Dáil Éireann Debate, Tuesday - 23 June 2020
85. Deputy Richard Boyd Barrett asked the Minister for Finance if he will make a provision to ensure that both the pandemic unemployment payment and the temporary wage subsidy scheme will be tax free in order to avoid an undue burden on those who lost their jobs or had their incomes dramatically reduced as a result of the pandemic; and if he will make a statement on the matter. [12682/20]
Amharc ar fhreagraPayments made under the Temporary Wage Subsidy Scheme (TWSS) and the Covid-19 Pandemic Unemployment Payment (PUP) are income supports and share the characteristics of income. Therefore, they fall to be taxed as such in the normal course of events. Also, other income earners in receipt of comparable “normal wages” are taxable on those wages so there is, in addition, a strong case on the grounds of equity for payments made under the TWSS and PUP to be subject to income tax. However, tax will not be collected in real-time while the measures are in operation.
While not liable to tax in real time under the PAYE system, the liability to tax on payments under the measures will instead normally be determined by way of review at the end of the tax year. I am advised by Revenue that when an end of the year review takes place, it may be the case that an employee’s unused tax credits will cover any further liability that may arise as a result of taxation of the measures. Where this is not the case, and should a tax liability arise, it is normal Revenue practice to collect any tax owing in manageable amounts by reducing an individual’s tax credits for a future year or future years in order to minimise any hardship. Additionally, if an individual has any additional tax credits to claim, for example, health expenses, this will also reduce any tax that may be owing. I have been assured by Revenue that they will be adopting a fair and flexible approach to collecting income tax due on such payments.
In the case of the PUP, the taxation position follows the general taxation rule for social welfare payments and, thus, while liable to income tax, the payments will be exempt from USC and PRSI. This will be the case whether the recipient of the PUP is either a former PAYE worker or a person who was previously self-employed.
As noted above, income tax, USC and PRSI are not deducted from the TWSS. However, the employee will be liable to income tax and USC on the subsidy by way of review at the end of the year.
