Wednesday, 13 November 2019

Ceisteanna (28)

Michael McGrath


28. Deputy Michael McGrath asked the Minister for Finance the position on the review of the flat rate expenses system; and if he will make a statement on the matter. [46832/19]

Amharc ar fhreagra

Freagraí ó Béal (6 píosaí cainte) (Ceist ar Finance)

I seek an update on the review being undertaken by the Revenue Commissioners on the flat rate expense allowance system, which is relevant for more than 600,000 workers. According to the Revenue website, the outcome of the review will mean that any change will come into effect on 1 January 2020. I seek an update for the House.

I thank Deputy Michael McGrath. This matter has also been raised with me by Deputy Pearse Doherty.

The flat rate expense allowance regime is an administratively-based practice operated by Revenue, where specific commonality of expenditure exists across an employment category and the statutory requirement for a tax deduction for expenses, as set out in section 114 of the Taxes Consolidation Act 1997, is satisfied, namely, that the expense must be wholly, exclusively and necessarily incurred in the performance of the duties of the relevant employment.

This allowance 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.

I am advised that a flat rate expense allowance amount is decided following engagement between Revenue and the relevant representative body for the particular group of employees who incur the same expense. The regime has developed incrementally over the past 40 to 50 years and currently incorporates 53 employment categories, broadly covering some 134 different allowances.

Over the past 18 months, Revenue has been conducting a comprehensive review of the regime. I understand the review is ongoing but is nearing conclusion, with an expected completion date by the end of the year.

As the Deputy is aware, the administration of the tax code is a matter for Revenue, which is independent in the performance of its functions. That being said, I expect that Revenue, as it has demonstrated on many occasions, will implement the outcome of its review in its customary proportionate and fair manner.

Having regard to the fact that we are coming closer to the date on which any changes are due to be implemented, I have written to Revenue this week requesting a factual update on the issue. I will revert to the Deputies who have raised the matter with me, with a view to sharing any information received, as soon as possible.

This is a significant issue for many workers. More than 600,000 workers availed of the flat rate expense allowance system in 2017, with gross claims of more than €160 million, which means a tax saved amount of €48 million. If we take an example such as miners working in Tara Mines, their allowances is €1,312 so their tax saving is more than €500 per annum. As the allowance for many nurses is €733, at the marginal rate it would result in a tax saving of close to €300 per annum.

I am concerned we are getting very close to the deadline and we do not know where all of this is going. There could be a nasty shock in January for tens of thousands of workers, if not more, when they see their payslips. I do not know the nature of the ongoing consultation but before any changes are made we should be made aware of them and we should be given an opportunity to debate the issue in the House. The Oireachtas finance committee should also have an opportunity to discuss with the Revenue Commissioners the nature and scope of this to see whether changes are possible.

I am well aware of the numbers of citizens who will be affected by this. I am also aware of the likely effect it will have on their after-tax income. In my letter to the Revenue Commissioners I also asked whether they can give me further clarity on the number of employees covered by this, the various categories of employees, the cost to Revenue and the benefit to each employee group in order that I have a clearer understanding of the scale of change that may ensue.

I am well aware of the concern regarding this matter and have asked the Revenue Commissioners to give me an update on their work.

Can the Minister confirm that it remains the position that these changes will come into effect on 1 January 2020? Will any changes that will come in not require the approval of either the Minister or this House? Has he any details regarding the nature of this consultation and engagement? Who has it been with? I imagine that it has been with the trade union bodies and employer representative bodies. We are getting a certain amount of feedback through those channels but the key concern here is that many low and middle-income workers, for whom this has become a normal part of their tax code, will be in for a shock and will have their net pay reduced in January 2020 as a result of these changes of which, as of now, we have no advance notice or foresight regarding what is involved.

It is my understanding that these changes are due to come in on 1 January 2020. Regarding my role or that of the Oireachtas, this is a matter for implementation of the tax code by the Revenue Commissioners. As is always the case, I have no doubt that the Deputy and the Opposition will raise the matter directly with me. I do not have the details regarding the bodies with which the Revenue Commissioners have engaged but I would expect that it included the representative bodies. If I am wrong on this, I will communicate that to the Deputy.