member of a trades union, namely, representation. Regarding the additional ongoing training services that are provided, one could argue that is not the function of a trade union. The function of a trade union is basically to represent its members. Again, I ask the witnesses to respond to this point.

I have two final questions. I will use primary school teachers and members of the INTO as an example. The witnesses are seeking that a member of the INTO gets tax relief on his or her annual membership fee. A primary school teacher or post-primary school teacher must become a member of the Teaching Council once he or she becomes qualified. That is a professional body, and teachers are actually obliged to become members of the Teaching Council. Is tax relief available on those fees? If not, can the witnesses see the other doors they are potentially opening up?

Finally, Mr. Cody mentioned retired members. Again, I ask this as a member of the Committee on Budgetary Oversight. I am just seeking information. What justification would there be for tax relief for retired members of trades unions on their membership fees? Are the membership fees of retired members reduced?

There are four or five questions on which the witnesses could perhaps provide clarity.

Mr. Shay Cody

I will deal with a number of them. First, bodies such as the Teaching Council, CORU and the Nursing and Midwifery Board of Ireland are not professional bodies; they are regulatory bodies. In other words, they are not the people who will represent a worker if, say, he or she gets into professional difficulties. They are the people who will-----

Deputy John Lahart

One cannot teach without being a member of the Teaching Council, though.

Mr. Shay Cody

Yes, but they are the people who will prosecute the worker.

Deputy John Lahart

Yes, but one cannot teach without being a member of the Teaching Council.

Mr. Shay Cody

Exactly, and there is no issue in that regard. Revenue recognises that if one is a member of a profession governed by any of those regulatory bodies and one must pay a professional fee, that fee is claimable against tax. However, for teachers the payment is €80-odd per year; CORU's fees are €100 per year; in the case of the Nursing Council, the fee is €100 per year. Even if one is given tax relief at the standard rate, it will amount to €20 so it will not be a king's ransom, but that is claimable.

The main purpose of a trade union is representation, but that is not all we do. Mr. O'Connor mentioned the fact that we represent thousands of special needs assistants. The State provides very little in-house training for special needs assistants. The body that does the CPD in that area is actually the trade union. We hold out-of-hours weekend workshops for our members in all the dimensions of delivering a professional service. This is very much akin to what a self-employed person would be able to benefit from-----

Deputy John Lahart

Are the trade unions funded for that, or does that come out of their own funding?

Mr. Shay Cody

It comes entirely out of our subscriptions. We receive no State funding or anything like that. We see it as part of what we do.

Deputy Lahart mentioned the INTO. The INTO also doubles up as a professional body, if I can call it that. One of its biggest conferences is its education conference, at which it discusses education issues, syllabuses and so on, as opposed to what might be called its trade union conference. This is very common within the teaching profession. Similarly, the Deputy may know that the Irish Nurses and Midwives Organisation has purchased the old Richmond Hospital as a training centre for the continuous professional development of its members. Many trade unions provide such a dimension to their work, but we see that the State does not fund this. We are not seeking funding from the State. This would simply be a recognition of what we do. If we go back to the former Minister, Charlie McCreevy's comments when he introduced the tax relief following discussions behind the scenes with the trade unions, it was in recognition of their role in delivering economic and social cohesion for the wider society. I would add to that the add-on benefits we provide for our members and the services they deliver.

Deputy Lahart mentioned, I suppose, a closed shop, whereby technically speaking one could claim tax relief on union subscriptions. They are very few and far between in the Irish trade union movement. They may be more a symptom in other countries.

Mr. Joe O'Connor

I wish to come in on a number of Deputy Lahart's points. I absolutely accept the situations he has described. The trade union movement, in terms of the services and the training we provide, has not achieved the same social standing as some of the professional bodies in terms of the services and training they provide, whereby it is actually a requirement to do the job. However, this does not mean it is not of equal value, and anyone who asks a special needs assistant or a health and social care professional who relies entirely on his or her trade union for those services will have this confirmed to them.

That is the professional bodies' scenario. We have also outlined the situation where there is no case to be made for the self-employed, for example, farmers, claiming tax relief on membership fees for their organisation, having any greater entitlement to that in the training, services and representation provided by those bodies versus trade unions. I agree that our core role is a representative function with professional representation at workplace level and collective bargaining negotiations, but that is of very great significance and value within our society and it should be recognised as such. It was said earlier that the reason we are having this conversation is because the intention was to take this away in an equitable way from all of these bodies as a response to the economic crisis. A lobbying campaign, however, was conducted that meant certain bodies were exempted. Fórsa had restrained in that regard and all we ask for now is to resort back to what would have remained the case if it was not for the economic crash that befell the State in 2011.

In my opening statement I spoke of the Revenue report. This report, essentially, couches its opposition to this on the basis that it would not incentivise trade union membership on the basis that people do not join trade unions for the tax relief, they join for the benefits of trade unions and even if it did incentivise, why would the State do that? We fully accept that point. This is not about incentivising trade union membership. It is about trade union members receiving the same tax treatment in their membership of Fórsa, which is of great value, as other professional bodies and self-employed people get.

Deputy John Lahart

I have one final supplementary question on an issue about which I am particularly concerned. We are wearing our budgetary oversight hats and I am broadly sympathetic to the compelling argument put forward by the witnesses, but is there any evidence that trade union membership has fallen off because of fees and that tax relief would assist and encourage members?

Mr. Shay Cody

During the difficult times people's incomes were under significant pressure. We are all aware of circumstances where people were literally put to the pin of their collars. At a meeting during this period a person told me that it came down to filling the tank with oil or paying the union subscription. That was the personal life choice this person had to deal with. There was an element of that in the difficult days. Union membership is growing again in the context of income recovery and so on. As Mr. O'Connor has said, this is not really a matter of the State subsidising trade union membership. It is simply a matter of holding us in parity of esteem with other representative bodies that are not shy about coming in here looking for various things on behalf of their members.

Ms Sarah Clarke

Could I come in here?

Chairman

I am sorry but Ms Clarke's colleague had indicated before her and he was very patient, so to be fair I will let him in now. Ms Clarke can follow on then.

Mr. Jerry King

I thank the Chairman. Deputy Lahart's question on training deserves more of an answer. Ms Clarke and I are acutely aware, as lay activists in the places where we work, that in both our employments and across almost all the public service employments, budgets for training disappeared almost overnight. Since the crash, and until relatively recently when there has been a small bit of clawback, almost all of the training we have had to do with our jobs, personal development and everything else, has been through the various trade unions. As Mr. Cody has said, much of this training happened on evenings and Saturdays. It was critical for continuous personal development. The actual value of tax relief on union subscriptions should not be discounted. It could be hugely important to people, even towards putting diesel, petrol or a battery into their car to bring them to this training.

Chairman

Would Ms Clarke like to make a quick addition to that?

Ms Sarah Clarke

Yes, just a very quick addition. I thank the Deputy for the remarks about the trade union movement. What people found most galling about the 2016 review was that there was no consultation. They never had an opportunity to feed in to this at any stage.

Deputy John Lahart

I was not aware of that.

Ms Sarah Clarke

There was supposed to be consultation. Our members would have put forward quite compelling cases had they been given a chance.

Deputy Richard Boyd Barrett

I thank Fórsa for the submissions and the witnesses for their contribution to the committee today. I thank Mr. O'Connor for meeting with me last week to brief me on the issue. I also thank the Dún Laoghaire-Rathdown County Council Fórsa branch which also contacted me about the issue as part of the campaign. The witnesses do not have to convince me any further; I have already been convinced, as has Solidarity - People Before Profit. It is a cut and dried case of fairness and equity that the tax relief for union subscriptions should be restored.

The witnesses may not have the answers to some of my questions. Why do they think this iniquitous situation has persisted? I find it bizarre that a subscription to the Irish Farmers' Journal or a membership of the Irish Farmers Association, IFA, qualifies for the tax relief but this does not. I do not see the difference between the representative function of the IFA vis-à-vis its members, and the representative function of trade unions vis-à-vis their members. I do not get how it can be justified to give the tax relief to one and not the other. The Irish Farmers' Journal situation is stranger. Is the Irish Small and Medium Enterprises Association, ISME, included along with the Irish Business and Employers Confederation, IBEC? By any stretch I do not believe one could say IBEC or ISME are anything other than representative organisations for certain businesses that campaign and advocate on behalf of their members' interests. They are not, however, a trade expense. If they are then so too is being a member of a union.

I do not understand how the Government could have refused the unions' request before the budget. Perhaps the witnesses will elaborate on how the Government can justify this iniquitous situation. It seems to be completely baffling. The representatives said that those organisations lobbied whereas in the teeth of the recession the unions did not. Is there anything more the union representatives can say about the nature of the lobbying by those organisations and why they were listened to?

Maybe it is due to my own political biases, but on the face of it it appears there is one law for workers and a different law for businesses and people who are trading. This is what seems to be running behind it and it is deeply unfair given the sacrifices workers were forced to endure in the period of austerity. Do the witnesses see it being as simple as being just a political or ideological bias? Was any credible argument put forward to them to explain how this iniquity has been maintained?

Have the unions had any recent engagement with the Government since it refused to reapply the relief in the last budget? Have there been subsequent discussions with the Government around what its stance might be coming in to the next budget?

Primarily this issue is an irritant. It is not a huge financial issue. It is an irritant because it is so unfair and inequitable. Ms Clarke spoke of how hammered the union members got on other fronts. It may stray from the subject but as rank and file Fórsa members what other measures would the witnesses like to see, beyond this, to try to restore the fortunes of workers who got hammered?

My last point may add to the armoury of the union's argument.

Profits have gone through the roof in the last six or seven years such that pre-tax profits were approximately €149 billion based on the last figures available. I think there is approximately €80 billion in tax reliefs and deductible expenses, overwhelmingly going to business. Even at that level it seems like a tiny request that workers might get something that might cost about €20 million, given the huge number of very questionable tax reliefs and deductions that are allowed for big business. I would be interested to hear the witnesses' comments on other tax reliefs and who benefits from them as against the very small one that the Government is refusing to give back to trade union members.

Chairman

Before the witnesses reply, I draw people's attention to our proposed finish time of 4.45 p.m. and ask them to stay focused on the subject matter of today's committee meeting. Two other members have also indicated they want to speak on this.

Mr. Shay Cody

Bearing in mind what the Chair has said, I will try to restrict myself to the issue at hand. When the abolition was announced in 2011 all the professional bodies got together. They did not lobby separately; they created a coalition. That very powerful and influential coalition absolutely upended what was at least an equitable announcement in the budget by the then Minister, Mr. Lenihan, that he would abolish the tax relief for everybody. We were in very dark days and the trade union movement decided to live with it. We did not press it until now. We have been speaking to various Deputies throughout the country. We wrote formally to the Minister for Finance, putting it on the agenda so that it is with him. We have only an acknowledgement at this stage, but the Minister is aware of its importance for the trade union movement.

We believe this is a part of the process of trying to influence the system and hopefully in the lead-up to the next budget in October there will be support for it from across the political spectrum and that will feed into the system. If it does not work in that timescale, we will keep knocking on the door. As my colleagues have said, it is an irritant. It is like the State recognising the difference between a trade union member in a workplace and somebody who opts not to be in the trade union in the same workplace but actually gets all the benefits of the work of the trade union movement. While it is a modest sum for an individual, it is simply a recognition that good is done by the collective bargaining process both in good times and, maybe more significantly, in very bad times.

Mr. Joe O'Connor

I wish to pick up on a point Deputy Boyd Barrett made. I have read the joint letter by the various professional bodies that Mr. Cody mentioned. That obviously happened in the autumn to winter time between the budget and the Finance Bill. It is clear that it was a very powerful argument from a very powerful lobby group to say that for a marginal saving to the State this is something that would greatly affect the business practices of all these professions and would impact on business. That was probably a scary thing for the State at the time. In the meantime our focus has very clearly been on protecting the jobs and incomes of the workers we represent. This was well down our priority list but was obviously high enough on the priority list of professional bodies to make those representations.

Mr. Jerry King

While we would not always agree with organisations such as IBEC and ISME, we respect them and the job they do. Business obviously drives the economy in any country. How do we feel about it being left for them and other agencies and organisations but not for us? It comes back to our earlier statement. We feel it is grossly unfair and we feel let down. It is iniquitous and we crave to have something done about it.

Deputy Pearse Doherty

I refer back to the equality part the Government claimed it was putting into the Finance Bill 2011 which removed the benefit-in-kind from employers' contributions towards the subscriptions for professional bodies of their employees. Am I correct in saying that still exists today?

Mr. Shay Cody

Yes.

Deputy Pearse Doherty

The claim is that it went further than that and it was reversed. Is it the case that there was lobbying to remove certain elements of it?

Mr. Shay Cody

In the Budget Statement the Minister announced he would abolish tax relief in effect for all bodies and organisations. By the time the Finance Bill was enacted, in effect, that was watered down or eliminated on behalf of the professions.

Deputy Pearse Doherty

I wanted that clarity.

I have met the witnesses' colleagues on many occasions. Richy Carrothers is a fine trade union representative from west Donegal. He has also briefed me on this. It did not take long because I support the aims of the campaign. I resisted, and campaigned and voted against it when it was introduced by the Fianna Fáil-led Government at the time. I made the point in 2011 that at a time when jobs were being lost and wages were being cut, trade union membership needed to be retained.

I have a slight disagreement with Mr. O'Connor. I believe the State has a responsibility to support trade union membership. I know he agrees with that. The argument is about the basis of equity. Trade unions are a movement for social good. I refer to the 2009 Commission on Taxation report. This was the same commission that recommended the introduction of water charges. We defeated that one and hopefully we can get rid of this one as well. It did not actually suggest that there should not be an incentive for trade union membership. The argument it made was that the incentive was not working and that it was kind of mandatory to be part of a trade union. From a public policy point of view, support for trade union subscriptions should be justified and legislated for. I wholeheartedly support the campaign.

There was mention of the support across the trade union sector and from ICTU. Have the unions had indications of political support or has that not yet been formally offered? I do not believe that my party has written formally to the trade unions. Is this something that is building momentum?

Mr. Joe O'Connor

On the Deputy's first point, he and I both agree that there is a role for the State to recognise in this way the important role that trade unions play. While the Deputy and I might agree on that, I would hope in the same way that Mr. King stated, that all Deputies would agree that fair tax treatment for trade unions vis-à-vis other bodies is absolutely essential.

On his second point on political support, we have not formally requested political parties to include this in their pre-budget submissions and their draft manifestos for a general election whenever that might come about, but we will certainly do that. In our individual representations to political parties, we have received support from Deputies in Fianna Fáil, Solidarity - People Before Profit, Sinn Féin, the Social Democrats, the Labour Party and many other individual Independent Deputies whom our campaign's representatives have met throughout the country. We will continue that engagement in coming months. As Mr. Cody has said, we feel this should be addressed in the upcoming budget and we call on members of the committee to bring it back to their own parties and to advocate that it be supported.

Deputy Pearse Doherty

I appreciate that. Outside the political party process, this committee has a role, irrespective of parties, whereby we can submit a report and hopefully come up with some recommendation in that regard.

I return to the cost issue. The highest cost of this tax expenditure was €26.7 million in 2009. It dropped to €26 million in the year before it was abolished. At that time a third of trade union members were not availing of this tax relief. This tax relief was valued at €70 per person; there was a cap at €350 at the standard rate of tax. Why did people not avail of it?

Mr. Shay Cody

There are a couple of reasons. First, certain casual low-paid workers are not in the tax net at all.

There is no point claiming something from which one will not benefit.

Second, it is somewhat similar to tax relief on medical expenses. There can be a lot of work involved in making a tax relief claim and if the amount of money involved is relatively modest, people sometimes do not get around to it. The Revenue estimates that only 50% to 60% of people claim their medical expenses. People are less likely to do so if the sums involved are not very high. There will always be some dead weight regarding tax expenditure and in this case that is the difference between the actual cost of €26 million and the estimated cost of €39 million. I am unsure it would ever cost €39 million because some union members do not pay tax, either because they were not in employment for the full year or have very low earnings which are, therefore, non-taxable.

Deputy Pearse Doherty

Thankfully, the number of trade union members has increased in the past year although it dipped sharply over a number of years prior to that. The cost of €26 million was based on a trade union membership of 511,000 rather than the current membership of 437,000. In that context, a cost of €26 million is probably on the high end given that it was based on a larger membership.

Mr. Shay Cody

All of the large unions experienced an increase in membership in the past two years, ever since we started coming out of the crisis and employment picked up. We are not in a position to argue whether the cost would be €26 million or €23 million.

Deputy Pearse Doherty

It is there or thereabouts.

Mr. Shay Cody

It is there or thereabouts.

Deputy Pearse Doherty

As regards the type of tax relief at which we are looking, is it modelled on the relief abolished in 2011 by the Government in which Brian Lenihan was Minister for Finance or is it a different version? Is the relief at the standard rate and capped at €350 or is there a stepped approach involved?

Mr. Joe O'Connor

When the relief was introduced and retained, we accepted that it would be at the standard rate, and would accept that were it to be reintroduced. The amount of relief that could be claimed was increased in 2008. We acknowledge that the quantum of trade union members in the country is more significant than the number of people who claim relief for membership of professional bodies. We are calling for the reintroduction of the relief that was removed seven years ago. Obviously, that can fluctuate in value, as it did in the period between 2001 and 20008, but we wish for it to be restored at that level.

Deputy Pearse Doherty

The relief should be introduced at the standard rate and with the cap that was in place when it was abolished.

In the context of my argument regarding the view of the Commission on Taxation, as repeated by Government Ministers today, former Ministers for Finance Brian Lenihan and Deputy Noonan and the current Minister, Deputy Donohoe, that the tax relief is dead weight and does not encourage trade union membership, I fully agree that this is about equality. We should not have tax relief for subscriptions for other professional bodies but none for trade union membership. I made the point at the time that the relief is an encouraging and deciding factor. People understand the benefit of being a member of a trade union but also its cost. The relief is a deciding factor for a person who is weighing up if he or she will have enough money after taking out membership.

Mr. Shay Cody

On the dead weight argument, after the arrangements were abolished matters were dormant until conversations took place between senior union representatives and then Minister for Finance, Deputy Noonan, and then Minister for Public Expenditure and Reform, Deputy Howlin, in the lead-up to the 2016 budget. The Ministers agreed to include in the budget a statement that they were going to review the abolition of the relief and have a public consultation in that regard. They indicated they had open minds on the matter. There was then an election and so on. There has since been a retreat from having an open mind to the fairly doctrinaire and dogmatic approach of the relief being dead weight. We could point out many other tax breaks about which that argument could also be made but they do not seem to be in danger of being abolished.

Deputy Pearse Doherty

Another member wishes to contribute so I will leave it at that. I look forward to working with the trade unions in the campaign to have the relief restored.

Chairman

I call Deputy Donnelly.

Deputy Stephen S. Donnelly

The witnesses are very welcome. I looked at the proposal in detail and discussed it with Mr. O'Connor at some length. I will be advocating within Fianna Fáil that we support it in the upcoming budget negotiations. I am conscious that the relief was introduced by Fianna Fáil and abolished by a Fianna Fáil Minister for Finance during a crisis. It is time for it to be reintroduced. The equity argument stands for itself but, in addition, the State must do what it can to support trade unionism and ensure we have strong trade unions in the country. There has been a very serious widening of the wealth gap in Ireland. The two biggest asset groups which we can track are home ownership - we are at the lowest level since 1970 in that regard - and pensions, which are in an absolute mess at the moment.

My portfolio is Brexit. I firmly believe that Brexit is part of a consistent pattern across much of the western world, as evidenced in public support for Marine Le Pen and Alternative für Deutschland, AfD, and all sorts of unpleasantness. That has largely arisen because the status quo is not working for many of the people who are or should be in trade unions. We need to reintroduce the relief and work with the unions to ensure the trade union movement in Ireland grows stronger and that employers are not allowed to tell their staff they may not join a trade union. I have spoken to my colleagues on this issue. We must be cognisant that we are in the middle of crises in homelessness, housing and hospital trolleys, as well as dealing with threats from Brexit. Significant investment in social and transport infrastructure is needed across the country and €26 million is not a small amount of money, so it will be assessed in the context of many urgent and competing demands. I will advocate that the relief be reintroduced and that we can potentially go further in supporting the growth and strength of the trade union movement in this country. It is very important.

In terms of the procedure of getting back the €70, must a member fill in a form 11 or go through a full self-assessment to do so or is there an easy way to get it? The only reason I ask is that one must assume that, at the margin, price matters and there will, therefore, be those for whom the €70 will make the difference between joining or not joining a union or, indeed, it may take pressure off another part of their lives. That becomes far more difficult if one must fill in an entire Revenue form 11 online. How does one get the €70 back?

Mr. Shay Cody

When the relief was first introduced, Revenue entered into an arrangement whereby large employers who had, for example, huge battalions on check-outs, were empowered to notify the Revenue Commissioners of all those in their workforce who were paying trade union subscriptions, which probably accounted for approximately three quarters of the recorded tax cases in a very administratively convenient way. Beyond that, trade unions and individuals sometimes submitted data banks. However, the Revenue was able to get it up and running very quickly by using the employers' payroll information. It would probably be easy to do the same if this was in place next year.

Deputy Stephen S. Donnelly

I thank Mr. Cody.

Chairman

We have covered almost all the points. There is just one small technical issue. We have discovered the approximate cost of the relief. What is the cost of the relief for membership of professional bodies?

Mr. Joe O'Connor

Is that in terms of the cost to the State?

Chairman

Yes.

Mr. Joe O'Connor

I am not willing to put this on the record but I think I read that it is approximately €5 million. That figure should be checked. I think it is contained in the Revenue report or the Finance Act 2011. I think I read a figure indicating that it is approximately €5 million.

Chairman

I thank Mr. O'Connor. I appreciate he is trying to facilitate the committee with that information and we will look into it further. On behalf of the committee, I thank the witnesses for attending and for the very good exchange of views. We will now discuss the matter as a committee. We very much appreciate the witnesses' involvement.

I would like to bring our meeting to a conclusion. There is no further business.

The select committee adjourned at 4.40 p.m. until 4 p.m. on Tuesday, 27 March 2018.