Minister for Finance Paschal Donohoe faced criticism from members of the Oireachtas finance committee on Wednesday for failing to ban companies from paying dividends to owners as they were in receipt of wage subsidies during the Covid-19 crisis.
Still, the Minister signalled that there would be no immediate changes to conditions of the Employment Wage Subsidy Scheme (EWSS) as it is phased out by the end of April, even after it emerged last month that the O'Flaherty family owned distributor of Mercedes-Benz cars in Ireland paid a €1.8 million dividend in 2020, having received a similar amount in wage subsidies that year.
Mr Donohoe told the committee that consideration had been given, when the EWSS was brought in, to adding conditions in addition to basing eligibility on companies enduring a 30 per cent slump in turnover and being tax compliant.
However, he said he decided against, as he anticipated at the time that there would be a “very low level of dividend payments” by supported firms, and because he was concerned about the “execution of such conditionality”.
This included the possibility that some companies would just defer dividends on profits made during the support period and pay them out after the scheme ended, he said.
“But it is something that I am going to monitor when I consider the future of these schemes. But . . . I won’t make any changes that undermine what I believe is the central objective of the scheme, which is the maintenance of employment and giving employers every chance to be viable,” he said.
“In the case of EWSS alone, over €7 billion has been provided comprising direct subsidy payments of €6.12 billion and PRSI forgone of €956 million to 51,900 employers in respect of over 706,700 employees.”
Mr Donohoe said that 402 employers had repaid all the EWSS supports they had received, amounting to €52 million, while a further 3,331 had made partial repayments, totalling €54 million.
Sinn Féin finance spokesman Pearse Doherty said his party had urged the Minister in 2020 that strict conditionality be attached to financial assistance provided to companies so that Government support would not be used to support shareholder dividends.
He said the UK government had ensured dividends couldn't be paid out from companies receiving supports, while the European Central Bank had effectively banned dividend payments by banks for a period.
Meanwhile, Mr Donohoe said that the Government had decided against introducing legislation to recover money that insurers had deducted from Covid-19 business interruption payouts to reflect State supports given to businesses.
“Having received legal advice, it was determined not to enact legislation seeking to retrospectively recover the amounts deducted by insurers,” he said.
“It appears that in most instances, this issue does not arise because well-established measures already exist whereby State supports are not provided if losses are already covered by insurance, or where they are, they can be refunded to the State through official channels.”
Still, he noted that the Insurance (Miscellaneous Provisions) Bill, which is being drafted, will require insurers to disclose to the Central Bank in future if they are deducting any taxpayer supports from compensation payments made on claims.
“This enhanced transparency . . . will enable us in the future to make better, evidence-based policy decisions to help ensure that this situation does not arise again, thus protecting the public interest,” he said.