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Tax Code

Dáil Éireann Debate, Thursday - 10 October 2019

Thursday, 10 October 2019

Ceisteanna (103)

Seán Sherlock

Ceist:

103. Deputy Sean Sherlock asked the Minister for Finance the categories of flat rate tax expense for workers which the Revenue Commissioners propose to abolish from the beginning of 2020; the anticipated increase in tax revenue arising out of the abolition or substantial reduction of flat rate tax expenses for workers; and if he has discussed this matter with the Revenue Commissioners in view of the fact it involves an effective pay cut for the workers concerned and a prioritisation of the measure by the Revenue Commissioners ahead of other reforms of aspects of the tax code which affect higher earners. [41460/19]

Amharc ar fhreagra

Freagraí scríofa

The flat-rate expenses (FRE) allowance regime is a concessionary practice operated by Revenue, where both specific commonality of expenditure exists across an employment category and the statutory requirement for the tax deduction as set out in section 114 of the Taxes Consolidation Act (TCA) 1997 is satisfied. To qualify for tax relief under that section, any travelling expenses must be necessarily incurred, and any other employment-related expenses must be wholly, exclusively and necessarily incurred, in the performance of the duties of the relevant employment and must not be reimbursed by the employer. The FRE regime eases the administrative burden on Revenue and on employees in certain sectors by facilitating the automatic granting of a fixed tax allowance to cover allowable employment-related expenses, without the need for annual claims by every employee concerned. It is important to note, however, that the regime does not preclude any employee from making an individual claim for a tax allowance in respect of employment-related expenses, where those expenses meet the statutory requirement for such an allowance. Therefore, while certain employees may no longer claim a deduction on a universal “flat rate” basis, they may still be able to still claim a deduction on a specific “vouched basis”.

I am aware that over the past 18 months, Revenue has been conducting a comprehensive review of the FRE regime. Revenue has advised me that the purpose of the FRE review, which involved engagement with relevant representative bodies, is to ensure that the expenses granted to each employment category remain justified and appropriate to modern day employments and work practices. Each category of FRE allowance is being examined separately in the light of the legislative requirements. The review will result in increases and decreases in several FRE categories and the withdrawal of the right to avail of an FRE allowance in some categories. An FRE allowance can only be retained to the extent that there is a legislative basis to support the right to tax deductibility in respect of the expense.

Revenue advise me that its review is now nearing conclusion. As previously advised, the implementation date for all changes to the FRE regime will be 1 January 2020 to make sure that employees in any one sector are not impacted on earlier than employees of another sector. Revenue will be publishing a comprehensive list of all FRE allowances for 2020 in advance of the implementation date. It is not appropriate, in advance of the finalisation of the review and the publication of the list, to indicate the employment categories which will be subject to increases or decreases in the FRE allowance amount or which no longer meet the legislative basis for deductibility.

I am also advised by Revenue that it is not possible to accurately quantify the anticipated increase in tax revenue arising out of any abolition or reduction of FRE allowances, as the cost of such allowances vary depending on the particular circumstances of the individual recipients, for example, the extent of their income subject to tax and whether income is subject to tax at the standard or marginal rate. Moreover, a breakdown of the cost and numbers by reference to each employment category in which the FRE regime currently operates is not readily available.

Finally, on the question of whether I have discussed the FRE review with Revenue, I can confirm that I am aware of Revenue’s programme of work in this area and I understand that the purpose of the review is to ensure that the expenses granted to each employment category remain justified and appropriate to modern day employments and work practices. As the Deputy will be aware, the administration of the tax code is exclusively a matter for Revenue who are independent in the performance of their functions. Any changes in practice to the flat rate expenses regime are therefore a matter for Revenue, but I understand that any withdrawal of the practice can only take place if Revenue are satisfied that there is no longer a legally valid basis to give the concession, after engagement with the relevant representative body acting on behalf of the various categories of workers.

Having said this, I expect that Revenue as they have demonstrated on many occasions will implement the outcome of their review in their customary proportionate and fair manner fully cognisant of the impact on the individuals concerned.

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