On Agenda: The way the tax system was used to support people and businesses during the pandemic, through the various wage subsidy schemes, is well known and recognised if also surprising: Revenue are known for collecting, rather than distributing money.
Perhaps, in terms of tax policy, an even bigger surprise was the notion of tax debt warehousing, which has come up for debate again in recent days.
Sometimes the quickest way to lend money to a business is not to take it out in the first place.
Tax warehousing allows businesses to defer payment of tax debt until the worst of the pandemic passes.
As well as having to meet their own tax liabilities, most businesses in Ireland collect tax on behalf of Revenue through the PAYE and Vat systems.
Tax warehousing in effect has allowed businesses to collect Vat from customers, and not pay it over, or pay wages to staff but not pay their PAYE.
This approach was striking because Revenue traditionally reserves harsh penalties for businesses not collecting and paying across PAYE and Vat on a strict timetable.
Special high rates of interest apply when these payments are made late. Permitting delays in payment, as tax warehousing does, was a significant tax policy departure.
Equally significant is the relatively low level of take-up of the tax warehousing option.
It seems many employers have payroll arrangements that have strong links between wage payment and PAYE payment, and they chose not to disrupt those links unless they absolutely had to.
The total amounts warehoused overall rarely exceeded more than about 5% of the total tax collected. Given the straitened circumstances most businesses found themselves in during the pandemic, this is low indeed.
The debate now is whether tax debts warehoused in this way should be written off entirely, rather than collected over the next few months and years.
The arguments for so doing may seem compelling, as so many businesses were severely damaged during the pandemic.
However, such a tax debt write-off would be unfair on those businesses which managed to find their way through the pandemic recession and were resilient enough to avoid warehousing tax debt.
Resilience always deserves a reward.
As is so often the case, businesses within the SME sector were among those most affected by trading restrictions.
Yet the SME Credit Demand Survey published by the Department of Finance last week suggests the majority of SMEs are not seeking credit terms because they do not require finance.
There are also indications that levels of profitability are returning. While still a good deal lower than the 2019 findings, 57% of SMEs reported profit during 2021, compared to just 31% in 2020.
Admittedly these are just survey findings, but they may bear out another phenomenon within Irish business which is that the number of company insolvencies taking place is far lower than occurred during the financial crash a decade ago.
The Government supports which were available during the pandemic undoubtedly contributed to this outcome and these low levels will not persist.
Writing off tax-warehoused debt entirely is not a magic formula to pull troubled businesses back from the brink.
Businesses which are only surviving because their tax costs are temporarily reduced may not continue to survive even if the overhang of tax debt is removed.
