Brian Cowen (Laois-Offaly, Fianna Fail)

With the permission of the Ceann Comhairle, amendments Nos. 14 and 20 are being discussed together.

The Deputy's amendment as tabled on Committee Stage highlighted the issue of whether the cost of retraining provided by an employer as part of a redundancy package was taxable. I indicated to the Select Committee on Finance and the Public Service that I would consider the issue before Report Stage.

The current situation is that statutory redundancy payments are exempt from tax. In addition, redundancy payments in excess of the statutory redundancy, including provision of retraining, are also currently free from tax up to certain statutory limits. The number of educational schemes and tax reliefs already in operation to assist individuals who have found themselves unemployed should also be noted. It was on that basis we devised the proposal.

Educational schemes are currently available. I refer to the back to education allowance scheme with immediate access for persons made redundant, the cost of education allowance, general education training and development courses, the back to education initiative including post-leaving certificate courses as well as vocational training opportunities scheme and local authority grants. All those schemes are available. Tax reliefs are in existence in this area to assist individuals finding themselves unemployed to retrain and to re-enter the workforce. There is relief for fees paid for third level education, relief for fees paid for training courses, relief for long-term unemployed which applies to both employers and employees, double deduction in respect of certain emoluments to help the long-term unemployed to return to employment and relief for training of local staff before commencement of trading. Many of those circumstances are covered by existing arrangements.

Having considered the matter, I have decided to introduce a new subsection into section 201 of the Taxes Consolidation Act 1997 which provides an additional new exemption of up to €5,000 for each eligible employee where an employer bears the cost of retraining workers as part of a redundancy package. An eligible employee is a person who has more than two years of continuous service. The retraining must be part of a redundancy package and be designed to improve skills or knowledge used in obtaining employment or setting up a business. To encourage people to avail of the training offered and be in a position to return to the workforce, there is a requirement that the course be completed within six months of the employee being made redundant.

As I indicated earlier, there are other supports and tax reliefs available for long-term courses. There are two measures in the section designed to counter tax avoidance. First, the exemption will not apply to spouses or dependants of the employer and second, employees will have to avail of retraining as they will not be able to receive cash instead, as the Deputy said.

I commend the amendment to the House on the basis that there is a large range of other initiatives, schemes and allowances to cover a situation where a person has immediate access to the back to education allowance scheme, for example. This was provided in budget 2007 to persons made redundant so long as they were entitled to statutory redundancy and qualified for a social welfare payment. Budget 2008 provides for an annual allowance towards the cost of recipients' studies as well as their weekly payment. This allowance is paid at the start of each academic year and was increased from €400 to €500 in budget 2008. I think the point is covered.

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