Written answers

Wednesday, 17 February 2021

Department of Finance

Covid-19 Pandemic Supports

Photo of Michael Healy-RaeMichael Healy-Rae (Kerry, Independent)
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154. To ask the Minister for Finance if he will address a matter regarding the wage subsidy scheme (details supplied); and if he will make a statement on the matter. [8463/21]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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Since the COVID-19 situation first arose, I have maintained contact with the BPFI and lenders on the measures they have put in place to assist their customers who are economically impacted by the pandemic. In relation to the particular issue of new mortgage lending, the main retail banks previously confirmed that they are considering mortgage applications and mortgage drawdowns in relation to their customers who are on the Employment Wage Subsidy Scheme (EWSS) on a case by case basis and that they are taking a fair and balanced approach. Lenders continue to process mortgage applications and have supports in place to assist customers impacted by COVID-19. Therefore, if mortgage applicants have any queries or concerns about the impact of COVID-19 on their mortgage application, they should in the first instance contact their lender directly on the matter.

However, there are certain consumer protection requirements which govern the provision of mortgage credit. For example, the European Union (Consumer Mortgage Credit Agreements) Regulations 2016 (CMCAR) provide that, before concluding a mortgage credit agreement, a lender must make a thorough assessment of the consumer’s creditworthiness with a view to verifying the prospect of the consumer being able to meet his or her obligations under the credit agreement. The CMCAR further provide that a lender should only make credit available to a consumer where the result of the creditworthiness assessment indicates that the consumer’s obligations resulting from the credit agreement are likely to be met in the manner required under that agreement. The assessment of creditworthiness must be carried out on the basis of information on the consumer’s income and expenses and other financial and economic circumstances which are necessary, sufficient and proportionate.

In addition, the Central Bank’s Consumer Protection Code 2012 imposes ‘Knowing the Consumer and Suitability’ requirements on lenders. Under these requirements, lenders are required to assess affordability of credit and the suitability of a product or service based on the individual circumstances of each borrower. The Code specifies that the affordability assessment must include consideration of the information gathered on the borrower’s personal circumstances and financial situation. Furthermore, where a lender refuses a mortgage application, the CMCAR requires that the lender must inform the consumer without delay of the refusal. In addition, the Code requires that the lender must clearly outline to the consumer the reasons why the credit was not approved, and provide these reasons on paper if requested.

Within this regulatory framework, the decision to grant or refuse an application for mortgage credit remains a commercial matter for the individual lender. Also a loan offer may contain a condition that would allow the lender to withdraw or vary the offer if in the lender’s opinion there is any material change in circumstances prior to drawdown. In such cases, the decision to withdraw or vary the offer is also a commercial decision for the lender.

Nevertheless, the Central Bank has indicated that it expects all regulated firms to take a consumer-focused approach and to act in their customers’ best interests at all times, including during the COVID-19 pandemic. If a mortgage applicant is not satisfied with how a regulated firm is dealing with them in relation to an application for credit, or they believe that the regulated firm is not following the requirements of the Central Bank’s codes and regulations or other financial services law, they should make a complaint directly to the regulated firm. If the mortgage applicant is still not satisfied with the response from the regulated firm, he or she can refer the complaint to the statutory Financial Services and Pensions Ombudsman.

Photo of Seán HaugheySeán Haughey (Dublin Bay North, Fianna Fail)
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156. To ask the Minister for Finance the reason employees are taxed on the temporary wage subsidy scheme and-or the employee wage subsidy scheme element of their wages and salaries; and if he will make a statement on the matter. [8527/21]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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The Temporary Wage Subsidy Scheme (TWSS) was introduced on 26 March 2020. It was an emergency measure to deal with the impact of the Covid-19 pandemic on the economy. Over 66,500 employers were supported through the TWSS in respect of more than 664,000 employees at a cost of €2.9bn. The scheme operated until 31 August 2020 and was replaced by the Employment Wage Subsidy Scheme (EWSS) from 1 September 2020.

Payments made under the TWSS were regarded as income supports and share the characteristics of income. Other income earners in receipt of comparable “normal wages” are taxable on those wages. In the interest of equity, therefore, payments under the TWSS are subject to income tax and Universal Social Charge (USC). It is noted however that a zero rate of PRSI applied for the purposes of employee PRSI contributions under the TWSS. The taxation treatment of TWSS payments was legislated for in section 28(5)(e) of the Emergency Measures in the Public Interest (Covid-19) Act 2020.

While income tax and the USC on earnings are generally deducted in real-time as and when the person is paid, tax was not collected in real-time through the PAYE system while the TWSS was in operation. Instead, liability to tax was to 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 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.

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, their 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.

Revenue will be adopting a fair and flexible approach to collecting tax due on payments made under the TWSS and has given assurances 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 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.

It is also understood that Revenue are facilitating employers who wish to pay the tax liabilities of their employees where such income tax and USC liabilities arise from the schemes.

Data Revenue have now released on the preliminary 2020 end of year statements which shows that almost half of those in receipt of the Pandemic Unemployment Payment (PUP) or TWSS in 2020 have no outstanding liability to discharge (in fact over a third are due a refund).

In the case of the remaining taxpayer units with an outstanding liability, the data indicates that amounts to be collected are modest in scale, with 44% owing less than €500 and 72% having a liability of less than €1,000.

If paid over the 4 year period beginning in 2022, the majority of those cases will owe less than €5 per week, with nearly half paying less than €2.50 per week. These figures represent a preliminary liability and may be further reduced by additional tax credits or reliefs such as health expenses.

The Employment Wage Subsidy Scheme (EWSS), was legislated for under the Financial Provisions (Covid-19) (No. 2) Act 2020. The EWSS has re-established the normal requirement to operate PAYE on all employee salaries, providing for the regular deduction and remittance of income tax, USC and employee PRSI.

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