Pearse Doherty (Donegal, Sinn Fein)
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88. To ask the Minister for Finance the manner in which payments made under the temporary wage subsidy scheme will be taxed at the of 2020; and the period over which outstanding tax liabilities will be collected in which the tax liability exceeds the value of unused tax credits in the relevant period. [24619/20]

Paschal Donohoe (Dublin Central, Fine Gael)
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The Temporary Wage Subsidy Scheme (TWSS) was introduced on 26 March to support firm viability and preserve the relationship between the employer and employee insofar as possible.  When originally announced, it was expected that this economy-wide measure would be in place for 12 weeks until mid-June but this was later extended until the end of August 2020. 

Payments made to employees under the TWSS were an income support and shared the characteristics of income.  They were therefore liable to income tax.  This is the general position that applies to all social welfare payments in the absence of specific statutory exemptions.   In addition, income tax and USC continued to apply in the case of other income earners whose pay was not subsidised by the State, including those who continued to work throughout the period of the strictest public health restrictions. It was appropriate and equitable therefore that payments made under the TWSS should be subject to income tax and USC.  A zero rate applied for the purposes of employee PRSI contributions. 

Tax was not collected in real-time through the PAYE system while the schemes were in operation.  Instead, liability to tax will be calculated by Revenue through the regular end of year review process. 

This decision was taken in order to maximise the amount of financial support that was provided to recipients at a time when it was considered that they needed such support most, when the TWSS was first announced and expected to only be in place for 12 weeks. 

When the TWSS was extended for a further 10 weeks until the end of August 2020, Revenue took steps to minimise the amount of income tax and USC due, if any, on TWSS payments at the end of the year.  This was done by placing all recipients of the TWSS or the Covid-19 Pandemic Unemployment Payment (PUP) on the ‘week 1 basis’ of taxation for the remainder of the year so as to “preserve” unused tax credits that can then be used to offset any income tax or USC liabilities that arise at year end.

In cases where the tax liability for those payments exceeds unused personal and PAYE tax credits for 2020, the level of income tax and USC due may be reduced if the person has additional tax credits, for example health expenses, to offset.   

Revenue has also assured me that if any income tax and USC liabilities still arise following the allocation of unused credits, it will work with its customers to collect the outstanding liabilities over an extended period of time.  Revenue will be adopting a fair and flexible approach to collecting tax due on payments made under the TWSS or the PUP.  This will be achieved by reducing their tax credits for subsequent tax years, thereby minimising any financial hardship to the greatest extent possible.    

I am advised that the final calculation of the end of year liability for each person is dependent on a range of factors, including a person’s civil status, his or her available tax credits, the amount received under TWSS and/or PUP, any top-up payments made by the employer, as well as other entitlements and credits, such as health expenses.  As there are considerable differences in each person’s tax circumstances, it is not possible to provide details of the estimated undercharges arising from the taxation of payments under the TWSS, nor to estimate the numbers of individuals who may have such undercharges.  These details will not be available with any degree of accuracy until after the year end.