Backdating of Income Levy

I was just updating our payroll software to incorporate the ongoing revisions to the ROS P35 (5 mods so far this year!) and, yet another, update to the Income Levy FAQs arrived from Revenue.

As it is getting close to the end of the year, I decided to read the section on EOY adjustments to the Income Levy, which details how employers should refund overpayments of the Income Levy in the final payment for 2009.

What surprised me was the statement that the lower exemption limit introduced in the April Budget is backdated to 1st January and the inference that people earning between €15,028 p.a. and €18,304 p.a. will have underpaid the levy for the first 4 months of the year. The document suggests that Revenue will deal directly with recouping the underpayment.

The idea of going after low-paid workers for tax which was increased retrospectively seems bizarre. Also, I wonder if the concept of introducing a retrospective tax is not legally suspect.

I'd be surprised if there were a huge amount of staff who would be earning that amount and paying the levy in the first place.

Low income earners under a certain threshold are entitled to the Medical Card. If they hold the medical card then they are exempt from the income levy. I would say that those in that wage bracket who are expected to pay the income levy would be a small percentage of all low income earners.

The income threshold for a Medical Card for a single person, living with family, or living alone, is less than €10k p.a. That's a long way from €15k. And, believe me, there are plenty of people surviving on €300 per week - Shop Assistants, Hairdressers, etc.

In any case, I think you missed my point, which was to question the morality and legality of retrospectively changing tax rates, especially when this affects the lowest paid workers in society, regardless of how many people are affected.

The €15,028 p.a. threshold is not backdated.

Towger, it very much depends on what you mean when you say that the threshold is not backdated. It is not backdated by the employer but Revenue says it is backdated and that they will deal with underpayments.

In the Revenue's Income Levy FAQs, Par. 4.16 which relates to the EOY calculations:

Page 21 - For individuals Under 65:

The exemption for individuals under 65 for 2009 was changed from €18,304 to €15,028 in the April 2009 Supplementary Budget. The €15,028 figure is effective from 1 January 2009. In their end of year adjustments employers/pension providers must apply a pro-rata €15,028 figure in both their Jan-Apr and May-Dec calculations. The €18,304 figure no longer exists for 2009.

This paragraph is repeated in other sections.

In Par.4.24 which deals with underpayments:

Where an employer/pension provider finds that the income levy has been under deducted at the end of the year they are not to deduct more income levy. Revenue will deal with any underpayments arising. An employer/pension provider is not responsible for paying any underpayment of income levy on an employee's behalf. The underpayment is between Revenue and the individual.

Revenue's position is clear. The threshold is backdated. Whether, or not, they will pursue underpayments remains to be seen.