Time to Scrap Tax Clearance Certs?

June 26, 2013

Revenue have this morning confirmed that from next Monday, 1 July, Tax Clearance Certs will not issue to taxpayers who have failed to pay the 2012 Household Charge.

From next Monday, all unpaid Household Charge bills become Local Property Tax (LPT) liabilities and are then collectable by Revenue.

While we can’t blame Revenue for doing all they can to collect outstanding Household Charge and LPT bills, its unfortunate that the conditions for obtaining a Tax Clearance Cert are becoming more and more onerous and bureaucratic – so much so that their original function has been almost forgotten.

Time to Scrap Tax Clearance Certs?

Tax Clearance Certs were introduced in the 1980s as a measure to combat blatant and widespread tax evasion. In those days, it was common practice for individuals and firms to dodge tax on State contracts and income.

The requirement to produce a Tax Clearance Cert quickly forced these cowboy operators to clean up their act. It was very successful in doing so and helped greatly in cleaning up tax evasion in that era.

However we have since learned that having a certificate is no guarantee of tax compliance and probity.

Successive high-profile scandals exposed countless politicians and business people who had blatantly evaded tax while holding tax clearance certs.

Indeed ex-TD Michael Collins was prosecuted and found guilty of obtaining a tax clearance certificate under false pretences, by falsely claiming to be tax compliant.

Mr Collins had in the meantime admitted to owning a bogus non-resident account, and later made a substantial tax arrears settlement with Revenue.

The Collins case demonstrates the futility of using tax clearance certs as a tool to combat wilful evasion. In fact they have become little more than a bureaucratic box-ticking exercise.

If your tax record is clear on a specific day, your certificate will issue. On the other hand, a tiny residual tax balance, an unpaid Household Charge bill, or a mislaid tax return will block its granting.

There is no allowance for materiality or overall compliance. And no sanction for persistent late filing of VAT, PAYE/PRSI or Income Tax returns, once the wrongdoer can contrive to regularise their tax position in the nick of time to ensure their certificate is renewed.

Worse still, those remaining cowboys who nowadays abuse the tax system, in a far more sophisticated and elaborate manner than their 1980s counterparts, still find the tax clearance cert system only a minor obstacle to their crimes.

I believe that the time has come to rethink the whole logic behind tax clearance certs, and devise a better system to police and reward tax compliance.

Todays’s Revenue eBrief is here.


Next Sunday is NPPR Deadline

June 24, 2013

The deadline for payment of the €200 NPPR charge for 2013 is midnight on next Sunday, 30 June.

You are liable if, on 31 March last, you owned a property which was not your Principal Private Residence on that date.

NPPR charge deadlineThere are a number of payment methods available. The smartest is online, at https://www.nppr.ie/ where you can pay by debit or credit card.

Failure to pay on time will cost you an extra €20 per month, which accumulates without limit until paid in full.

If you owe NPPR arrears for past years, you should still pay this year’s €200 fee by next Sunday. This will stop the 2013 charge accumulating in future months.


OECD Director Threatens Irish Corporation Tax Reliefs

June 19, 2013

The head of tax at the OECD has today told Ireland that it must charge Corporation Tax at the full 12.5% rate, if we wish to retain our current Corporation Tax regime

The comments by Pascal Saint-Amans, a former French Ministry of Finance official, were made at a conference in Dublin and reported by RTE News.

Ireland must charge full corporation tax rate - OECD - RTE- 19-6-13

It’s worth bearing in mind that any move to enforce an effective Corporation Tax rate of 12.5% here would mean the abolition of

  • Capital Allowances
  • Research & Development Tax Credits
  • Group Relief

These reliefs are very important to both indigenous firms and multinationals based here, particularly in productive sectors that require large capital investment.

It would be a disaster for these firms if our government was to acquiesce in their removal.

Oddly enough, as a Frenchman, M. Saint Amans will be acutely aware that:

Maybe he should clean up his own backyard first.

 


Revenue Warning Letters to Issue to Tech Companies

June 17, 2013

Revenue are poised to issue tax warning letters to technology contractor companies by the end of June, in the latest phase of their ongoing investigation into the sector.

This is according to an update issued by Chartered Accountants Ireland to its members today.

Revenue Probe Tech Contractor Companies

The Revenue “Services Contractors Project” targets companies which provide contracting services to a larger company. Its main focus is on the level of expenses claimed against taxable income.

Revenue believe that at least some expense claims are excessive and have previously invited companies based in the South-West region (counties Cork, Limerick, Kerry and Clare) to review their tax returns and settle any underpayments along with interest and penalties.

If you have a liability, you can avail of lower penalties by completing an Unprompted Qualifying Disclosure and settling the liability.

However, you must do this before Revenue notify you of an impending audit. Once you are notified of an audit, this option is no longer available, and you are then restricted to completing a less attractive Prompted Qualifying Disclosure.

If  you feel this may affect you, you should review your situation immediately, preferably with your tax advisor. You should also consider getting independent professional advice – if only for your own peace of mind.

For more on the Revenue “Services Contractors Project”, see my previous blog posts on this topic.

For more on Qualifying Disclosures see the Revenue Code of Practice for Revenue Audit

Today’s Chartered Accountants Ireland update is here.


Property Tax: Revenue 6 Councils 0

June 12, 2013

The latest Revenue Local Property Tax figures confirm that they have now received over 1.55 million returns from property owners.

The exact number of properties liable for the charge is unclear, but Revenue issued 1.66 million LPT notifications for the new tax.

We can safely assume the total number of liable properties is somewhat higher, as some property owners didn’t receive any notifications.

If we estimate a total pool of 1.7 million properties, this means that at least 90% of liable properties have been registered for the LPT.
Local Property Tax LPTBy anyone’s reckoning, this is a very successful outcome for Revenue, and is a stark contrast to the local authorities’ bungling in collecting the 2011 Household Charge.

Revenue’s success clearly vindicates the government decision to entrust them, and not the local councils, with the administration of the new property tax.

Isn’t it ironic though that the State needs its central tax authority to efficiently collect what is supposed to be a Local Property Tax?


Still Time to Avoid Local Property Tax Penalties

June 10, 2013

If you missed the recent Local Property Tax (LPT) deadline, there is still time to avoid interest and penalties on late registration and payment.

Revenue have confirmed that you can still file your Return (via paper form  or online) before 1 July without incurring any interest or penalties (see here if the link fails, or is unclear).

However, it is important to do act quickly. If you delay, Revenue may in the meantime seek to have the tax deducted directly from your wages or occupational pension.

Local Property Tax

The Revenue LPT helpline remains open at  1890- 200255.  If, like me,  you don’t like overpaying for 1890 phone calls, you can call 01-7023049 instead.