Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

I thank the Senator. The recommendation differs from that put forward on Committee Stage in that it proposes to exempt the PUP from taxation for the period prior to 5 August, rather than maintaining that the payment is not currently taxable.The Senator has accepted that the payments have been taxable since August and is now proposing that payments from March, when they were introduced, until that date in August be non-taxable. I repeat that the PUP is and always was taxable. There is no question here about retrospection of taxation.

As I advised on Committee Stage, it bears reiterating that the main purpose of section 3 is to confer on PUP recipients, both employees and self-employed, an entitlement to the employee tax credit, thus allowing those concerned to offset the credit against their tax liability arising from receipt of the PUP. That is what section 3 is about, as discussed on Committee Stage. It is about making sure that those on the PUP can offset their employee tax credit or PAYE allowance against that payment. If we do not do so, it would result in more tax being paid on the PUP. In the absence of such an approach, the PUP would fall to be treated for income tax purposes as case IV, schedule D income, that is, miscellaneous income not falling under any other heading. In such circumstances, recipients of the payment, that is, employees or self-employed persons who have lost employment due to Covid-19, would be liable for the gross amount of income tax arising on the PUP payments that they receive.They could use neither the employee tax credit in the case of employees, also known as the PAYE credit, nor earned income credit in the case of self-employed persons to abate the gross tax liability. That is what section 3 is about, as discussed on Committee Stage.

Of its nature, the PUP is a taxable payment and, having regard to considerations of equity, grounds to move away from that position are not strong. The Government and the Minister for Finance, Deputy Donohoe, have been consistent on that point, essentially from the outset. Several parliamentary questions have been tabled on this exact issue since the payment came in. Questions were tabled on it right through May, June and July, long before the August date was even mentioned. Is it fair and equitable that recipients of the PUP are subject to tax on that income, just as those who continued in employment or those in receipt of the temporary wage subsidy payment are subject to tax on their emoluments?

Furthermore, the PUP is an income support and shares the characteristics of jobseeker's benefit and jobseeker's benefit for the self-employed, both of which are taxable. It would be inequitable if the PUP was not to be taxable while jobseeker's benefit is subject to tax. Indeed, as a general rule, all social welfare payments are subject to taxation unless specifically exempted. It is for these reasons that I do not see the logic in exempting the PUP from taxation as proposed, but taxing it after 5 August. What the Senator is actually saying is that she accepts it is taxable. I am saying it is taxable from when it was introduced in March. The recommendation accepts that it is taxable from August but the Senator wants it to be not taxable prior to August. How can people in receipt of the PUP after that date in August be liable for tax while those who got it before August would not be liable for tax? There is zero equity in that approach, in my view. A person on the PUP at the end of July and a person on the PUP at the beginning of August are entitled to be treated the same way under the tax code. It is the same payment and there should not be a differential in that regard. It would be most unfair to tax people in receipt of PUP in one month, while those who were on the payment in the previous month are not taxable.

I refer to the Social Welfare (Covid-19) (Amendment) Act 2020 that was debated in the Seanad on 29 July. The then Minister for Employment Affairs and Social Protection, Deputy Humphreys, made it clear during that debate that the payment was always taxable. That legislation was passed in the Seanad on 29 July and came into effect on 5 August following signature by the President. Section 6 of the Act provides:

Benefit to be paid or provided for out of the Social Insurance Fund shall include such sums as the Minister may estimate on the basis that may be agreed between the Minister and the Minister for Public Expenditure and Reform in respect of the payments, commonly known as the pandemic unemployment payments, made under section 202 on and after 13 March 2020 to the relevant date ...

That legislation, which was passed through the Dáil and the Seanad at the end of July and then came into effect, clearly states in section 6 that the relevant date in terms of income received is 13 March. Claims for the payment may have been submitted some days before that date but, in terms of payments received, 13 March is the relevant date as set out in legislation. I cannot see how we can go back and untangle that Act which was passed through the House, signed by the President and came into legal effect on 5 August in order to change the relevant date for receipt of the PUP. That legislation states the relevant date is 13 March 2020. That date did not come from nowhere. It is specified in legislation passed by the Houses. In the context of the PUP, the relevant date is 13 March as set out in the legislation passed in the House at the end of July. I cannot see how there could be any equity in amending that legislation, which sets out that the effective date is 13 March, by providing that those who got the payment in the first three or four months should pay no tax but those who got it in months 4, 5 or 6 should pay tax. I just cannot accept that approach. I cannot accept the proposal in the recommendation that some people who received a payment, the relevant date for which as specified in legislation is 13 March, in one month should be exempt from tax, while those who got it in a later month would be subject to tax. The Senator accepts the payment would be subject to tax from 5 August. The recommendation would mean that a person getting the payment in a particular month would not have to pay tax on it while a person getting the same payment the next month would have to pay tax on it in circumstances where there is no relevant basis for that date. The relevant date in the legislation as passed here several months ago is 13 March.

On that basis, not only do I not wish to go there in terms of the recommendation, it would be utterly unfair for people who began receiving the PUP later in the year as they were not laid off in the early stages of the pandemic to be taxed whereas those who came in the first wave of PUP would get it tax free. In many cases, it could be the same person. I could not accept such a situation. I know the recommendation is designed to assist, but I cannot see how there is any equity in what is proposed in terms of treating people differently in respect of the same payment depending on the month in which they received the payment. On that basis, I am unable to accept the recommendation.