Flat rate deductions are unfairly squashed
Most of us did not gain from the budget and it’s now emerging that many of us will, in fact, lose out in 2020.
Last year Revenue took it upon themselves to review the system of flat-rate expenses for employees.
These are the standard tax deductions granted to different categories of workers to reflect the money they have to spend on exclusively work-related items, like cleaning their uniforms. Mostly, the deductions are small and the tax saved is smaller.
The initial outcomes of the review published last year suggest that “review”actually means “removal”.
After some clamour, leading to the Taoiseach having to make a statement in the Dáil, the review was deferred until 2020.
It might have been hoped that the idea has been quietly dropped, but an answer given to a parliamentary question last week from Séan Sherlock scotched that hope.
This flat rate expenses regime for Paye workers isn’t a giveaway. It is a way of reflecting the reality of the situation of workers while short-circuiting some of the paperwork involved with their tax affairs.
According to the Taxes Acts, everyone is entitled to reduce their taxable income if they have to pay money out in pursuit of their employment. The conditions attaching to any reduction are very difficult to meet.
In his reply to Deputy Sherlock, the minister described the practice as “concessionary”. If it is a concession, it is not primarily a concession to taxpayers. If anything it is a concession to Revenue. It stops Revenue having to deal with large-scale, sometimes erroneous, claims for expenses — claims which might never have arisen if a flat-rate expenses regime operated.
The flat rate expenses arrangement, with differing deductions for different types of workers, was brokered with various representative organisations and trade unions over the years. Most of these deductions are modest. A few, however, such as those for doctors, nurses, school principals, miners, and some employed musicians are quite substantial — €600 or more.
Revenue has apparently told the minister that their review of the expenses granted to each employment category remains justified and appropriate to modern-day employments and work practices.
That suggests a pasteurised, homogenised approach to the world of work which prevails in the Civil Service but does not prevail in the private sector.
Where deductions are removed across the board, those workers with a legitimate entitlement to a deduction will in practice find it very hard to have it reinstated for their own circumstances.
Individuals can make claims, but such claims must be accompanied by a return of income and will inevitably result in protracted correspondence with Revenue without any guarantee of success.
The removal of the fixed-rate expenses for any particular category of employees will generate the kind of administrative difficulty the system was designed to avoid.
In an ideal world, the minister would be telling Revenue to announce what flat rate expenses will not be affected in the review, but he cannot do that because the political system is prevented by law from interfering with Revenue decisions concerning taxpayers.
Nor can the minister,according to the response to the parliamentary question, even tell another member of the Oireachtas how many people might be affected because a breakdown “is not readily available”.
So, if your take home pay next January is indeed smaller than it was in December, it’s probably not because of the budget this time.
