'Tax grab' will hit ordinary families as 80,000 set to have allowances stripped

Minister for Finance and Public Expenditure and Reform, Paschal Donohoe Photo: Gareth Chaney, Collins

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thumbnail: Minister for Finance and Public Expenditure and Reform, Paschal Donohoe Photo: Gareth Chaney, Collins
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Charlie Weston and Anne-Marie Walsh

Tens of thousands more workers are in the firing line for a sudden 'tax grab' that will hit the incomes of some of the lowest paid.

CIÉ workers, teachers, hotel, bar and construction staff may be next to see tax relief on their expenses axed.

The Revenue Commissioners stands accused of an "attack on workers" after it already moved to strip 80,000 people of these annual tax allowances from January 1.

Shop assistants, actors and journalists are among those who have already been hit with no warning. Now the Irish Independent has learned that a raft of other sectors is under scrutiny, as the Revenue further reviews the scheme.

Hotel workers, bar staff, construction workers, and rail and bus staff are all in the firing line, it is understood. However, unions claimed that tax officials were reluctant to cut allowances to staff who pay fees to professional bodies, including hospital consultants.

The flat-rate scheme is meant to cover the cost of workers who have to pay for uniforms and tools. It reduces the portion of a worker's income they have to pay tax on. The exact reduction depends on a person's profession - but more than half-a-million PAYE workers currently avail of it.

Ending the allowance will likely wipe out any gains from the recent Budget. There was no warning about the impending change, and it comes despite Fine Gael promising more tax cuts for workers.

General Secretary of the Mandate trade union John Douglas said teachers were among those discussed at meetings with Revenue.

They get a tax relief worth more than €500 that could be slashed to just €60. He said a €93 allowance for bar staff, reliefs worth between €103 and €175 for construction workers, and a €160 allowance for rail and bus staff could be targeted.

President of the Irish Congress of Trade Unions Patricia King has written to Revenue, accusing it of an attack on workers. She expressed surprise it is cutting down on flat-rate expenses that can be claimed by PAYE workers, rather than reforming capital taxes or looking at corporation tax losses.

Ms King said the average flat-rate claim was €155 and it boosts low-paid families.

The loss will be as high as €300 for freelance actors on the 40pc tax rate. Shop assistants will lose €24, assuming they are on the 20pc tax rate.

"You will be aware many of these reliefs go to some of the lowest-paid workers in the country, including in the wholesale and retail and the accommodation and food sectors."

She wrote that the €85m that the flat-rate expenses regime cost in 2017 is a tiny fraction of the €231bn in corporation tax losses and capital allowances available to be carried forward at the end of last year.

"We would argue that moves to abolish this regime will be perceived as an attack on workers at a time when other sections of society are continuing to receive entirely unfair and wholly disproportionate benefits from other tax expenditures that are not being reconsidered."

Brian Keegan, director of public policy and taxation at Chartered Accountants Ireland, said changes to the scheme coming into effect next year affecting around 80,000 people were "ill-timed and difficult for employers and employees alike".

Finance Minister Paschal Donohoe said the expenses regime had grown piecemeal over the years and had to be reviewed. A spokesperson at the Revenue Commissioners said allowances paid to all categories of staff who can claim the tax relief will be examined as a review continues.