Róisín Shortall (Dublin North West, Social Democrats)
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59. To ask the Minister for Finance if the pandemic unemployment payment is taxable; if so, the taxes that apply; the way in which it is planned to levy any taxes due for 2020; and if he will make a statement on the matter. [2098/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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The Pandemic Unemployment Payment (PUP) is administered by the Department of Social Protection.   It is an income support which is taxable and subject to income tax. The PUP follows the general taxation rule for social welfare type payments and is exempt from USC and PRSI charges.

Tax is not collected in real-time through the PAYE system.  Instead, liability to tax will be calculated by Revenue through the regular end of year review process.  This is being done in order to maximise the amount of financial support provided to recipients at a time when they need such support most.

For 2020, to minimise the end of year tax impact on persons who received payments, Revenue placed them on the ‘week 1/month 1 basis’ of taxation from 21 June 2020. The ‘week 1/month 1 basis’ preserves recipients’ unused tax credits, which can then be offset against any accumulated tax liabilities at year end, including in respect of PUP.  Any additional credits that an employee may have, for example health expenses, may also be used to further reduce the accumulated tax liability.

In the case of lower income households or those whose income comprises solely of social welfare payments, a liability to tax typically does not arise because the value of social welfare payments received in a tax year are usually lower than the income sheltered by the main income tax credits.  Further, in cases where the tax liability for those payments exceeds unused personal and PAYE tax credits for 2020, the level of income tax due may be reduced if the person has additional tax credits, for example health expenses, to offset.  

Revenue will be adopting a fair and flexible approach to collecting tax due on payments made under the PUP.  

Revenue has also given assurances that if any income tax and USC liabilities still arise following the allocation of unused credits, it will work with PUP recipients to collect the outstanding liabilities and a number of flexible arrangements may be entered into, including the collection without interest over an extended period of time for 4 years beginning in 2022.  The latter will be achieved by reducing taxpayers' credits for subsequent tax years, thereby minimising any financial hardship to the greatest extent possible.