On the agenda: The way the tax system has been used to support people and businesses during the pandemic, through the various wage subsidy schemes, is well known and recognized albeit surprisingly: incomes are known to collect rather than distribute money.

In terms of tax policy, perhaps an even bigger surprise has been the notion of tax debt warehousing, which has again been the subject of debate in recent days.

Sometimes the fastest way to lend money to a business is not to withdraw it in the first place.

Tax warehousing allows businesses to defer paying tax debt until the worst of the pandemic is over.

As well as having to meet their own tax obligations, most Irish businesses collect tax on behalf of the Inland Revenue through the PAYE and Vat systems.

Tax warehousing has in effect allowed businesses to collect VAT from customers and not pay it, or pay staff salaries but not pay their PAYE.

This approach was striking as Revenue traditionally reserves stiff penalties for businesses that fail to collect and pay via PAYE and Vat on a strict schedule.

High special interest rates apply when such payments are made late. Allowing late payments, as tax warehousing does, was a significant departure from tax policy.

Equally significant is the relatively low level of adoption of the tax warehouse option.

Relatively speaking, less PAYE than Vat has been stored.

It seems that many employers have payroll agreements that have close ties between paying wages and paying PAYE, and they have chosen not to disrupt those ties unless they absolutely have to.

Overall, the total amounts stored rarely exceeded more than about 5% of the total taxes collected. Given the difficult circumstances most businesses have found themselves in during the pandemic, this figure is indeed low.

Brian Keegan is Director of Public Policy at Chartered Accountants Ireland.

The debate now is whether tax debts stored in this way should be written off entirely, rather than collected over the next few months and years.

The case for such action may seem compelling, as many businesses have been badly damaged during the pandemic.

However, such tax debt forgiveness would be unfair to companies that have managed to navigate their way through the pandemic recession and have been resilient enough to avoid hoarding tax debt.

Resilience always deserves a reward.

While not being resilient should not necessarily be punished, it should not confer competitive advantage.

As is often the case, companies in the SME sector have been among the hardest hit by trade restrictions.

Yet the SME Credit Demand Survey released by the Department of Finance last week suggests that the majority of SMEs do not apply for credit terms because they do not need finance.

It also looks like profitability levels are coming back. Although still well below 2019 results, 57% of SMEs reported profits in 2021, compared to just 31% in 2020.

Admittedly, these are just survey results, but they may confirm another phenomenon within Irish business, which is that the number of business insolvencies is much lower than that which occurred during the financial crash. of ten years ago.

The government supports that were available during the pandemic undoubtedly contributed to this outcome and these low levels will not persist.

Complete cancellation of tax debt is not a magic formula to pull struggling companies from the brink.

Businesses that survive only because their tax burdens are temporarily reduced may not continue to survive even if the excess tax liability is removed.

Brian Keegan is Director of Public Policy at Chartered Accountants Ireland