The finance minister has rejected this, following the example of France to make tips from hotel employees tax-free in order to make work in the industry more attractive.
French President Emmanuel Macron said the move in France was in part a response to staff shortages in the industry. Bars, restaurants and hotels across Europe have reported difficulties with recruiting.
In Ireland, any tip, gratuity or service charge received by an employer and redistributed to an employee is considered consideration under the PAYE system. This does not apply to cash tips that an employee receives directly from a customer. However, cash tips are still taxable and must be included in their income tax returns by employees.
The clear change towards a cashless society means that more and more tips are paid with cards and are therefore taxable in the PAYE system.
Fine Gael TD Neale Richmond raised the matter in the Dáil and asked the Treasury Secretary if he was considering exempting such tips.
Paschal Donohoe said he had no plans to change the system, but added that the Department of Enterprise, Trade and Employment was pushing tipping and gratuity laws that would prohibit the use of tips to top up wages. The new legislation would also ensure that electronic tips are distributed fairly and fairly among employees.
Speaking to the Irish Examiner, Mr Richmond said the tax exemption on tips received in cash or by card would be beneficial to any employee who has returned or is planning a return to the hospitality industry, which has been badly hit by Covid -19.
“Introducing a measure that would increase employee financial returns will send a positive message to hospitality workers who have been through 18 months of dire hardship,” said Richmond.
“This is an easy way to make work worthwhile and I have written to the Finance Minister asking him to review the current tax system on tips and other allowances to consider allowing tax-free income and following the example of our French friends . “
