Dáil Éireann Debate, Thursday - 1 February 2024
80. Deputy Ged Nash asked the Minister for Finance the amount of warehoused tax debt arising from the scheme introduced during the pandemic that has yet to be repaid to the Exchequer; if he is considering extending the repayment period again; and if he will make a statement on the matter. [4817/24]
View answerThe deadline is looming in May 2024 for businesses to make arrangements with the Revenue Commissioners to repay tax debt warehoused during the pandemic. The Minister made comments to the media when he was in Davos that suggested very clearly that he intends to make changes to the operation of that scheme and potentially to the way in which repayments are to be organised. The word he used was that he intended to be "flexible". Could he put on the record of the House what he means by "flexible" and what his plans are in respect of the tax debt warehousing scheme?
I thank the Deputy for the question. The tax debt warehousing scheme has offered valuable and practical liquidity support to businesses during the Covid pandemic and continues to support businesses as they recover from the impacts of the pandemic and the cost-of-living crisis. It has assisted businesses with their cash flow during difficult trading periods, preventing business failure.
Introduced in May 2020, the scheme allowed businesses to temporarily defer VAT and employer PAYE, certain self-assessed income tax liabilities and wage subsidy scheme and employment wage subsidy scheme overpayments on an interest-free basis for an extended period, up to the end of 2022, or until the end of April 2023 for those availing of the extended scheme. After this, a 3% interest rate applies until the debt is either fully repaid or the customer otherwise exits the warehouse.
A key qualifying condition of the scheme is that all current liabilities are filed and paid on time. The total debt in the warehouse has decreased substantially since January 2022 when more than €3 billion was warehoused for more than 100,000 customers. By 26 January 2024, a total of €1.72 billion was warehoused for 57,435 customers, of which 70% have outstanding liabilities of less than €5,000. The bulk of the debt, almost €1.5 billion, was warehoused by 5,265 customers with outstanding balances greater than €50,000.
It is important to note that, while payments can be made in advance, businesses do not have to pay all of their warehoused debt by 1 May 2024. Instead, they are required to engage with Revenue to make arrangements to pay the debt over an agreed period, based on their individual circumstances and capacity to pay.
Revenue has advised me that its approach will be flexible in relation to payment plans on warehoused debt. I will respond further in a moment when I have time, but I have been engaging with the Revenue Commissioner and I expect to very shortly finalise some additional flexibilities under the tax debt warehousing scheme. I will be happy to report to the House when I announce them.
Time is of the essence in this regard. It is clear from the figures the Minister provided that a very substantial proportion of those who have warehoused tax debt have actually met their liabilities in full and a considerable number of businesses have made arrangements with Revenue.
It was a very important scheme and it gave viable companies breathing space during the pandemic and made sure they could get back on their feet once normal trading conditions resumed. However, I get a sense from some businesses across the economy that they are adopting a wait-and-see approach. That is why the Minister needs to be very clear, very quickly on what he means by flexibility. I ask him to again put on the record of the House what he means by flexibility, and how pragmatic he and the Revenue Commissioners intend to be in the management of that warehoused debt? He might put the figures on the record. I am sure they are available to him. I assume the vast bulk of those who have yet to engage with the Revenue Commissioners may very well be in the hospitality sector.
I thank the Deputy.
The Minister is very clear on the issues the hospitality sector is experiencing at the moment.
It is important to emphasise a number of points. One is that the requirement on businesses is to engage with Revenue now and to enter into an agreement by 1 May 2024. I have seen reports that they must have repaid their tax warehouse debt by 1 May but that is not the case. It is not even necessarily the case that there has to be a downpayment by that date but they must have entered into an agreement, which will then be implemented over a period.
A strict condition of the flexibilities that are currently in place, and the new ones that I will announce, is that businesses must file their current returns on time and they must stay up to date with their current liabilities. The commitment I am giving is that the warehoused debt will be treated very differently, as a separate liability, but it is only on the basis that current returns are made in a timely fashion and the current taxation liabilities are met. Even as it is, there is significant flexibility around payment breaks, deferral of the next payment date due, amendments to payment dates-----
I thank the Minister.
-----and to monthly repayments. I will perhaps put on record the breakdown in a moment when I get a chance.
I too urge those companies who have not yet engaged to engage very quickly and not to adopt a wait-and-see approach. Further clarity would be welcome from the Minister in the coming weeks about what it is he intends to do in terms of greater flexibility, as he described it.
There is a balancing act here as well. Where liabilities fall due, businesses ought to pay those liabilities to Revenue. It is interesting to note as well – I am sure the Minister will be conscious of this when he considers how he approaches it – that, for example, the treatment of liabilities of PAYE workers under the PUP and wage subsidy schemes was obviously very different. The option there was either to repay it in full or have their tax credits reduced over a number of years. There is a balance to be struck in paying the money back but also ensuring that we do not get into a situation where there is a significant number of insolvencies. One way has come to my attention whereby the Minister could assist the hospitality sector.
I thank the Deputy.
If you could bear with me a moment, Acting Chair, there are many businesses in the hospitality sector-----
I thank the Deputy.
-----who for example, in terms of their projections for the wage subsidy scheme-----
The Deputy's time is up.
-----they are paying a significant debt in that regard.
The time is up. I call on the Minister to respond.
They made projections in terms of the 30% threshold and they have actually exceeded the thresholds.
The Deputy's time is up.
Perhaps some pragmatism should be shown to them.
First, the tax debt warehousing scheme is a really good scheme when compared to the interest rates that apply, for example, to other tax debt. Non-warehoused tax debt has a general interest rate of 10% or 8% in the case of income tax underpayments. That just puts in context that this is a really good scheme.
We do have to be fair to all of those who did not avail of tax debt warehousing. More than €30 billion of taxes could have come within the scope of the warehousing scheme and approximately 10% of those responsible for it availed of it, amounting to €3 billion. We need to be conscious of that. I understand that this is a very important issue for many businesses. In terms of the breakdown, which we provided in response to written parliamentary questions in the past, the sector with the largest number of businesses availing of warehousing is construction, not hospitality, with just under 9,200 customers availing of the tax debt warehousing regime, followed by the wholesale and retail trade sector with 8,600.
I thank the Minister.
So hospitality is not among the top sectors benefiting from this scheme.
