As Independent Ireland TD Ken O'Flynn calls for tips to be exempt from income tax, Lunchtime Live asked whether the plan would work in practice.

CEO of the Restaurants Association of Ireland, Adrian Cummins, told Andrea Gilligan he feels that generally staff do understand their obligations with regard to the current rules. 

"If it's paid through a credit card machine, the employer will process the tip through payroll and the tax and PRSI will be paid on that tip.  If it’s paid in cash, there is an obligation on the staff member to declare that cash and pay tax on it."

Abolish tax on tips?

Woman in a hairdressers having her hair washed after getting it cut and coloured.

However, Mr Cummins believes that Ireland should follow other countries like France or the US and exclude gratuities from being taxed.

Accountant and CEO of Kinore, Larissa Feeney does not agree with this : “The fundamental rule of our tax system is that all income is taxed and tips are classed as an income," Ms. Feeney said, citing a lack of fairness in treating some industries in a different way to others.

“If you compare a retail worker earning less than €15 an hour to a hospitality worker earning €15 an hour, but they include tips [...] if the tips are non-taxable, then those workers, who are both working very hard and both provide an excellent service - are taxed very differently."

Despite this, Ms. Feeney does admit that declaring gratuities “does lead to additional work, both on the employer and employee - and additional costs in terms of employer's PRSI for those tips that are processed through payroll."

Terance Boyle, owner of his own hairdressing business, believes tipping is “a personal thing between a customer and a stylist of their choice."

He says that tipping “might not be a lot of money, but it is a lot of money if it's an extra €20 at the end of the day’. 

It has been argued that tipping is a token of good faith and shouldn’t be classed as income, but Ms. Feeney reiterates the rules round gratuities:

‘There are rules around gifting as well and the government has stipulated that tipping is not a gift, it’s income - so it’s taxed as such."