Editor’s Note
The relationship between business owners and the Revenue Commissioners is one of master and servant. The entrepreneur toils in the vineyard and the taxman demands a large portion of the harvest surplus. In 2020, Revenue broke with tradition with a tax holiday for enterprise. The Covid pandemic was the reason, and three out of four of the country’s 250,000 enterprises availed of the offer to park VAT, and employer income tax and PRSI liabilities, in a tax warehouse.
Parking taxes due for 2020, and some residual taxes from 2019, made sense, given the cashflow shock when businesses couldn’t open their doors. Outside of hospitality and tourism, most firms were back to semi-normal in 2021, but all the taxes due for that year could be warehoused too. The warehouse door was closed in April 2022. At that stage, Revenue estimated of the €31bn in tax eligible for warehousing since the scheme began, 90% had been remitted. That left €3.1bn in the warehouse, owed by 105,000 individual businesses. Of those, only 12,000 hadn’t paid back any of their warehoused liability in 2022.
Many of these tax debtors were hoping against hope that Revenue and government would cave and implement a warehouse haircut. After all, the debt terms kept being relaxed. Originally the plan was that parked tax would attract no interest penalty through 2022 and start to be repaid in January 2023, when the interest penalty levied would be 3%. The repayment commencement date was then pushed out May 2024, and the 3% interest scrapped.
In effect, taxpayers who availed of the scheme for the full four years 2020 to 2024 have been able to avail of an interest free loan. And these weren’t just pubs. Hostelworld plc disclosed recently that it had €9.6m in warehoused payroll taxes owing to Revenue at the end of 2023. The company agreed to make a repayment of 15% of the balance owed in May 2024, with the balance to be repaid monthly over a three-year period.
In the event, Revenue and finance minister Michael McGrath didn’t cave. May 1 is the deadline for Revenue ‘customers’ in the warehouse to strike a repayment deal. At stake is €1,580m owed by 53,000 tax debtors, according to the latest Revenue count. In particular focus are the 4,800 businesses and individuals who collectively owe €1,350m, an average of €280,000 each.
No doubt most of these debtors will pay the money back. Others will ride their luck until Revenue finally catches up with them, probably some time in 2025, when many will wind up one company and continue trading through another.