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Call to spread wage subsidy tax burden over four years

The group representing Irish accountancy bodies has called on the Government to spread the taxation burden for recipients of the pandemic wage subsidy schemes over a four year period.

Workers are liable for tax on the income they have received via the Temporary Wage Subsidy Scheme (TWSS).

But the liability will not arise until the end of the year rather than paying it on a monthly, fortnightly or weekly basis, as they do with the portion of the earnings that they receive from their employer.

More than 66,500 employers have registered with Revenue for the scheme. Almost 700,000 workers have received at least one payment through the scheme.

The same taxation treatment will apply to recipients of the Pandemic Unemployment Payment.

As part of its pre-budget submission, the Consultative Committee of Accountancy Bodies said concessions were urgently needed.

“If an employee receives €350 per week under the TWSS, this amounts to €7,700 over 22 weeks and is a substantial amount of untaxed income for a worker to deal with at the end of the year.

“Tax due on these payments should be spread over four years or more to avoid a significant drop in the worker’s take home pay,” the committee says its submission.

The submission also proposes a write-down on the first €10,000 of balance of 2019 tax liability for self-employed people who are in severe financial difficulty as a result of the pandemic.
While acknowledging the supports already introduced, the group warns that without further extraordinary state measures, many SMEs in Ireland cannot survive. 

Among its other proposals are the introduction of a digital tax credit for small and medium sized enterprises (SMEs) and the tailoring of R&D (Research and Development) tax credits to facilitate the recovery of the SME sector.  

“When we talk about small businesses, we mean local retailers, manufacturers, hospitality, and service providers. They are reeling from the economic impact of Covid-19and face liquidity pressures which could result in business closures without Government support”, Norah Collender, Professional Tax Lead, Chartered Accountants Ireland said. 

“The tax system is a powerful means of getting supports to SMEs, which in turn always respond positively with increased economic activity,” Norah Collender said.

“SMEs account for over 1 million employees, or 68.4% of total employment in the Irish business economy and economic recovery is simply impossible if these businesses don’t get the tax supports they need,” they added.

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