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Playing the system How Ireland's super-rich used Covid scheme to avoid paying €6m in tax

The millionaires – each with net assets of more than €20m – have been able to withhold the taxes due on earnings and perks

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Finance Minister Paschal Donohoe. Photo: Gareth Chaney/Collins Photos

Finance Minister Paschal Donohoe. Photo: Gareth Chaney/Collins Photos

Finance Minister Paschal Donohoe. Photo: Gareth Chaney/Collins Photos

Some of Ireland’s richest people have been able to put off paying €6m in taxes they owe by using a Government scheme designed to save businesses during the pandemic.

The millionaires – each with net assets of more than €20m – have been able to withhold the taxes due on earnings and perks.

They do not even have to pay interest on the amounts they have corralled into the Debt Warehouse Scheme until the end of this year.

The scheme was introduced in May 2020 as part of the Government’s efforts to help businesses survive the Covid pandemic.

Businesses could defer, interest-free, some tax debts such as VAT and employer tax due under PAYE for a limited period because they suffered during lockdowns and reduced consumer spending.

One interest-free period ended last December, another elapses at the end of this year, while there is a limited ­interest-free period that extends into next year.

Ireland’s super-rich had to apply directly to Revenue to access the scheme.

They had to prove they had been unable to pay tax owed due to the impact of Covid on turnover or the volume of customer orders, or provide another reasonable explanation for being unable to pay.

A person could avail of income tax “warehousing” if their income had dropped by more than 25pc.

Alternatively, the scheme allowed company directors or employees with a material interest in their business – where they control more than 15pc of it – to warehouse some of their tax liabilities where their income had not fallen by 25pc or more.

Those so-called Schedule E taxes include liabilities that arise from all emoluments received by a director.

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These include wages, fees and benefits such as medical insurance, rent paid by the company for a directors’ residence or tickets to a sporting event, for example.

In a reply to a written question posed in the Oireachtas last week by Fine Gael TD Michael Creed, Finance Minister Paschal Donohoe confirmed that, as of the end of March, €6m in taxes had been warehoused by so-called high net worth individuals.

It is understood the figure has declined by €1m since then.

Revenue has a separate division that deals with the super-wealthy.

It classifies such individuals as people with net assets of more than €20m.

There are thought to be more than 700 people who fall under Revenue’s special unit.

In the written reply, Mr Donohoe said a total of €31bn in taxes was eligible for the Debt Warehousing Scheme since it was introduced, with 250,000 businesses eligible for it.

But 91pc of the debt has been paid. As of the end of March this year, there was €2.9bn outstanding in respect of 94,000 businesses.

“The Debt Warehousing Scheme was introduced to provide a vital liquidity support to businesses suffering a downturn due to the Covid-19 pandemic,” said Mr Donohoe in his reply.

Figures from Revenue show that of the outstanding amount of taxes due under the scheme at the end of March, almost €1.5bn related to large corporations.

More than 14,400 wholesale and retail businesses accounted for 23pc, or €652m, of the almost €2.9bn outstanding at the end of the last financial year. Just under 9,900 accommodation and food services businesses accounted for €427m, or 15pc of the total.

Some companies have been criticised for paying dividends to shareholders despite being in receipt of Covid supports such as the Employee Wage Support Scheme.

A wave of business failures is expected by experts in the coming months as firms propped up by Government supports go to the wall because these mechanisms are being reduced or cut off.

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