I propose to take Questions Nos. 154 and 190 together.
Section 28 of the Emergency Measures in the Public Interest (Covid-19) Act 2020 provides for the Temporary Wage Subsidy Scheme (TWSS). The scheme is designed to maintain the key relationship between employers and employees and minimise the impact on the economy to the greatest extent possible during the public health restrictions necessitated by the COVID-19 pandemic.
Based on the most recent statistics, for the week to 2 July 2020, 410,000 employees are currently being supported by the scheme and almost 568,000 employees have received a subsidy since commencement. In addition, the Department of Social Protection and Rural Affairs has indicated that since the start of the pandemic over 730,000 people have applied for the Pandemic Unemployment Payment (PUP).
Payments made under both the TWSS and PUP are income supports and share the characteristics of income and are subject to tax. The TWSS is also subject to USC while the PUP follows the general taxation rule for social welfare payments and is exempt from that charge. Both schemes are exempt from PRSI charges. However, neither scheme is being taxed in real-time through the PAYE system, but recipients may become liable for tax and USC (for TWSS) at the end of the year, which will be calculated by Revenue through the employee End of Year Review process.
The level of tax and USC due by any person at year end in respect of TWSS and PUP payments may be reduced or eliminated by the amount of unused tax credits available. Any liability due may also be further reduced if the person has additional tax credits, for example health expenses, to offset. Revenue has also very recently placed all recipients of either the TWSS or the PUP on the ‘week 1 basis’ of taxation for the remainder of 2020 to ‘preserve’ unused tax credits that can then be used to offset any tax or USC liabilities that arise.
Revenue has also assured me that if any tax and USC liabilities still arise following the allocation of unused credits, it will work with the persons impacted upon to collect the outstanding liabilities over an extended period. This will be achieved by reducing their tax credits for future years, thereby minimising any financial hardship to the greatest extent possible.
I am advised by Revenue that the final calculation of the end of year liability for each person is dependent on a range of factors, including a person’s civil status, the available tax credits, the actual amounts received during the year under the TWSS and PUP schemes, any top-up payments made by the employer, as well as other entitlements and credits, such as health expenses. As there are considerable differences in each person’s tax circumstances, it is not yet possible to provide details of the estimated undercharges (if any) arising from the taxation of TWSS and PUP payments. It is also not yet possible to estimate the numbers of taxpayers who may have such undercharges as these details will not be available with any degree of accuracy until after the year end.
In relation to Deputy Doherty's point regarding payment breaks for mortgage holders, I welcomed the announcement by the Banking and Payments Federation of Ireland (BPFI) of the introduction of the payment breaks for those affected by Covid-19 in March for 3 months and the subsequent announcement on 30 May of the extension to the payment breaks for a possible further 3 months, on a non-legislative basis. Figures released by the BPFI on 28 May stated that over 78,000 payment breaks were in place for mortgages and work is ongoing in relation to those seeking to avail of the 2nd payment break. These payment breaks have provided welcome breathing space and support for those affected by Covid-19.
As the Deputy will be aware, the Central Bank expects lenders to clearly explain to their customers the implications of a payment break; for the term, payment schedule, and costs of the loan. The Central Bank has communicated its expectations to financial institutions that at the end of the agreed payment break, borrowers should be given the option to either (i) repay the loan within the remaining term or (ii) extend the term of the loan. This choice should apply for all loans, including mortgages, and the impact of both options on the overall cost of credit and monthly repayments should be fully explained to the customer, noting that borrower circumstances and the appropriateness of each option will differ. As part of their supervisory work, they will be monitoring compliance with this expectation and take action, where their expectations are not met.