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Pandemic Unemployment Payment is subject to income tax, Dáil Finance Committee agrees

The Committee voted in favour of the Finance Bill clause this afternoon.

Image: Shutterstock/Yulia Grigoryeva

THE OIREACHTAS FINANCE Committee has voted in favour of a section of the Finance Bill, which clarifies that the Pandemic Unemployment Payment is subject to income tax.

The weekly payment was rolled out in March for workers who lost income as a result of government-imposed public health restrictions.

Over the course of its lifespan, government ministers and the Revenue Commissioners have said that the payment, like other social welfare payments, is subject to income tax.

This is despite the fact that when the PUP was given legal footing in August, the government characterised all payments under the scheme made between April and August as “urgent needs payments” under Section 202 of the Social Welfare Consolidation Act 2005.

Payments of this type are usually not subject to tax.

The Finance Bill, which will give legislative effect to Budget 2021, is currently being debated by Members of the Oireachtas Committee on Finance, Public Expenditure and Reform.

Opposition TDs have accused the government of trying to ‘sneak’ a section into that bill, which enshrines the taxability of the PUP in Irish law.

But speaking in front of the Oireachtas Finance Committee this morning, Finance Minister Paschal Donohoe said that the initial characterisation of the PUP as a Section 202 payment was simply a matter of convenience.

“These payments were paid out under Section 202 of that bill because of the need to make these payments quickly and to associate them with a relevant clause in the social welfare legislation,” he said.

Unlike other Section 202 payments, he said, the PUP is not “means-tested” and is therefore subject to tax.

“I want to make clear though, from the very start, the intention of the government was that those payments would be taxed and they will be treated in the same way as we tax other equivalent social welfare payments,” Donohoe added. 

Sinn Féin finance spokesperson Pearse Doherty accused the minister of  “trying to rewind back the clock and to make a payment that was paid to people who lost their jobs during the pandemic, taxable”.

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“I think there are serious issues in relation to this, particularly around the principle of retrospective taxation. Regardless of whatever the minister’s personal intentions were or the government’s personal intentions, the legal basis for this payment that was paid out — which was hundreds of millions of euro at the time — was Section 202 of the Social Welfare Act, and therefore, as a result, was not taxable.”

The Committee voted in favour of the section of Finance Bill by five votes to four this afternoon.

In September, Revenue confirmed that PUP recipients will have the option to pay back whatever tax is owed at the end of 2020 if they wish.

Alternatively, they can allow the Revenue to deduct the liabilities through reductions in their tax credits over a period of four years.

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