Revenue has written off €26.4 million of tax it is owed that had been warehoused under the Covid business debt relief scheme.
Minister for Finance Paschal Donohoe said the money had been owed by companies that have been liquidated since the scheme came into effect in May 2020. He was giving the figures in response to a parliamentary question from Sinn Féin spokeswoman on enterprise Louise O’Reilly.
Mr Donohoe said the Government was working on the assumption that a quarter of the money owed to the Revenue Commissioners would never be repaid.
“My department makes certain assumptions and projections in preparing the annual budget and Stability Programme Update [SPU]. In that regard, SPU 2022 projections made by my department in April also incorporated the prudent assumption that 25 per cent of the warehoused tax liabilities are not repaid, ie, that 25 per cent of the businesses that have availed of the scheme will never be in a position to repay,” he said.
The Minister acknowledged the figure was conservative but said that it was considered “better to err on the side of caution in this matter”.
Ms O’Reilly said the Government needed to have a sensible response in place to ensure the money owing under the scheme was repaid without pushing more businesses into insolvency.
“The tax warehousing scheme offered businesses some respite during the height of the Covid-19 crisis. However, we are now entering a crunch period as the majority of businesses still to repay their warehoused tax will begin to do so from January 2023 onwards, said Ms O’Reilly.
“It is essential that Revenue and the Minister for Finance approach repayment in a manner that ensures all monies owed are repaid, but that does not push companies towards the brink of administration or liquidation. The Minister and Revenue should have a plan in place that delivers for the exchequer, for business and for workers.”
Under the warehousing scheme, businesses were able to defer payment of VAT, payroll taxes and refunds of temporary and employment wage subsidy scheme funds that were due for payment in 2020 and 2021.
Repayment
Until the end of 2022, they were warehoused at a zero per cent interest rate. However, from January next, businesses need to start repaying the money on a phased basis by agreement with the Revenue. The money owing will be subject to a special low-interest rate of 3 per cent during this repayment process.
Certain businesses secured an extension to the scheme which means they do not have to start repaying the money owed until May 1st next year.
To secure the discounted rate, businesses had to file all tax returns on time and pay all other taxes as they fall due — from January 2022 for most companies and from May 2022 for those availing of the extension.
Mr Donohoe said the scheme had offered “valuable and practical liquidity support to individuals and businesses, assisting them with their cash flow during the difficult trading periods” during the pandemic.
Some 17,000 businesses have settled Revenue bills of almost €300 million, according to the latest figures disclosed by the Minister. He said that 88,000 businesses had outstanding debt of €2.892 billion warehoused as of the end of June.
At the end of January, 105,000 businesses were availing of the scheme, owing €3.2 billion between them.
“The cost of doing business has exploded for companies as the rates for energy, fuel, materials and stock, insurance, and transport, amongst others, have risen significantly,” Ms O’Reilly said.
“This must be taken into consideration by the Minister for Finance and Revenue when working out repayment plans. It is better to be flexible and recover all the tax owed than to be inflexible and push companies into liquidation which would see none of the tax owed repaid.”
