Dáil Éireann Debate, Wednesday - 21 April 2021
475. Deputy Pádraig O'Sullivan asked the Minister for Finance if he has considered reducing the tax liability of those whose income was supported by the temporary wage subsidy scheme; and if he will make a statement on the matter. [18447/21]
View answerThe Temporary Wage Subsidy (TWSS) was in place between 26 March and 31 August 2020 and was introduced as an emergency income support for employees of vulnerable firms whose businesses had been negatively impacted by COVID restrictions and whose turnover had reduced by at least 25% during Q2 while the strictest public health measures were in place. The support was paid via the employer so as to maintain employment links between the employee and employer insofar as was possible and, to that end, the rate of Employers' PRSI was also significantly reduced to 0.5%. The level of income given to each individual employee was based on previous wages received in January and February 2020. Over 66,500 employers received a subsidy under the TWSS with payments worth just under €2.9 billion paid out to a total of 664,000 workers.
The subsidy was based on net pay and tax was not collected in real-time through the PAYE system while the scheme was in operation, and instead would be collected after an end of year review, if any such liability arose. This decision was taken in order to maximise the amount of financial support that was provided to recipients at a time when it was considered that they needed such support most, when the TWSS was first announced and expected to only be in place for 12 weeks.
Net pay was the chosen benchmark for the TWSS as the priority was to preserve take-home income of workers insofar as was possible, noting that similar rates of income supports based on previous pay levels were also being provided for those on the Pandemic Unemployment Payment (PUP) administered by the Department of Social Protection.
When the TWSS was extended for a further 10 weeks until the end of August 2020, Revenue took steps to minimise the amount of income tax and USC due, if any, on TWSS payments at the end of the year. This was done by placing all recipients of the TWSS or PUP on the ‘week 1 basis ’ of taxation for the remainder of the year so as to “preserve” unused tax credits that can then be used to offset any income tax or USC liabilities that arise at year end.
The Government has been consistent as regards the TWSS’s liability to tax from the outset of the payment and, in my view, having regard to considerations of equitable treatment of taxpayers, a case for any action along the lines mentioned by the Deputy does not arise.
Payments made under the TWSS were regarded as income supports and share the characteristics of income. Other income earners in receipt of comparable “normal wages” are taxable on those wages. In equity, therefore, payments under the TWSS are subject to income tax and Universal Social Charge (USC). While income tax and the USC on most income is deducted in real-time as and when the person is paid, the TWSS payments were not taxed in real-time and were instead liable to income tax and USC at the end of 2020.
I have been advised by Revenue that it clarified the tax treatment of the TWSS at employee level in the guidance material on the TWSS that it has published on its website since the commencement of the Scheme. Furthermore, Revenue actively engaged in facilitating webinars with the Employer Bodies, Accountancy Firms and Tax Practitioners to explain and clarify any issues for employers as regards the TWSS. For the information of the Deputy, Revenue’s material on Frequently Asked Questions on the TWSS can be found at:
https://www.revenue.ie/en/employing-people/documents/pmod-topics/guidance-on-operation-of-temporary-covid-wage-subsidy-scheme.pdf.
Although the final calculation of the end of year liability for each person is dependent on their personal circumstances based on data that Revenue released in January, it is noted that almost half of those in receipt of the PUP or TWSS have no outstanding liability to discharge (in fact over a third are due a refund).
In the case of the remaining taxpayer units with an outstanding liability, the data indicates that amounts to be collected are modest in scale, with 44% owing less than €500 and 72% having a liability of less than €1,000. If paid over the 4 year period beginning in 2022, the majority of those cases will owe less than €5 per week, with nearly half paying less than €2.50 per week. These figures represent a preliminary liability and may be further reduced by additional tax credits or reliefs such as health expenses.
Revenue has also given assurances that if any income tax and USC liabilities remain following the allocation of unused credits, it will work with its customers to collect the outstanding liabilities and a number of flexible arrangements may be entered into, including the collection without interest over an extended period of time for 4 years beginning in 2022. It is also understood that Revenue are facilitating employers who wish to pay the tax liabilities of their employees where such income tax and USC liabilities arise from the scheme.
Revenue made a Preliminary End of Year Statement available to all employees from 15 January 2021, including those who were in receipt of the TWSS. The Preliminary End of Year Statement includes information relating to an employee’s income received, including pensions and income from the Department of Social Protection, as well as their tax credit entitlements. For the tax year 2020, the Statement also includes information on the amounts of TWSS payments, if any, received by each employee. In addition, the Statement provides employees with a preliminary calculation of the income tax and USC position for 2020 and indicates whether their tax position is balanced, underpaid or overpaid for the year.
Upon viewing the Preliminary End of Year Statement through myAccount, which is Revenue’s secure online facility for individual taxpayer services, employees have an opportunity to complete their income tax return for 2020, declaring any additional income and claiming any additional tax credits due, for example qualifying health expenses, to arrive at their final liability for 2020.
When a liability is finalised, individuals may opt to fully or partially pay any income tax and USC liability through the Payments/Repayments facility in myAccount. Where individuals do not opt to fully or partially pay, Revenue will collect the liability by reducing their tax credits over 4 years, interest free. The reduction of tax credits will start in January 2022.
The Preliminary End of Year Statement sets out a provisional tax position for 2020, based on information available on Revenue records, including any Temporary Wage Subsidy Scheme (TWSS) payments reported by the individual’s employer. Revenue published provisional statistics in relation to the preliminary end of year tax position for all PAYE taxpayers for the year 2020, on 14 January 2021 which is available to view on Revenue’s website:
https://www.revenue.ie/en/corporate/documents/statistics/registrations/paye-preliminary-eoy-statements.pdf.
I might conclude by noting that Revenue are facilitating employers who wish to pay the tax liabilities of their employees where such income tax and USC liabilities arise from the scheme. Any employers who are in a position to discharge such liabilities on behalf of their workers are encouraged to do so, but it is also acknowledged that, as with the decision around whether to avail of the TWSS in the first place, the question of whether an employer pays the income tax owed by employees in respect of the TWSS is a matter between the employer and the relevant employees.
