Who should be paying tax on tips?

In a restaurant or hair dressers or other place of work where staff receive tips, should tax be deducted on those tips? Is the employer liable for the tax and prsi or is the employee liable.

If the employee is given cash into the hand by a customer and the employer does not know about it, then is it not up to the employee to declare the income and pay tax. (Tips are taxable income!)

If the customer pays by laser card (debit card) and asks for cash back and gives some of it to the employee and the employer does not know about it, then is it not up to the employee to declare the income and pay tax. Even if the employer knows about the tip, there is no record of it.

If the customer pays by credit card (VISA/MASTERCARD) there will be a record of the transaction, as on the credit card slip or screen you are asked to place a gratuity. Who now is liable to pay the tax or prsi, employee or employer?

If all the tips are pooled and divided out to the staff by the staff, is the employer liable to deduct tax and prsi. Are the employees liable to pay tax and prsi?

If the company charges a service charge and gives some of it to the employee, then is the employer not liable to deduct tax and prsi from it?

If you are a highly tax compliant employer you may have difficulty finding staff as they can get better untaxed tips elsewhere. If you do not deduct tax and prsi, are you building up a tax liability. But then you don't know who gets what in tips so how can you tax it!

If I give a tip to a waiter, can I claim it back as an expense if I use my visa receipt?

Currently there appears to be no firm answer and no easy solution to this situation!

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