No lump-sum tax build-up with new wage subsidy scheme, says Paschal Donohoe

Minister for Finance Paschal Donohoe

Any tax liability for Ireland’s new wage subsidy scheme will be handled at source, meaning that employees will not build up a lump sum bill which then falls due at a later date.

That was a key message delivered by Minister for Finance Paschal Donohoe at a press briefing to remind employers of the new Employment Wage Subsidy Scheme (EWSS), which is due to kick in from September 1 and which will see the Government subsidising some workers’ income well into 2021.

The Temporary Wage Subsidy Scheme which will come to an end at midnight on August 31 was first announced in late March as a means of bolstering workers’ income as the country entered two months of lockdown.

The new scheme will be paid at two different levels, €151.50 and €203, both per week, on a sliding scale depending upon a worker’s wage in non-Covid times.

It will also require that an employer accessing it can show that its turnover will be no more than 70% of what it could reasonably have expected to be if there were no pandemic, while all applicants will need to submit tax clearance certificates guaranteeing their compliance with tax law.

Mr Donohoe told the briefing that the new scheme would be “simpler… and open to more employees”, solving the issue of seasonal workers’ non-eligibility for the previous scheme.

He said the new scheme will be viable for a “far longer extension than otherwise might have been expected”, adding that the decision to launch the scheme at this juncture rather than in mid-September or at Budget time in early October is a strategic one in order to have it up and running ahead of the crucial Brexit deadline at the end of 2020.

A special employer’s rate of PRSI of 0.5% would be applicable to the scheme in order to keep as many workers in their jobs as possible, the Minister said.

He said that the new scheme will cost in the region of €2.3 billion, as compared with the €2.7 billion paid out to date on its predecessor.

“There is a lot more commercial activity taking place now than would have been the case when the TWSS was introduced," Mr Donohoe said.

In terms of an employee’s tax liability, an issue which emerged with the initial scheme, the minister said that the issue would be dealt with “in real time”.

He acknowledged that the issue does still exist for the previous scheme, with that money set to fall due to the Revenue Commissioners at some point in 2021.

However, he said that the authorities will be “very sensitive” to the issue and to the needs of businesses. Rather than being collected in a lump sum, the minister said it would instead be gathered in a “phased manner”.

Mr Donohoe did acknowledge the fact that a time-lag of about six weeks between an employer applying for the new scheme and receiving the subsidy could cause issues with cashflow for businesses. 

He said that his officials and revenue will be considering the “causes” for the delay and “options in relation to how we might be able to deal with this matter”.

“This is all about how we keep people at work,” he said.