Gerald Nash (Louth, Labour)
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380. To ask the Minister for Finance the estimated annual cost of increasing the small benefit exemption to €2,000; and if he will make a statement on the matter. [29430/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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Where an employer provides an employee or director with a small benefit, that is, a voucher or a benefit (a tangible asset other than cash) with a value not exceeding €500, that benefit will be exempt from Income Tax, PRSI and USC, provided all of the conditions, contained within section 112B of the Taxes Consolidation Act 1997 are satisfied.

The conditions are as follows -

- the incentive is provided in the form of a voucher or other non-cash item;

- where the incentive provided is in the form of a voucher, this voucher must only be for the purchase of goods or services and must not be capable of being exchanged in part or in full for cash;

- the value of the incentive does not exceed €500; and

- the incentive does not form part of a salary sacrifice arrangement.

Where all of the conditions are not satisfied, the exemption does not apply and the benefit is subject to tax in the usual way, in accordance with section 112 TCA 1997.

Concessional Treatment – COVID 19 circumstances

Due to the unprecedented nature of the COVID-19 pandemic, employers may have wanted to recognise efforts of frontline or other key staff working during the crisis, either by accelerating part of a reward usually made later in the year or making an additional award.

Following the start of the COVID-19 pandemic, Revenue has in certain circumstances concessionally waived the requirement that only one voucher issues per year for the 2020 and 2021 tax years and has permitted an employer to issue two vouchers to the (maximum) value of €500. This concessionary treatment continues to apply for 2022. It applies where the additional award is related to an employee's exceptional efforts during the COVID-19 pandemic and where the employee continued to work during the restricted period.

All other conditions of section 112B TCA 1997 must be met, for example the maximum cumulative value of incentives must not exceed €500 and the voucher or incentive must not be redeemable, in full or in part, for cash. Appropriate documentation must be retained by an employer where this concession is availed of.

The overall cost of the increase proposed by the Deputy is difficult to estimate, and would depend very much on the take-up, the amounts awarded by employers and the tax situation of the employees. No separate returns are required under the scheme so Revenue does not have statistics.

The scheme continues to be kept under review and any amendments would need to be considered in with reference to the Department’s guidelines on tax expenditures, which make clear that it is important that any policy proposal which involves tax expenditures should only occur in limited circumstances where there are demonstrable market failures, where a tax-based incentive is more efficient than a direct expenditure intervention; and that the potential for deadweight and additionality are considered.

Any increase in the amounts allowable under scheme would create an additional cost which must be recovered elsewhere.