Charlie McCreevy (Kildare North, Fianna Fail)

The recommendation seeks to exempt from income tax various types of compensation payments made to employees under the listed provisions in respect of discrimination, harassment, etc. There has been some publicity recently regarding the tax treatment of equality awards. In a recent article in Irish Tax Review it was incorrectly suggested that Revenue had changed its position and was now proposing to tax these awards. There has been no change in Revenue's view of the tax treatment of such awards. Revenue has always held the line that general awards of this nature are taxable under the Tax Acts. This is in line with case law where the courts have consistently ruled that anything received from being, having been or becoming an employee is taxable under Schedule E as part of the remuneration of the office of employment.

The recommendation proposes their exemption unless a relevant authority, a tribunal, Rights Commissioner, the Labour Court or a judge, declares them to be taxable. This would effectively mean that such an authority would have absolute discretion, without any objective criteria, in deciding whether the payments were taxable. I could not accept this particular procedure.

I am not convinced that the awards in question should not be taxable, particularly when one considers that we tax unemployment benefit. If payments of this type are to be exempt from tax, a statutory exemption will have to be enacted. Furthermore, such exemption would have to be considered in the context of the nature of payment of these awards. Many are settled out of court and often involve a global sum in full and final settlement of all actions. The element of the award relating to harassment, etc., would have to be isolated from any other compensation element such as, for example, loss of normal remuneration or from normal earnings.

As stated when we discussed this matter in the Lower House, I am willing to give it further consideration. I will ask my officials and the Revenue Commissioners to investigate it in the context of next year's budget and Finance Bill. In the meantime, I cannot accept the recommendation.