The Fianna Fáil TD, Jim O'Callaghan, has said it is "alarming" that companies which received the very generous wage supports from the State are paying out dividends to shareholders and called for the scheme to be amended into the future.

It follows an Irish Times report that the Irish owned group that distributes Mercedes-Benz cars in Ireland received €1.8m in taxpayer funded pandemic subsidies last year, but paid out a similar sized dividend to the company that controls the business.

In a statement the company, O'Flaherty Holdings which is owned through Motor Manufacturers Limited, said the subsidy received by it under the Temporary Wage Subsidy Scheme was used solely and entirely for the purpose intended, namely to maintain the jobs of its workforce as businesses faced into the unknown of an unprecedented lockdown of their operations.

The wage subsidy scheme does not expressly preclude firms from paying a dividend to shareholders in the event a profit is made for the year in which the subsidy was claimed.

However, a number of firms, including CRH and Grafton, voluntarily returned what they received from the State in wage subsidies after their sales rebounded when the pandemic eased.

But speaking to RTÉ's News at One Mr O'Callaghan said, "it was never envisaged that companies that received State financial support in one hand, would then be paying out dividends to shareholders with the other hand".

He said these wage subsidy schemes were designed to ensure companies survived and to keep their employees on the worksheet and that the scheme could be amended as it goes forward.

"The scheme is still in operation" he added.

"So the scheme could be amended as it operates into the future, to say that anyone who receives a wage subsidy benefit can't pay a dividend out to shareholders."

"Or alternatively, that people who have paid out dividends in the past, they can be looked at differently by the State when it comes to seeing whether or not they deserve to be paid out wage supports in the future."

Mr O’Callaghan said the amendment should expressly prohibit the payment of dividends and the State should be given some discretion to look at back at companies that received the payments in the past.

He said he raised this issue with the Minister for Finance 14 months ago, in October 2020.

The Fianna Fail TD said it's not tenable that you can have companies receiving money from the State as a support and then paying out dividends.

He said in other countries in Europe, including Austria and France, they have said that companies receiving payments by way of State supports during the Pandemic can't pay dividends to shareholders.

However, Labour accused Fianna Fail of crying crocodile tears on the matter.

It said Government TDs consistently refused to back Labour calls for conditions to be attached to the two wage subsidy scheme.

"I welcome the government Deputy's conversion to the principle that strict conditions should be attached to the drawdown of State support under the EWSS," said Labour finance spokesman, Ged Nash.

"This is a significant shift in position from a deputy who represents a government that refused to support calls by Labour to attach strict social and economic conditions to the massive wage subsidy schemes when it really mattered."

The Department of Finance said the question of whether it is necessary or appropriate to go further and legislate for further conditionality on the question of distribution of profits is something that will be examined.

However, it said the Revenue experience to date is that the vast majority of firms have operated the wage subsidy schemes in good faith.

The Irish Congress of Trade Unions described the situation as entirely unacceptable.

"It goes completely against the principle objective of the EWSS which is solely to underpin the ability of the employer to retain their workers in employment despite the negative Covid effect," said general secretary, Patricia King.

She added that the Government should now act to close off any loopholes.