Dáil Éireann Debate, Tuesday - 15 February 2022
293. Deputy Neale Richmond asked the Minister for Finance the amount received in the Exchequer in each of the years 2011 to 2021 from the taxes imposed in the hospitality sector on tips, gratuities and service charges in tabular form; and if he will make a statement on the matter. [7788/22]
View answer294. Deputy Neale Richmond asked the Minister for Finance if he has considered making tips received in the hospitality sector tax free in view of the legislative progress made to protect employee tips and gratuities; and if he will make a statement on the matter. [7789/22]
View answerI propose to take Questions Nos. 293 and 294 together.
It is a general principle of taxation that, as far as possible, income from all sources should be subject to taxation. This is a well established and broadly accepted principle.
Section 19 of the Taxes Consolidation Act (TCA) 1997, sets out that tax under Schedule E shall be charged in respect of every public office or employment of profit. In addition, Section 112 of the TCA 1997 brings into charge all salaries, fees, wages, perquisites or profits of any kind arising from an office or employment. Therefore, the long-standing position is that all tips, gratuities and service charges arising from an office or employment are chargeable to income tax under Schedule E in accordance with Section 112.
Gratuities from customers for example, service charges in hotels or tips in restaurants, paid to the employer and subsequently paid out to an employee should be included in pay for the income tax week or month in which they are paid out. These tips constitute pay for the purposes of the PAYE system. The employer is not required to provide a separate breakdown to Revenue detailing these amounts.
However, in a situation where an employee receives tips directly from customers, the employer is not obliged to operate PAYE and in that case, the tips and gratuities are fully taxable and should be included by the employee in his or her income tax return. It is important to point out that such tips constitute pay for the purposes of the PAYE system. Where such income is declared by employees themselves, there is no requirement that it be itemised separately from other forms of income on the relevant tax returns.
Therefore, I am advised by Revenue that is not possible to provide the information requested by the Deputy as regards the precise amount received by Exchequer in the form of tips, gratuities and service charges, from Revenue data.
As referenced by the Deputy in his question, the Department of Enterprise, Trade and Employment is progressing legislation on tips and gratuities and this legislation will prohibit the practise of using tips or gratuities to top up wages. It will also ensure that electronic tips and gratuities, which are much more common these days, have to be divided fairly and equitably among the staff. In addition, the legislation will provide transparency to customers so they will know what the policy is on tips and service charges, how they are managed and to whom they go.
For the reasons outlined in the opening paragraphs of my reply, I have no plans to amend the tax treatment of tips and gratuities.
