Vol. 519 No. 5
33 Ms Shortall asked the Minister for Finance if, arising from the commitment given in the Programme for Prosperity and Fairness, he will outline the way in which it is intended to review the treatment of work related expenses and benefits for workers; and if he will make a statement on the matter. [14273/00]
This working group has not yet been set up but it will be established before July 2000. The precise mechanism for carrying out the review of the tax treatment of work related expenses has not, as yet, been determined. I expect discussions to take place shortly between the appropriate parties, including the Revenue Commissioners, the ICTU and IBEC to establish the appropriate review mechanism.
Which work related expenses does the Minister expect to be the subject of the review? Does he expect trade union membership fees to be considered in the review?
That area will probably be examined by the group. The concerns of the ICTU appear to relate to matters such as the treatment of expenses for travelling to work, including, in one case, the payment of ferry charges, the treatment of expenses for workers who must be on call and benefit-in-kind issues where workers have the use of vans overnight. The IBEC did not raise any matter in this area during the partnership talks.
The Deputy will be aware that expenses which should be allowed for working people has concentrated the minds of tax advisers for many years. There is a fundamental difference between what is allowed to a self-employed person and a person in employment. If I remember my tax law correctly, it means that in the case of a self-employed person the expense must fall in the category that it is wholly, exclusively and necessarily incurred for the business, whereas in the case of a person in employment the expense must necessarily be incurred in the performance of the employment.
The definitive case in this area was in 1932 or 1933, where a teacher claimed the expense of the cost of his horse travelling to and from the school. The teacher correctly claimed that he could not get to the school without a horse or a bicycle – I forget whether it was a horse or a bicycle. The judgment was that he could not claim it because he did not require the horse or bicycle in the performance of his duties, which was teaching. However, there is a different rule for a self-employed person who needs his van or vehicle for the purposes of his trade. That is the underlying difference which has remained in the tax code for many years.
The working group will probably examine this and other issues. It is a difficult area and it will be difficult to arrive at a solution.
With the changeover to a tax credit system, does the Minister envisage that expenses actually incurred will continue to be allowed as deductible at their full value from the amount of taxable income or will it be convertible in some way?
Over the years in the PAYE tax code a number of understandings and agreements were arrived at between categories of workers and the Revenue Commissioners to allow a flat rate expense deduction. That has always been allowed at the taxpayer's marginal rate and I would prefer that system to continue.
