Bríd Smith (Dublin South Central, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source

69. To ask the Minister for Finance the reason the Revenue Commissioners deduct tax refunds due to workers for medical expenses from outstanding amounts owed from the administration of the pandemic unemployment payment and temporary wage subsidy scheme; and if he will make a statement on the matter. [17189/21]

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The Pandemic Unemployment Payment (PUP) and the Temporary Wage Subsidy Scheme (TWSS) payments are classified in legislation as income supports and as such are subject to income tax.

The PUP reflects the standard approach to the taxation of social welfare type payments, which means it is liable to income tax but exempt from the Universal Social Charge (USC) and Pay Related Social Insurance (PRSI). The TWSS is also exempt from PRSI but is liable to income tax and USC.

The PUP and TWSS were not taxed in ‘real-time’ in the normal manner in 2020, meaning the collection of any tax due was deferred until year end. This approach was adopted to minimise the impact on employee’s incomes and ensure payments reached recipients as quickly as possible.

Regarding any tax liabilities arising in 2020, including in relation to the PUP and the TWSS, I am advised by Revenue that on 15 January 2021, Revenue made a Preliminary End of Year Statementavailable to all PAYE taxpayers through its online myAccount facility. The statement provided taxpayers with a preliminary calculation of their income tax and USC position for the year and indicated whether their tax position was balanced, underpaid, or overpaid for 2020.

However, an employee’s income tax and USC position for the year is not finalised until he or she submits an income tax return. The income tax return provides the employee with an opportunity to update any personal record details, declare any additional income and claim additional tax credits or reliefs, such as qualifying health expenses. The employee’s annual tax liability is then calculated having regard to the tax rate appropriate to his/her income, including PUP and/or TWSS payments, and the application of all tax credits and reliefs that are correctly due, including Health Expenses. A refund only applies where an excess amount of tax was paid relative to a person’s total income and allowable tax credits and reliefs.

There is no legal basis for Revenue to exclude a source of income from the calculation of a person’s tax liability.

Where a liability for 2020 still exists after taking account of all credits and reliefs, the amount owed can be collected, interest free, over four years from 1 January 2022 by reducing tax credits, thereby minimising any financial hardship to the greatest extent possible.