Thursday, 7 November 2019
Department of Finance
56. To ask the Minister for Finance the number of flat rate expenses in the income tax system; the number of persons that have claimed under each classification; the cost under each classification; and if he will make a statement on the matter. [45980/19]
57. To ask the Minister for Finance the status of the review of flat rate expenses; if it is being undertaken by the Revenue Commissioners; when he expects the review to conclude; and if he will make a statement on the matter. [45981/19]
I propose to take Questions Nos. 56 and 57 together.
The FRE allowance regime is an administratively based practice operated by Revenue, where both specific commonality of expenditure exists across an employment category and the statutory requirement for a tax deduction for expenses as set out in section 114 of the Taxes Consolidation Act (TCA) 1997 is satisfied, namely, the expense must be wholly, exclusively and necessarily incurred in the performance of the duties of the relevant employment.
The FRE allowance regime eases the administrative burden on Revenue and on employees in certain sectors by facilitating the automatic granting of a fixed tax allowance to cover allowable employment-related expenses, without the need for annual claims by every employee concerned. It is important to note, however, that the regime does not preclude any employee from making an individual claim for a tax allowance in respect of employment-related expenses, where those expenses meet the statutory requirement for such an allowance.
I am advised by Revenue that an FRE allowance amount is decided following engagement between Revenue and the relevant representative body for the particular group of employees who incur the same expense. The regime has developed incrementally over the last 40 to 50 years and currently incorporates 53 employment categories, broadly covering some 134 individual FRE allowance amounts - see list attached.
I am also advised by Revenue that a breakdown of the cost of the relief and numbers of employees by reference to each employment classification in which the FRE regime currently operates is not readily available. For 2017, however, the estimated number of taxpayer units who availed of FRE allowances was 606,570 with gross claims of €163 million equating to a tax cost of some €48 million. Final figures for 2018 are not expected to be available until mid-2020, to allow for processing of the data from income tax returns and cross referencing across Revenue’s operational systems.
As the Deputy will be aware, over the past 18 months, Revenue has been conducting a comprehensive review of the FRE allowance regime. Revenue has advised me that the purpose of the FRE review, which involved engagement with relevant representative bodies, is to ensure that the expenses granted to each employment category remain justified and appropriate to modern day employments and work practices. Each category of FRE allowance is being examined separately in the light of the legislative requirements of section 114 TCA 1997.
Having regard to the Deputy's questions and to the fact that we are coming closer to the date on which any changes on foot of the review are due to be implemented, I will write to Revenue and request a factual update on the issue. I will also take the opportunity to enquire if Revenue can provide any further clarification on the numbers of employees by reference to each employment classification as well as the cost under each classification. I will revert to the Deputy in the matter as soon as possible.