Minister could help stimulate spending by scrapping wage scheme and PUP tax bills
Workers who have already experienced a drop in wages and unemployment now face a double hit with TWSS and PUP tax bills.
Scrapping Covid-19 related tax bills would provide vital household stimulus for those who need it most.
Money allocated to doomed Staycation Subsidy Scheme and unused Covid Loan scheme could be redirected to support workers and the economy.
Labour’s Ged Nash TD has said the Minister for Finance should bin the Covid-19 wage subsidy tax bills that will hit the letterboxes of 400,000 workers, and to do the same for the third of PUP recipients facing tax bills for being out of work during the pandemic.
The Revenue Commissioners are chasing small sums of income tax from workers hardest hit by the pandemic while in the US we see the Democrats prepared to stimulate their economy with $2,000 stimulus cheques for those earning under $75,000.
The Party’s Finance Spokesperson Deputy Ged Nash said;
“Serious consideration should be given to this once-off gesture of solidarity for the hundreds of thousands of workers who have now been hit with wage subsidy scheme and PUP tax bills. These are the workers who were hit hardest by the pandemic. They lost their job, had their pay cut and have faced huge uncertainty through no fault of their own.
“It is not too late for Minister Donohoe to do the right thing and in doing so design a waiver capped to ensure that any benefit goes only to low and middle income earners, and not those at the higher end of the income distribution.
“Hundreds of thousands of tax bills are being generated creating a huge amount of paperwork for officials and regular PAYE workers who are used to having their income tax taken at source.
“This week I asked the Minister for Finance to confirm the quantum of money due to Revenue in terms of the tax and USC liabilities on wage subsidy scheme payments.
“Figures published on Thursday suggest that a total of €458 million is outstanding, with 165,000 of the 400,000 workers who had wages paid under the TWSS levied with tax bills of less than €200.
“15% of workers impacted owe amounts ranging between €500 and €1,000. According to Revenue figures published on Thursday, for those who only received the PUP, a total of €57m is owed by 99,700 people which is an average of €571 per person.
“The TWSS has been a successful innovation designed to support incomes and struggling firms and to keep workers tied to their companies during this unprecedented economic shock. On the expiry of the TWSS in September last, the Minister for Finance confirmed to me in the Dáil that the scheme costed a total of €2.9 billion. There is no doubt that this innovation was a crucial support for business and workers alike, removing labour costs from tens of thousands of companies’ balance sheets and all thanks to the State.
“The successor Employment Wage Subsidy Scheme was estimated to cost just over €2 billion and this scheme where tax is paid at source will undoubtedly have to be extended beyond the stated cut-off date.
“The full cost of the small break that the binning of the TWSS & PUP tax bill would represent for workers in this toughest of years is dwarfed by the total amount of money spent on these schemes and other initiatives taken by government in response to the pandemic. Capping the amount of relief would ensure it is targeted at the lowest paid workers. This is an important consideration.”
Deputy Nash said that in terms of the TWSS, the evidence shows that significant numbers of workers saw no weekly top-up to their wages from their employer. As a result, many thousands of workers took a serious hit to their incomes.
“The tax bill, albeit payable over four years from 2022 serves as a double hit for working people, many of whom have already seen a drop in their wages and may at this point be out of work because of the latest restrictions.
“Throughout this pandemic we have seen significant support for businesses, much of it required but some of it representing nothing more than ‘no-strings’ bailouts for big businesses.
“Workers need a break, and the Minister must consider scrapping the wage scheme tax bills.
“What we are proposing is, in essence, the conversion of this tax liability into a family and local stimulus as a form of ‘helicopter money’ for low and middle income workers. The Democrats in the United States are backing a $2,000 stimulus cheque scheme but in Ireland we’re sending tax bills to those who lost their jobs or suffered pay cuts.
“This makes sound economic sense and is by definition and design targeted at those workers and sectors who have been most affected by the economic fallout of the pandemic.
“It is worth remembering that €2 billion was set aside in the autumn to cover the Government’s Covid-19 Credit Guarantee Scheme. Less than €100m in funding has been drawn down to date. It is clear the States exposure on this scheme is minimal.
“In addition, there is little call on the €250m allocated for the doomed Staycation Scheme. Instead of continuing with failed initiatives like this, unallocated and unused money from these schemes should now be redirected to support workers, families and our economy by scrapping the wage subsidy and PUP tax bills on a once-off basis.”