Employment supports welcomed but concerns over absence of further measures to address issues affecting multinationals and remote workers has been saved
Employment supports welcomed but concerns over absence of further measures to address issues affecting multinationals and remote workers
As had been widely anticipated, no changes to income tax credits or bands were announced. In light of the unprecedented circumstances brought about by the COVID-19 global pandemic, there was no expectation of a reduction in the marginal rates of income tax and universal social charge.
The announcement that the 2% USC rate threshold is to be increased from €8,472 to €8,675 is to be welcomed. The weekly threshold for the higher rate of employer's PRSI of 11.05% also increases from €394 to €398. These changes are to ensure that those on the minimum wage are not adversely impacted from a tax perspective and that there is no incentive to reduce working hours for a full-time minimum wage worker.
But while tax giveaways were never likely to feature in Budget 2021, with our marginal rate remaining at 52%, Irish employees still have one of the highest personal tax burdens in the OECD.
The current crisis has shown us that the future of work is likely to change fundamentally, as is evidenced by the way employers and employees alike have embraced working-from-home arrangements over the last number of months. It is positive to see the focus on developing a remote working strategy and the recommendations of the interdepartmental group will be awaited with interest. It is a bit disappointing that a more concrete plan has not been put forward, given that a significant proportion of our workforce has now been working remotely for up to seven months. Including broadband expenses in the costs which may be claimed by employees for working from home will be welcomed. However, the existing methodology for calculating allowable utility costs means that in practice the tax relief due to most individuals is minimal. The addition of broadband to this relief is likely to be of negligible value.
While employers can make a payment of €3.20 per day tax-free to employees, not all businesses have the financial resources to make this payment in the current climate. For ease of administration, where employees make a claim directly it would be beneficial if this could also be based on a flat rate expense of €3.20.
The area of remote working becomes more complex when one considers that many employees are currently working in overseas jurisdictions for their Irish employer. If this arrangement continues for a significant period of time or becomes a permanent arrangement this will lead to administrative complications in terms of payroll withholding obligations, immigration requirements and social security contributions. This is likely to be a key area of focus for HR departments as consideration will need to be given to developing remote working policies as well as implementing procedures for tracking and monitoring the location of employees.
The Minister did not refer to a number of employment-related COVID concessions that have been introduced over the last few months. In particular, employers will be looking for certainty on when these concessions are likely to end. The Special Assignee Relief Programme is a valuable relief that encourages skilled individuals to relocate to Ireland by providing an income tax exemption for earnings in excess of €75,000 up to a cap of €1m. The fact that some employees may have returned to work from their home locations or that new hires have started working overseas for the Irish entity due to travel restrictions means that there may be difficulties in meeting some of the technical conditions of the relief. The absence of announcements of administrative supports for the multi-national community at a critical juncture for Ireland may be greeted with disappointment. We hope that these uncertainties will be addressed in the forthcoming Finance Bill.
The announcement that a wage support scheme will extend to the end of 2021 in some form will be warmly welcomed by many businesses and will greatly help them to in their efforts to retain employees. It is hoped that the scheme will broadly follow the same format as the current Employment Wage Subsidy Scheme which is administratively much more straightforward, albeit less valuable, than its predecessor the Temporary Wage Subsidy Scheme.
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