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Dáil Éireann debate -
Wednesday, 14 Mar 1990

Vol. 397 No. 1

Ceisteanna — Questions. Oral Answers. - Withholding Tax.

Michael Noonan

Question:

5 Mr. Noonan (Limerick East) asked the Minister for Finance if his attention has been drawn to the widespread dissatisfaction among general practitioners arising from the operation of the withholding tax on professional fees; to the fact that (a) rebates are not made promptly where there is no liability (b) deductions are made in respect of payments of nurses, secretarial and locum fees and (c) young doctors who have to undergo the initial expense of setting up in practice are particularly affected; and if he will make a statement on the matter.

I am not aware of widespread dissatisfaction among general practitioners about the operation of the withholding tax on professional fees. I would point out that the withholding tax involves no more than the withholding, on account, of an amount of tax due. Full credit for the amount withheld is given in computing the final tax liability. The scheme accordingly confers no additional tax liability on any individual or company and contains safeguards to ensure that no undue adverse effects arise from its operation. Principal among such safeguards is the provision for the payment of an interim refund.

In relation to rebates, I assume that the Deputy is, in fact, referring to payments of interim refunds. The Revenue Commissioners have assured me that they make every effort to ensure that delays in the interim refund procedures are kept to a minimum. Claims for interim refunds of withholding tax are given priority in tax districts. The Commissioners say they are satisfied that, generally speaking, the procedures are working satisfactorily and that there are no delays in making repayments where the conditions necessary for the payment of an interim refund are satisfied.

The withholding tax applies to the full amount, including payments for expenses, paid to a practitioner in respect of the rendering of medical services. Practitioners are, however, granted full allowance for valid expenses when computing their tax liability. This fact, along with the operation of the interim refund procedures, should ensure that hardship does not arise from the application of the tax to expenses.

I am not aware that young doctors are particularly adversely affected by the withholding tax. This is because most doctors will already have practised for some time before entry into the GMS scheme. The fact that they are already in the tax net will qualify them for the interim refund system.

If the Deputy is aware of any specific instances of doctors, young or otherwise, suffering particular hardship as a result of the operation of the withholding tax, I would be glad to have such cases investigated.

(Limerick East): I am surprised at the Minister's lack of awareness, he must be operating from a very deep bunker indeed. The doctors and their representatives who have communicated with me have communicated the same information directly to the Minister. The fact of the matter is — and I would ask the Minister if it has been brought to his attention even at his clinics — that the system of interim rebates is not operating effectively and there are long delays which are affecting the cash flow of doctors who may be deprived of funds even in circumstances when they have no tax liability.

There were a significant number of representations made on the issue in the first year of the operation of this tax and I would accept that the cash flow position of some doctors would have been adversely affected. The system has settled down and this is indicated by the fact that the volume of representation to my Department has been greatly reduced. In addition, my Department and the Revenue Commissioners have had meetings from time to time to discuss the withholding tax with representatives of the medical profession.

I would also emphasise that the doctor in question will get full credit for his expenses when his normal tax liability is being assessed. In addition, the doctor is generally entitled to an interim refund once the amount withheld in the current period exceeds his tax liability for the previous period. The liability includes full allowance for valid expenses so, providing his tax affairs are otherwise in order, the doctor can limit the net amount withheld in the current period to his liability for the previous period. There may well be cases — I am aware of one such case — where, for different reasons, such as if a doctor has most of his business in the GMS scheme, the withholding tax can hit harder than it would hit a doctor who has a better balance in his practice. In general terms what we are saying is that the withholding tax is working much better than it was. It has been in operation for a couple of years so the cash flow problems should not be as critical as they were.

(Limerick East): I am glad the Minister is coming around to seeing some of the problems. This system affects those in the GMS scheme, in effect it affects most those who are providing medical attention for the poor. Finally, does the Minister not consider it totally unjustified and penal that cheques for expenses which the doctors in turn pay to nurses, secretaries or locums have 32 per cent deducted from them while the doctor has had to pay full employee and employer PRSI and deduct income tax as well? Is that not totally penal and unjustified and will the Minister change that aspect of it?

I am sure the Deputy is as aware as I am that withholding tax is very clear in what it applies to and it applies to some of the areas the Deputy has already mentioned. In 1988 and 1989 the gross amount of the withholding tax paid by all taxapayers was £57.93 million and £63.2 million respectively. This will give Members an idea of how effective the tax is. There is no evidence to suggest to me that there is anything of the kind the Deputy is talking about or that there is need for further adjustment. Many doctors have told me — I am not familiar with the exact details of every doctor's practice — that although they opposed it, it is a big help to them because their tax is being paid as they go along and they are not stuck with having to pay a big lump sum at the end of a period. There may be different views but there is no widespread area I know of that calls for adjustment. If the Deputy has any specific case he wants me to look into in relation to hardship, I will certainly do so. In answer to a question from Deputy Farrelly on 27 February I said the first claim in the tax year can take longer than the seven days which it normally takes to process the tax return because it is necessary to verify the tax position for the previous year. It currently takes up to four weeks to verify these initial claims in country districts and it could take up to two months in Dublin, but, as I have said, that is for the first return in the tax year. After that it is reasonably plain sailing. If they are over the amount the rebate procedure is triggered off.

(Limerick East): A Cheann Comhairle——

I am sorry Deputy, I must proceed to Question No. 6. Time is fast running out in dealing with Priority Questions.

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