Robert Troy
Question:85. Deputy Robert Troy asked the Minister for Finance if he will ensure flexibility and support for businesses with regard to tax debt warehousing. [4605/24]
View answerThursday, 1 February 2024
Questions (85)
Oral answers (6 contributions)
The Minister will be acutely aware the Government introduced debt warehousing as part of the response to difficult trading conditions for businesses during the Covid-19 pandemic. Businesses that availed of debt warehousing are now receiving letters from Revenue demanding repayment. I welcome that the Minster stated a few weeks ago there would be flexibility. Today, if possible, I would like him to update the House on what that flexibility would look like.
The tax debt warehousing scheme offered valuable and practical liquidity support to businesses during the Covid-19 pandemic and continues to support businesses as they recover from the impacts of the pandemic and the cost-of-living crisis. It assisted businesses with their cash flow in recent years, during difficult trading periods and certainly has, in many cases, prevented business failure.
The total debt in the warehouse has decreased substantially since the beginning of 2022 when the figure was more than €3 billion of warehoused tax debt for more than 100,000 customers. By late January this year, slightly more than €1.7 billion was warehoused for more than 57,000 customers and for 70% of those the businesses have outstanding liabilities of less than €5,000.
For the majority of businesses availing of tax debt warehousing, the amount they owe in warehoused debt is quite modest. However, I do not underestimate the challenge it is for many of them to pay it. The bulk of the debt, almost €1.5 billion, was warehoused by 5,265 customers with outstanding balances greater than €50,000. The vast majority of the warehoused tax debt is represented by just over 5,000 businesses. While payments can be made in advance, businesses do not have to pay all of their debt by 1 May 2024. Instead, they are required to engage with Revenue to make arrangements to pay the debt over an agreed period of time, based on their individual circumstances and capacity to pay.
The Revenue Commissioners have assured me that they are currently being flexible in terms of the warehousing regime. There is the possibility of a payment break, deferring the next payment due if there are cash flow issues, amending the payment date and so on. The Deputy is correct that I have been engaging with the Revenue Commissioners and with my officials. I have a further meeting on this issue today and I hope to finalise the further flexibilities on this issue very shortly. I would welcome the Deputy's views on that issue today.
I welcome the Minister's reply. He is right. This was a critical support at the time of the response to Covid. It helped businesses through a very difficult trading period. The environment is not as challenging as it was during Covid but it remains very challenging for businesses. We have high energy costs, the increase in VAT, auto-enrolment, sick pay and the increase in minimum wages. Some of these are very positive in their own right but they are all coming together at the same time and making it very challenging for businesses currently.
I welcome the fact that flexibility is going to be forthcoming but we need certainty. Businesses need certainty as to what that flexibility will look like. We need to ensure that the interest rate is kept as low as possible and there is an extension for as long as possible. The key here is that sustainable businesses are given a lifeline to ensure they can continue and protect jobs.
The Deputy has touched on the key issues in the tax debt warehousing regime. It is important that we are as flexible as possible. The overall principle is that this tax debt will be treated very differently from other tax debt. It is important that businesses continue to file their current returns on time and meet their current taxation liabilities. On that basis, the Revenue Commissioners will be very flexible with businesses. It is important to emphasise that the requirement here is not to pay the warehoused debt by 1 May, which I have heard reported. The requirement is to engage with Revenue and agree a plan which will be worked out and implemented over a number of years. I believe that additional flexibilities are warranted. Trading conditions are very challenging for a lot of businesses in different sectors. This is a legacy of Covid and I expect to finalise it very shortly.
I do not think there is much further to add. It is critically important that the message goes out from this House that businesses should engage with Revenue and should not bury their heads in the sand. When they are forthcoming and engage with Revenue, the Minister is saying today that flexibilities will be forthcoming and we should know very shortly what those flexibilities will look like. Businesses need certainty. They are planning. They do not plan day to day or week to week but, quite often, a year in advance. The sooner we can get that certainty out to business and that flexibility, the better. We need to see low interest rates and longer periods of time so that sustainable businesses can continue to trade and protect the jobs they create.
I assure the Deputy that this is very much on my desk. I have a further meeting today. I am very anxious to finalise the arrangements for the tax debt warehousing scheme very shortly. The Deputy is correct that businesses want to plan. They need to manage their cash flow and understand the position for dealing with the warehoused debt over the coming years. What has been put in place so far is very good. It is a very good scheme. The normal interest rate for tax debt is 10% for most taxes and 8% for income tax. In recent times, a rate of 3% has been applied in respect of warehoused debt. I need to be fair to all parties involved. Many businesses did not avail of warehoused debt; the vast majority did not but some did. They need additional support and a lot of flexibility to ensure they can manage their obligations. I thank the Deputy for his representations on the issue. I intend to finalise this very shortly and will take on board the points he has made.