Neale Richmond (Dublin Rathdown, Fine Gael)
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131. To ask the Minister for Finance if he has considered making tips received in the hospitality sector tax free; and if he will make a statement on the matter. [62133/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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Section 19 of the Taxes Consolidation Act (TCA) 1997 sets out that tax under Schedule E shall be charged in respect of every public office or employment of profit. Section 112 of the TCA 1997 brings into charge all salaries, fees, wages, perquisites or profits whatever arising from an office or employment. Therefore, all tips, gratuities and service charges arising from an office or employment are chargeable to income tax under Schedule E in accordance with section 112. I have no plans to change this position.

Gratuities from customers for example, service charges in hotels or tips in restaurants, paid to the employer and subsequently paid out to an employee should be included in pay for the income tax week or month in which they are paid out. These tips constitute pay for the purposes of the PAYE system. However, in a situation where an employee receives tips directly from customers, the employer is not obliged to operate PAYE and in that case, the tips and gratuities are fully taxable and should be included by the employee in his or her income tax return.

The Deputy will be aware that the Department of Enterprise, Trade and Employment is progressing legislation on tips and gratuities. It will prohibit the practice of using tips or gratuities to top up wages. It will also ensure that electronic tips and gratuities, which are much more common these days, have to be divided fairly and equitably among the staff. As well as this, it will provide transparency to customers so they will know what the policy is on tips and service charges, how they are managed and to whom they go. Further information can be located at the following link: enterprise.gov.ie/en/Legislation/General-Scheme-of-the-Payment-of-Wages-Amendment-Tips-and-Gratuities-Bill.html#:~:text=November%202021%20%7C%20Bills-,The%20Payment%20of%20Wages%20(Amendment)%20(Tips%20and%20Gratuities),up'%20contractual%20rates%20of%20pay