Thursday, 22 November 2018
Ceisteanna Eile - Other Questions
7. To ask the Minister for Finance if his attention has been drawn to the Revenue Commissioners’ decision to end the unvouched disregard allowance for certain workers as of 1 January 2019; and if he will discuss this matter with the Revenue Commissioners and seek to have this decision reversed. [48597/18]
I welcome the deferral of the terrible attack on the flat rate system but note that in his confirmation to me earlier this week, the Minister said the approach will ensure that any changes that may be made to the flat rate expenses regime will not impact on any specific group earlier than the rest. That is a clear indication that there is more to follow and that all of these changes should happen at the one time. Yesterday, we heard from the Taoiseach a suggestion that this may not happen. He said the measures would be politically proofed and that no change would happen before 1 January 2020, if at all. Can the Minister confirm the current position? He has indicated to me on two previous occasions that the review is complete under a number of headings and that what has been deferred is a decision which has already been made. Yesterday, however, the Taoiseach suggested the change may not happen at all.
I am advised by Revenue that the effective date for implementation of the changes referred to by the Deputy is being deferred to 1 January 2020. The intention is that Revenue will have completed the comprehensive review of all flat rate expenses by that date. As such, this approach will ensure that changes to the flat rate expenses regime do not impact on any specific group earlier than the rest. I also understand that Revenue will be in contact with the relevant representative bodies in this regard. However, it is important to be clear that there has been no change to the general rule set out in legislation that all employees are entitled to claim a deduction under section 114 of the Taxes Consolidation Act 1997, or TCA, in respect of an expense incurred wholly, exclusively and necessarily in the performance of the duties of their employment to the extent that the expenses are not reimbursed by the employer. This means that all employees remain entitled to claim deductions for valid and specific expenses incurred.
Revenue is independent in the administration of the tax code and the flat rate expenses regime is an additional 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 1997 Act, is satisfied. The purpose of the regime is to simplify administration where the specific legislative criteria are met and help both the taxpayer and Revenue by making it easier for large groups of employees working in the same sector to avail of their entitlement to tax relief in respect of expenses incurred in the performance of their employment duties. Earlier this year, Revenue commenced a comprehensive review of flat rate expenses to ensure the expenses are still justified and appropriate to modern day employment and work practices given the historical nature of the practice and having regard to changes in employment circumstances, regulations and work practices across employments.
The Minister may imply that nothing has changed, but the reality is very different. There is a reason we have this system. It is so that organised groups of workers can avail of their rights. That is why ICTU and Mandate are opposed to this. I commend their activism in that regard. The mechanism is now being taken from individual workers who were previously allocated these deductions as of right as a group of workers and who will now have to hold receipts and claim individually. It is a bureaucratic nightmare for those claiming as well as for Revenue which will have to process and check such claims. The Minister said Revenue was independent in the implementation of the tax code. While that is a clear statement of fact, I quote to him the Taoiseach's statement:
No changes will be implemented before 1 January 2020 if at all. I will make sure changes are politically proofed before they happen.
Can the Minister outline to the House what political proofing the Government intends to engage in on this? Why is the Taoiseach suggesting these changes may not happen at all? Has the review been completed in a number of sectors and has a decision been made in that regard, notwithstanding the deferral of its implementation, or is there a question mark, as outlined by the Taoiseach, over whether this will happen? What engagement has the Minister or his officials had with Revenue officials on this measure?
To date, this has been a matter being implemented by the Revenue Commissioners. On foot of the concern that developed on the matter in the early part of the week, Revenue made the decision on deferral. As to the proofing to which the Deputy referred, it is important that there is broader awareness of what is happening when work like this is under way. I welcome the fact that Revenue will contact representative bodies on the matter so that everyone is aware of what is under way.
The Deputy will know that, because this is a tax relief, the Revenue Commissioners will have to consider that it is therefore worth more to people who are on higher rates of income tax. They will review this matter across next year. As I have said, they have decided that any changes will be deferred until 1 January 2020.
It has already been decided to end the flat-rate expenses relief system in respect of 75,000 workers in five categories. Those working in shops will be most affected by this decision. Will the Minister confirm to the House whether that decision still stands or is now subject to review? Will he outline whether any reviews have taken place in respect of workers outside the five categories to which I have referred? Have decisions been made in respect of those workers at this point? The Taoiseach asserted in this Chamber yesterday that he will personally ensure there is political proofing in this regard. Does that not suggest that this will ultimately be a political decision, as the Taoiseach clearly indicated in this House yesterday, rather than one that is solely in the hands of Revenue? Will the Minister deal with this issue in a transparent way by amending the Finance Bill as it makes its way through the Seanad to ensure any changes to the flat-rate expenses regime will require political proofing by means of the consent of the Houses of the Oireachtas?
The Minister needs to clarify whether this is a stay of execution or a review of what has already been decided. Will he tell us what Revenue found when it reviewed certain categories of employment? What was the outcome of that review? Was there any consultation with the representative bodies as part of that review? Is it Revenue's case that tax relief is granted in respect of a level of expenses which is greater than the level of expenses actually incurred? Is that what Revenue is saying? Is that its conclusion? The cost of moving to a new system, involving tens of thousands of individual claims by employees in respect of expenses wholly, exclusively and necessarily incurred in the performance of their duties, must be weighed into the equation as well. These key questions need to be answered.
The Revenue Commissioners commenced this review because they wanted to ensure this matter could be dealt with as effectively and efficiently as possible. They wanted to ensure the expenses agreed are still justified, are appropriate to modern employment and work practices, and are in accordance with the requirements of the Taxes Consolidation Act 1997. Arising from the review, there may be an adjustment to the quantum of particular flat-rate expenses. A decision on whether they should be increased or withdrawn is a matter for the Revenue Commissioners. As I have said, they have confirmed that their work is under way and that they will review where it stands for next year. Regarding the question asked by Deputy Pearse Doherty, I have not yet seen the amendment that the Deputy or his party may propose during the debate on the Finance Bill.