Seán Haughey (Dublin Bay North, Fianna Fail)
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492. To ask the Minister for Finance if he will mandate employers to pay the income tax owed by employees in respect of the temporary wage subsidy scheme and employment wage subsidy scheme given that employees are obliged to pay this income tax out of their net pay or have their credits reduced meaning that their net pay will be reduced in future years; and if he will make a statement on the matter. [15469/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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The Temporary Wage Subsidy Scheme (TWSS) was introduced on 26 March 2020. It was legislated for in section 28 of the Emergency Measures in the Public Interest (Covid-19) Act 2020 and 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.

It will be recalled that in order to maximise the financial support provided to recipients, tax on TWSS payments was not collected in real-time through the PAYE system and that instead liability for the 2020 tax year will be determined at the end of the year by Revenue through the regular “end year review” process. Also, Revenue has confirmed that it will facilitate employers who wish to pay the tax liabilities of their employees where such income tax and USC liabilities arise from the TWSS.

Should an employer wish to pay these liabilities on behalf of their employees, on an exceptional, once off basis and subject to certain conditions, Revenue will not apply the Benefit-in- Kind rules that would usually apply where employers make payments of this nature on behalf of their employees.

The consequence for the employer is that they will not be entitled to the usual tax deduction for such payments made on behalf of their employees in calculating the tax liability of their business as the payments would not be regarded as wholly and exclusively incurred for the purposes of the employer’s trade or profession.

To prevent any abuse of this arrangement, while still allowing the employer sufficient time to consider the option on behalf of their employees, this facility is limited to payments made by employers on behalf of their employees up to end June 2021.

I would encourage any employers who are in a position to discharge such liabilities on behalf of their workers to do so, but I also acknowledge that, as with the decision around whether to avail of the TWSS in the first place, the question of whether an employer pays the income tax owed by employees in respect of the TWSS is a matter between the employer and the relevant employees.

In this regard, it is recalled that an individual’s entitlements and rights in an employment context, the amount of wages that an employer may be legally obliged to pay employees in respect of hours worked as well as an employer’s capacity to pay wages to employees in light of the impact of the Covid-19 pandemic on the employer’s business are all matters that are outside the remit of the scheme.

The EWSS, which replaced the TWSS from 1 September 2020, re-established the the normal requirement to operate PAYE on all employee salaries, providing for the regular deduction and remittance of income tax, USC and employee PRSI.