Dáil Éireann Debate, Wednesday - 18 January 2023
310. Deputy Jackie Cahill asked the Minister for Finance the reason that workers who received the EWSS and TWSS are now being taxed for this payment (details supplied); his views on whether it is fair to place a tax burden on them now for their work; if this will result in a higher tax bill than if their employer had not availed of these payments and paid their wages as usual; and if he will make a statement on the matter. [63447/22]
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 2020. The support was paid via the employer so as to maintain employment links between the employee and employer insofar as was possible.
Payments made under the TWSS were regarded as income supports and shared the characteristics of income. Other income earners in receipt of comparable “normal wages” were taxable on those wages. In the interest of equity, therefore, payments under the TWSS were subject to income tax and Universal Social Charge (USC).
While income tax and 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. Tax was not collected while the scheme was in operation in order to maximise the amount of financial support provided to recipients at a time when it was considered most needed.
The Government was consistent as regards the TWSS’s liability to tax from the outset of the payment. Indeed, Revenue advised my predecessor that it clarified the tax treatment of the TWSS at employee level in the guidance material that it published on its website from 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.
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. This Statement, which is based on information available on Revenue records, 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 included information on the amounts of TWSS payments, if any, reported by the individual’s employer and received by each employee. In addition, it provided employees with a preliminary calculation of the income tax and USC position for 2020 and indicated whether their tax position was 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 had an opportunity to complete their income tax return for 2020, while 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 was finalised, individuals could opt to fully or partially pay any income tax and USC liability through the Payments/Repayments facility in myAccount. Where individuals did not opt to fully or partially pay, the outstanding liability was to be collected by reducing their tax credits over 4 years, interest free. The reduction of tax credits started in January 2022.
While the income tax and USC liabilities arising from TWSS payments were those of the employee, Revenue also facilitated employers who wished to pay some or all of the employees' 2020 TWSS-related tax and USC liabilities. Where the employer opted to pay, Revenue concessionally did not apply benefit-in-kind rules to these payments. Initially, this facility was limited to payments made by employers on behalf of their employees up to end June 2021 however the concession was extended to run until the end of September 2021.
As regards the Deputy’s query as to whether the arrangements would result in a higher tax bill for the employee as compared with circumstances where their employer had not availed of TWSS, I am advised by Revenue that a higher tax bill would not arise in cases involving TWSS. In fact, those in receipt of TWSS would not have been liable for the 4% employee PRSI that other workers in receipt of “normal wages” would have faced and would be better off to that extent. The only other difference in treatment between “normal wages” and TWSS payments is that the latter were not taxed in real time but were instead liable to income tax and USC at the end of 2020.
The Government was clear from the outset that TWSS payments were taxable and, in the interests of equity for all taxpayers, there are no plans to alter this approach.
The TWSS was replaced by the Employment Wage Subsidy Scheme (EWSS) with effect from 1 September 2020.
EWSS payments were not made to the employee but were made directly to employers as a per-head subsidy for each employee, and the employer was expected to pay their employees their “normal wages”. The employee was taxed in real time on these wages in the normal manner and, consequently, they would not have suffered additional tax because their employer opted into the scheme.
