Independent Ireland TD for Cork North Central, Ken O’Flynn, has sharply criticised what he described as the Government’s “refusal” to exempt gratuities from income tax, calling it “a tax on decency” and “an insult to the dignity of work”.
Speaking in response to a recent Dáil statement by Minister for Public Expenditure Jack Chambers — which confirmed there are no plans to alter the tax treatment of tips — Deputy O’Flynn accused the Government of “penalising low-paid workers for doing their jobs well.”
“It is astonishing that in 2025, the State still insists on taxing a thank-you,” the Cork North Central TD said. “A tip is not a wage and it’s not a bonus — it’s a gesture of appreciation from a customer to a worker. The notion that the Revenue Commissioners should reach in and claim a slice of that is indefensible.”
Under the current law, all tips — whether given in cash, by card, or included as a service charge — are treated as taxable income. This applies regardless of how they’re distributed.
“So whether a fiver is left on a saucer or a few euros is added to the bill, the Government wants its cut,” O’Flynn said. “It’s punitive and profoundly unfair on minimum wage workers already struggling with the cost of living.”
Deputy O’Flynn is now calling for a full exemption from PAYE, USC and PRSI for all genuine customer gratuities, regardless of how they’re paid.
“If the State genuinely believes in rewarding effort and supporting workers, then it should leave people’s tips alone,” he said. “Other countries show respect for their service workers. It’s time Ireland did the same.”
Calling for the tax to be scrapped, he said : “Taxing tips is petty, punitive and profoundly unfair. The Government must reverse this policy — not tweak it, not regulate it, but abolish it entirely.”
In previously addressing the issue, Minister Chambers said that “it is a general principle of taxation that, as far as possible, income from all sources should be subject to taxation. This is a well-established and broadly accepted principle.”
He said that “the long-standing position is that all tips, gratuities and service charges arising from an office or employment are chargeable to income tax under Schedule E in accordance with Section 112.”
“Gratuities from customers, for example service charges in hotels or tips in restaurants, paid to the employer and subsequently paid out to an employee should be included in pay for the income tax week or month in which they are paid out. These tips constitute pay for the purposes of the PAYE system. However, in a situation where an employee receives tips directly from customers, the employer is not obliged to operate PAYE and in that case, the tips and gratuities are fully taxable and should be included by the employee in his or her income tax return,” he went on.
“As you may be aware, the Payment of Wages (Amendment) (Tips and Gratuities) Act 2022 was enacted on 20 July 2022 and came into effect on 1 December 2022. The Act, which is under the remit of the Department of Enterprise, Trade and Employment, introduced new rules about how employers must share tips, gratuities, and service charges amongst employees. It also prohibits the practise of using tips or gratuities to top up wages/contractual rates of pay.”
“In addition, the legislation provides transparency to customers, as it requires businesses to clearly display their policy on how tips, gratuities and service charges are distributed. Further, any charge called a ‘service charge’ or anything that would lead a customer to believe it is a charge for service, has to be distributed to staff as if it were a tip or gratuity received by electronic means.”
“For the reasons I have outlined in my reply, I have no plans to amend the tax treatment of tips and gratuities.”