Pearse Doherty (Donegal, Sinn Fein)
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10. To ask the Minister for Finance the tax treatment of the Covid-19 pandemic unemployment payment and payments under the temporary wage subsidy scheme; the way in which liability will be calculated for 2020; the way in which it will be collected; the planned tax treatment of both payments in cases in which the liability due exceeds unused tax credits for 2020; and if he will make a statement on the matter. [16296/20]

Pearse Doherty (Donegal, Sinn Fein)
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I want to ask about the tax treatment of the temporary wage subsidy scheme, TWSS, the way in which the liability will be calculated for 2020, the way in which it will be collected and the planned tax treatment of the payments in cases in where the liability due exceeds the unused tax credits for 2020. This is a significant worry for workers whose employers are benefitting from the TWSS and who may potentially face paying a lump sum payment at the end of the year or over a short period of time into 2021.

Paschal Donohoe (Dublin Central, Fine Gael)
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I am aware this is a matter of concern to many who are participating in the TWSS. Even at the very point the TWSS was launched, I and the Revenue Commissioner were at pains to make this point clear.

I will answer the specific questions Deputy Doherty put to me. At the end of 2020 Revenue will have all available information for each employee who received TWSS payments. Revenue will also have details of any pandemic unemployment payment, PUP, made by the Department of Employment Affairs and Social Protection. The payment details from both schemes will be included against an employee's tax record and a preliminary end-of-year statement will be created that will show an employee's end-of-year tax and USC position, that is, his or her tax or USC for the year balanced or underpaid or overpaid.

If an employee is in an underpayment position he or she may be entitled to additional tax credits and reliefs such as health expenses. He or she will need to complete their 2020 income tax return online through Revenue's myAccount to claim any additional tax credits or reliefs. Revenue will collect any tax owing by reducing an employee's tax credits and rate band so that the liability will be collected evenly during 2021 and, indeed, possibly beyond that. Alternatively, should an employee wish to pay his or her underpayment in part or in full, he or she can make a payment to settle any underpayment through myAccount.

Revenue will adopt a fair and flexible approach to collecting tax due on payments made under the TWSS to avoid any undue hardship on employees.

Pearse Doherty (Donegal, Sinn Fein)
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This is one of the issues we addressed when the scheme was introduced. The scheme has been extended and will be extended again. It needs to be extended for affected sectors right out to the end of the year. However, if we take it that it will potentially run for 22 weeks, for those workers and employees who have benefitted to the maximum amount of €410, it is more than €9,000 in untaxed income from which they have benefitted. If it is extended, that figure will go up. There is a huge anxiety here because they do not know what this means. They do not know if the underpaid tax will amount to hundreds or thousands of euro at the end of the year. They have no way of calculating it. There is no online calculator for the Revenue, which I am suggesting to the Minister today. Revenue is extremely efficient and excellent in terms of the Revenue Online Service, ROS. A type of online calculator would be beneficial.

The Minister mentioned that it would be spread over 2021 and possibly beyond. When will a decision be made on whether it will be 2021 or whether it will go into 2022? What will happen to those employees who have their employment terminated either at or before the end of the year and who have an unpaid tax liability? Will they have to pay it in a lump sum? I have asked a number of questions but most important is the suggestion that we need an online tax calculator that will give examples of the potential liability across a range of individuals.

Paschal Donohoe (Dublin Central, Fine Gael)
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That is a very helpful suggestion because I am aware of the concern with regard to this matter. It is worth making the point that the whole purpose of this scheme being brought in is to keep a job, and the reason the payments in respect of it need to be taxed is that most social welfare payments are, in principal, taxable. It is important to maintain fairness in how income supports that are being made available for the State are taxed or are not taxed.

To deal with the substantive point the Deputy made, it is a good idea and I will talk to Revenue about it to see if we can provide clarity to individual taxpayers on what their individual circumstances could be.

On the Deputy's second question on whether a decision will be made on 2021 and beyond, I imagine the view of the Revenue Commissioner will be that the amount of time the taxpayer has to settle the outstanding liability could vary from taxpayer to taxpayer, depending on his or her circumstances and on the bill.

Regarding the Deputy's final point, if a person loses his or her job before the end of the year, I imagine that if there is a liability, it will travel with him or her as he or she moves into the next tax year regardless of what his or her job is, but I will double-check that. I will get back to him on it. I will also certainly consider the suggestion he made regarding a calculator.

Pearse Doherty (Donegal, Sinn Fein)
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I thank the Minister for taking up that suggestion.

The concern in this regard is there is a lack of awareness of what the liability will be for employees in the first instance. It could be substantial, particularly if it is extended. We also know that those benefitting mostly from the TWSS and the PUP are those in low-income sectors. Those hit hardest as a result of the pandemic are in hospitality and tourism, where the average income is quite low. In terms of accommodation and food, for example, their spend is just under €350. Other sectors, such as retail, are also /low income.

When these tax liabilities are spread over 2021, it means, in effect, a net wage cut for the employee. It is a cut in take-home pay because the person's tax liability will be higher. As the Minister discussed with my colleague earlier, employers are reducing wages as well. We can see from official figures that a 7% reduction in weekly take-home pay is the average. There may be a need to consider setting a maximum tax liability that an employee should have to take in a certain month. We need more clarity on this. In social welfare, for example, where there is an overpayment, whether it is a mistake by the Department or by the individual, a maximum amount can be deducted from a social welfare. We need to give certainty to employees that Revenue will not take more than X per week. Next year we will continue to deal with the pandemic. This will have an impact on take-home pay. Many of these employees are struggling week-to-week, whether with mortgage costs or rent costs, insurance costs, crèche costs, etc.

Paschal Donohoe (Dublin Central, Fine Gael)
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It is precisely because I understand that so many are suffering with costs relating to crèches, paying their mortgages and worries about their income that we brought in the wage subsidy and PUP schemes. When the Deputy refers to the anxieties of citizens and taxpayers, that is what motivated me, the previous Government and this one to bring in both schemes.

I am concerned about the Deputy's suggestion to set a maximum amount that could be due in dealing with tax liabilities under the TWSS because some participants are not on low incomes and are, in fact, middle-income workers, and they are on the scheme because we wanted to protect their jobs. For example, low-income workers can look at other people on the scheme and see that their income is quite a bit higher theirs. It is fair that we have a principle that if there is a tax liability due, the right amount should be paid by all. Bringing in a cap might get in the way of that.

Pearse Doherty (Donegal, Sinn Fein)
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It is not a cap. It is about ensuring the deductions by Revenue would be spread over a longer period.

Paschal Donohoe (Dublin Central, Fine Gael)
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That is also something that the Revenue Commissioners will want to look at but the answer I gave to the Deputy earlier is that the Revenue Commissioners will be flexible in how they implement this. He made the point, which I have often seen reported, about the concerns of those on low-incomes. While it is the case, I hope, by the scheme working that if a tax liability is generated for the future, it will be small. I am aware that small tax liability could form a large share of that person's income. I absolutely understand that. That is why we need to have flexibility in how this matter is dealt with.

I take the Deputy's point. If we can clarify the amount that is due, that could be helpful in helping taxpayers understand the scale of the liability, if one at all is due.