Politics

Businesses with warehoused Covid-era tax liabilities to face relaxed deadlines, lower interest rates

Michael McGrath says expectation is that interest rates will fall but scale of these remain to be seen

Minister for Finance Michael McGrath and Minister for Public Expenditure Paschal Donohoe. Photograph: Olivier Hoslet/EPA
Minister for Finance Michael McGrath and Minister for Public Expenditure Paschal Donohoe. Photograph: Olivier Hoslet/EPA
Jack Horgan-Jones
Wed Jan 17 2024 - 10:32

Businesses who warehoused tax liabilities during the Covid-19 pandemic are to be given relaxed deadlines and lower interest rates for repaying their debts under plans being developed by the Government.

Speaking to reporters at the World Economic Forum in Davos on Wednesday, Minister for Finance Michael McGrath said that around €1.75 billion in back taxes was owed by firms who took advantage of Covid-era scheme to defer some tax liabilities for payment at a future date. Around 7,000 businesses owe money to the Revenue Commissioners.

Mr McGrath said the Government was “really anxious” to ensure viable businesses were supported and would remain in operation.

“We are going to make some changes to the tax warehousing regime with a view to being as flexible as we possibly can,” he said. “I’ve been engaging with the Revenue Commissioners and a proposal is currently being developed which we hope to finalise very shortly to introduce further flexibility in relation to the specific terms associated with the tax warehousing regime.”

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The Minister urged businesses to engage with the Revenue Commissioners, who he said would be flexible, and to put in place a repayment plan which could run over an extended period of time “and on attractive terms”.

He added that existing tax liabilities and returns must be kept up to date but warehoused taxes would be treated differently.

He said that there was a recognition that entering into a “onerous” repayment plan would be challenging.

Around €1.5 billion of the total is owed by 5,000 of the businesses, typically owing more than €50,000.

“Those are the businesses that we’re most concerned about, and we want to make sure that they are supported provided they engage in a genuine and open way with the Revenue Commissioners,” the Fianna Fáil TD said.

The duration and interest rate of repayment plans was being considered and it is hoped proposals can be finalised within the next fortnight, he added.

Asked about comments by Christine Lagarde, managing director of the European Central Bank, who said she expected interest rates had peaked this year barring any unexpected shocks, Mr McGrath said Ireland would take its guidance from market expectations which were that there would be rate reductions. However, he said the timing and scale of these remained to be seen.

“Overall I’m optimistic for the outlook for the Irish economy this year,” he added. “I do believe we will have economic growth this year, it will be at a more modest level than we have had in recent years but against the backdrop of international uncertainty, conflict, geopolitical tension, the impact of inflation and high interest rates.”

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Jack Horgan-Jones

Jack Horgan-Jones

Jack Horgan-Jones is a Political Correspondent with The Irish Times