FROM THE ARCHIVES:Before PAYE was introduced in the 1950s employees had to pay income tax in annual lump sums, a practice that was apparently pretty lax, judging by this report that employers were to be forced to withhold the amounts due, thereby hastening the introduction of PAYE.
WHY NOT Pay-as-You- Earn? That is a question which thousands of Irish employees are asking this week. It is a question which has been the subject of discussion by both employers and workers for years.
Last week the Revenue Commissioners did, in fact, initiate both employers and employees into a new and violent form of P.A.Y.E. Firms throughout the country have been notified that, in respect of tax owing by their employees, the Revenue Commissioners intend to collect from pay packets at the source within a given period.
The director of one Dublin firm said: “Employers are being billed with their employees’ unpaid income tax, and, in turn, must act as bloodsucking collectors towards their employees.”
The demand on the employers is part of an all-out assault upon income tax arrears. The happy days of three or four warning notices and “six months to pay” have, apparently, become history. In future it is intended to reduce this period by half and to dispense with the reminders. Taxpayers will be informed of their obligations by assessment, and, if the amount has not been remitted within three months, it will be collected automatically by distraint.
The Revenue Commissioners have, of course, had this power since 1923. Up to now it has mainly been used in individual cases where arrears are high.
The official view is that too much laxity in collection has been allowed in the past, and that now the “big guns” must be brought into play. The laxity has, in fact, led to the paradoxical position that, in spite of the increase in the income tax rate, the amount of income tax in the Exchequer in the first six months of this year was £200,000 less than at the corresponding date last year.
It is doubtful if the man has yet been born with social conscience sufficiently highly developed to pay his income tax voluntarily. There is little reason to regard with any degree of wonder, therefore, the fact that, given an easy-going system of collection, the average Irish wage-earner elected to pay as little as possible for as long as possible. Now the Elysian days have ended with startling abruptness, and both employers and employees are caught in a vicious circle of arrears and current payments.
There can be little objection to the introduction of some feasible type of Pay-as-You-Earn system. The employees would welcome it. The employers would suffer it, more or less gracefully. But there is a tremendous difference between being asked, as British firms were, to begin deducting current income tax payments at a stated time, and being told to relieve employees’ present wage packets of probably as much as two years’ arrears of income tax over a period of a few months.
In such cases the circle will, indeed, be a vicious one.