Dáil Éireann díospóireacht -
Wednesday, 10 May 2000

Vol. 518 No. 6

Written Answers. - Withholding Tax.

Derek McDowell

Ceist:

254 Mr. McDowell asked the Minister for Finance the amount of money he expects to raise from withholding taxes on professional services in 2000; the amount raised from such taxes in each of the years 1993 to 1999; the cost of reducing the rate of withholding tax on professional services from 24% to 22% in 2000; and if he will make a statement on the matter. [12783/00]

Derek McDowell

Ceist:

255 Mr. McDowell asked the Minister for Finance the amount of withholding tax on professional services collected in 1999 by category of service provided, for example, legal services, management consultancy, advertising and public relations; and if he will make a statement on the matter. [12784/00]

Derek McDowell

Ceist:

256 Mr. McDowell asked the Minister for Finance the amount of revenue received from withholding tax on professional services in 1999 by reference to withholding tax on fees and withholding tax on invoices in respect of third party costs incurred by individuals or companies providing services; and if he will make a statement on the matter. [12785/00]

Minister for Finance (Mr. McCreevy)

It is proposed to take Questions Nos. 254, 255 and 256 together.

The budget estimate of net yield in 2000 from withholding tax on fees paid for professional services is £108 million, but it is probable that this estimate will be exceeded.

The net receipt of withholding tax on professional fees for each of the years 1993 to 1999 is as follows:

Net receipt of Withholding Tax, 1993 to 1999

	1993	1994	1995	1996	1997	1998	1999
	£m.	£m.	£m.	£m.	£m.	£m.	£m.
Net receipt	69.4	79.1	73.4	78.7	106.5	110.1	136.7

"Net receipt" means the total tax deducted and paid over in a year less repayments made in the same year. The net receipt of the tax in 1999 includes a single payment of £14.5 million which was regarded as a once-off and not included in the budget estimate for 2000.

The cost to the Exchequer of reducing the rate of withholding tax on professional fees from 24% to 22% is estimated at £6.4 million in 2000 and £11.6 million in a full year. These costs are included in the ordinary costing of a cut in the standard rate of income tax.

To determine the amount of withholding tax on professional services collected in 1999 by category of service provided would require an individual examination of all the relevant returns furnished to date by the accountable bodies. Such an examination could be carried out only at disproportionate cost.

I am advised by the Revenue Commissioners that basic data are not available which would enable the amounts of withholding tax referable to third party costs to be identified.

Derek McDowell

Ceist:

257 Mr. McDowell asked the Minister for Finance the reason withholding tax on professional services is not applied to invoices in respect of third party costs incurred by advertising agencies but is applied to invoices in respect of third party costs submitted by all other companies providing services to the State. [12786/00]

Minister for Finance (Mr. McCreevy)

Professional services withholding tax applies to a payment made by an accountable person, generally public bodies, in respect of professional services. Where an accountable person makes such a payment, they are obliged to deduct tax at the standard rate of income tax in force at the time of payment. The obligation to deduct tax applies as regards the entire payment, including any element which is for the reimbursement of expenses, outlay or third party costs. This general rule applies to advertising agencies as well as to all other industries.

I am informed by the Revenue Commissioners that payments made to an advertising medium, e.g. a newspaper, or to a person acting as agent for the advertising medium, e.g. an advertising agency, in order to obtain advertising space or time are not subject to PSWT as such payments are not made in respect of professional services.

Where advertising space or time is provided as part of an overall professional service or by an advertising agency as part of an advertising, i.e. professional service, the total payment is subject to PSWT. Where a separate contract is drawn up by an advertising agency in respect of advertising space or time, payments made under this contract are made purely for advertising space or time. Revenue accepts that PSWT need not be deducted from payments for such space or time, as the payment is not being made in respect of a professional service.