Paschal Donohoe (Dublin Central, Fine Gael)

The professional services withholding tax is a deduction at the standard rate of income tax of 20% from relevant payments made by accountable persons to specified persons in respect of certain professional services. Accountable persons include Departments, commercial and non-commercial State agencies and bodies, local authorities, the HSE and authorised medical insurers. The tax only applies to payments for professional services made by the State sector and plays an important role in ensuring the tax compliance of specified persons in receipt of payments that originate from Exchequer funds.

Deputies will be aware that the professional services withholding tax is a payment on account of the income tax or corporate tax liability. The extension of the professional services withholding tax to large contractors of professional services in the private sector would therefore result in no extra tax yield to the Exchequer, assuming current rates of compliance. To consider doing so would impose an administrative burden on those accountable persons required to operate the tax, the specified persons who incur the tax and Revenue, which administers the tax, provides customer service and ensures that accountable persons fulfil all their obligations in relation to the operation of the tax. Furthermore, specified persons who have incurred the professional services withholding tax and who satisfied the eligibility requirement for a repayment may submit repayment claims to Revenue but, in the meantime, could suffer from cash-flow issues as a result of moving from a situation where they currently receive full payment for their services to a situation where 20% of the payment is withheld as a withholding tax.

As Deputies will know, I announced on budget day that a joint Department of Finance and Revenue public consultation on withholding taxes would take place. The consultation will be launched in the coming weeks, in line with the announcement on budget day. This public consultation will explore opportunities to modernise, digitalise and further expand the scope of withholding taxes in general. The associated report will then be available and should address the issue raised by Deputy Doherty. For that reason, I do not propose to accept this amendment.

To go to the question the Deputy raised regarding the broadening of the use of the tax, this is something the consultation would consider, but I indicated the different trade-offs in relation to that. Overall, this will not deliver a tax gain to the State. It is about the timing of cash payments, as the Deputy knows. We need to be convinced from the point of view of administration by the tax collector, and the taxpayer, there is a good rationale for doing this. We will complete that report and share it with the committee.