Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

The Senator is requesting a comprehensive report on transborder workers' relief. This was discussed during the debate on last year’s Finance Bill, when I undertook that the relief would be examined as part of the work of the TSG process for 2021. I fulfilled this commitment and this relief was examined by that process earlier this year.

This issue was also raised with me on Committee and Report Stages of the Dáil, in particular Revenue’s temporary concession for the years 2020 and 2021, introduced in light of the exceptional and unprecedented circumstances arising from the pandemic. The concession provides that employees will still be entitled to claim transborder workers' relief where they are required to work from home in the State due to Covid-19 restrictions, provided all other conditions of the relief are met.

This concession is due to lapse at the end of this year. The question has been raised previously if the concession would be extended further due to recent public health advice recommending that everyone should work from home unless it is necessary to attend the workplace in person.

The Senator may wish to note that the operation of the relief is a matter for the Revenue Commissioners.I am advised that Revenue has been reviewing this matter. Having regard to current circumstances, I can confirm that Revenue will continue to adopt a pragmatic and flexible approach by allowing for a further extension of the temporary concession. This extension will apply for the period of time in 2022 during which the public health advice recommends that everyone should work from home unless it is necessary to attend the workplace in person. I am advised that Revenue issued further guidance on this temporary extension, which is available on Revenue’s website.

More broadly, in relation to the Senator’s request for a further report on transborder workers’ relief, as I said, a comprehensive examination of the issue was undertaken by the TSG that encompassed very detailed consideration of all relevant matters, including the equity of treatment between Irish residents who pay tax in the State, the competitive position of Irish employers and the established principles of international tax.

Ordinarily to avail of the relief, the duties of employment must be performed wholly outside the State and in a country with which Ireland has a double taxation agreement. When examining whether the temporary concession should be placed on a statutory footing, the TSG review identified a number of significant concerns from a policy perspective having regard to the interest of the wider body of taxpayers encompassing Irish resident employees and employers.

The review noted that if the temporary concession regarding transborder workers’ relief was placed on a statutory footing, it would allow residents in the State to avail of the relief while working in the State and pay no tax to the Exchequer in respect of the foreign employment income. Where employment duties are carried out in the State, Ireland has a taxing right over that income and to not tax that income would be asking the State to give up a taxing right it rightfully has under the Irish tax code. It is unclear why Ireland would not exercise those taxing rights and it is unclear also how another jurisdiction would then have taxing rights over income earned in the State in respect of duties carried out in the State.

The review identified issues relating to equity for all Irish taxpayers. Currently, there may be different tax liabilities and different effective tax rates between those Irish residents who can avail of the relief as compared to those who cannot. However, there is a key distinguishing factor in that the employment duties are exercised outside the State for a non-resident employer. The move to increased levels of remote working, including blended working arrangements, within the State weaken that critical distinction.

If transborder workers’ relief was relaxed to allow for work carried out in the State to qualify for the relief, there would no longer be a distinguishing factor between Irish residents as both sets of Irish residents would be exercising their employment duties in the State. In such circumstances, some - those with Irish resident employers - would be liable to tax at the Irish tax rates with income tax and USC, and a potentially higher effective tax rate, while others, those with non-resident employers, would be liable to tax at the tax rates in the other jurisdiction and a potentially lower effective tax rate. This is an example of some of the issues of equity that arise with regard to the report the Senator is requesting. Revenue has given an indication that it will extend the relief on a pragmatic basis given the current public health guidance. I am prepared to continue to look at the matter as I accept it causes issues for those affected by the current public health guidance and the need for them to work in their homes while their employer is located in another tax jurisdiction. However, for the reasons I have outlined, there are really important issues of principle that mean that I am not in a position to make the kind of change the Senator is advocating for.