Neale Richmond (Dublin Rathdown, Fine Gael)
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72. To ask the Minister for Finance if he will consider making tips received in the hospitality sector tax free; and if he will make a statement on the matter. [9456/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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It is a general principle of taxation that, as far as possible, income from all sources should be subject to taxation. This is a well-established and broadly accepted principle.

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 of any kind arising from an office or employment. Therefore, the long-standing position is that 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.

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. It is important to point out that such tips constitute pay for the purposes of the PAYE system.

The Department of Enterprise, Trade and Employment is progressing legislation on tips and gratuities and this legislation will prohibit the practise 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. In addition, the legislation 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.

For the reasons outlined in the opening paragraphs of my reply, I have no plans to amend the tax treatment of tips and gratuities.