TAX SURVEY Taxpayers willing to pay the price by ToaKohe-Love


JUNE 14 2009                                                                                                                                                                                                                                                                 n15               1

Taxpayers willing to pay the price
                                                                                                                                                                                                                                                            smooth implementation.
Tax measures in the recent budget                                                                                                                                                                                                                              On the subject of pensions,
                                                                                                                                                                                                                                                            the message from the survey is
have increased our marginal tax                                                                                                                                                                                                                             unequivocal. Do not remove
                                                                                                                                                                                                                                                            the tax relief on pension contri-
rate. Now shifting the emphasis to                                                                                                                                                                                                                          butions, as this will result in a
                                                                                                                                                                                                                                                            cessation or reduction in con-
the spending side of the equation is                                                                                                                                                                                                                        tributions. Over half of all em-
                                                                                                                                                                                                                                                            ployed adults would be likely to
critically important                                                                                                                                                                                                                                        stop or reduce their personal
                                                                                                                                                                                                                                                            pension contributions if tax re-
                                                                                                                                                                                                                                                            lief on these payments were re-
                                                                                                                                                                                                                                                            moved. If this were to come to

                    ne of the                                                                                                                                                                                                                               pass, it would place a huge ad-
                    more sur-                                                                                                                                                                                                                               ditional burden on the state
                    prising find-                                                                                                                                                                                                                           coffers in years to come.
                    ings i n our                                                                                                                                                                                                                               Now is not the time to re-
                    survey is the                                                                                                                                                                                                                           move assistance to taxpayers
                    level of ac -                                                                                                                                                                                                                           to fund their own pensions.
ceptance of the personal tax                                                                                                                                                                                                                                The very reason for giving tax
increases in the April budget.                                                                                                                                                                                                                              relief on pensions is that the
While the recent election re-                                                                                                                                                                                                                               money is inaccessible for such
sults indicate that the budget                                                                                                                                                                                                                              a long period. We must main-
was deeply unpopular, our sur-                                                                                                                                                                                                                              tain a strongly supportive re-
vey suggests that people are                                                                                                                                                                                                                                gime that not only encourages
willing to pay higher taxes ^                                                                                                                                                                                                                               people who are already paying
provided the money is wisely                                                                                                                                                                                                                                into pension funds to continue
spent.The best evidence of this                                                                                                                                                                                                                             making these payments, but
is the relatively high accep-          Jim Ryan                                                                                                                                                                                                             also encourages many more
tance of the need to raise taxes                                                                                                                                                                                                                            taxpayers to do so.
during the current crisis, with                                                                                                                                                                                                                                The government has worked
54 per cent of respondents say-                                                                                                                                                                                                                             very hard to promote the need
ing they accepted that the sup-      ope.That figure has dropped to                                                                                                                                                                                         for people to invest in their fu-
ple me ntar y budg et t a x          50 per cent in the 2009 survey,                                                                                                                                                                                        ture retirement plan. It needs
increases were necessary to ad-      even though we’ve seen signifi-                                                                                                                                                                                        to stay focused on this policy
dress the economic difficulties.     cant increases in taxation in       In correcting our public finances, we must return to low taxes on labour and a simple and well-understood personal tax system TONY O’SHEA                                          for the long term ^ to be di-
But it is clear that taxpayers ex-   the two emergency budgets in                                                                                                                                                                                           verted from this could be cata-
pect this additional tax contri-     October 2008 and April 2009.                                                                                                                                                                                           strophic to future generations,
bution to be put to good use.           In fact, the reality is quite    Ireland is sti l l b elow the       through child benefits. How-            Our survey also shows that       ping point in the marginal rate     stand and administer.             who would be left carrying the
The poll shows they expect it        different. Some 18 per cent of      OECD average. In fact, despite      ever, our consumption taxes,         taxpayers are focused on what       and the potential impact on ex-     & It should be based on ability   can.
to be used to help resolve our       respondents to our 2009 poll        recent budget tax hikes, Ire-       such as Vat and excise, were         might be contained in the next      ternal competitiveness. In our      to pay.
economic difficulties, with 50       correctly hold the view that        land ^ along with New Zeal-         proved to be high by interna-        budget, and are anticipating        small and extremely open            & Anyone who bought their            Jim Ryan is president of the
per cent saying they would like      our income tax burden is typi-      and, Korea and Mexico ^ has         tional standards.                    the possibility that even more      economy, competitiveness is         home in recent years, at the      Irish Taxation Institute
some of it to be used to fund        cally lower than the rest of Eur-   one of the lowest tax burdens          Following the recent in-          will have to be done to address     vital. Overtaxing the produc-       height of the property boom, is
new employment initiatives.          ope (again, surprisingly, an        in the industrialised world, ac-    creases, our marginal tax rate       the deficit in the public fi-       tive side of the economy could      probably servicing a large
   Another surprising finding        increase from the 11 per cent       cording to figures from the         is now quite high, and it is im-     nances.                             further stall its recovery.         mortgage and has already paid
of the survey relates to public      result in 2006). Prior to Octo-     OECD.                               portant that we monitor this            Against that backdrop, it is        Therefore, taxpayers are         very high stamp duty rates. In       Red C poll
perception of the burden of in-      ber 2008, the personal tax bur-        Benefits, such as child bene-    key rate. The marginal rate re-      interesting to note that over 60    probably correct to assume          the interest of fairness, some
come tax in Ireland. In 2006,        den in Ireland was quite low in     fit, appear to be the most gen-     fers to the amount of tax paid       per cent of respondents are         that, in addition to cuts in pub-   form of credit should be al-
the last time the Irish Taxation     terms of the Organisation for       erous in the OECD, whose            on every additional euro of in-      bracing themselves for the in-      lic spending, a property tax is     lowed to avoid overburdening
Institute National Tax Survey        Economic Cooperation Devel-         figures show that an Irish cou-     come earned.                         troduction of a property tax,       the much more likely option. If     these taxpayers.                   1,000 interviews were con-
was conducted, 53 per cent of        opment (OECD) average.              ple with two children earning          It is important to recognise      most likely in the next budget,     there is a need to increase taxes   & Any new property tax must        ducted by phone using a
respondents felt the personal        While the tax burden has in-        an average wage were paying         the tipping point in the mar-        although only 40 per cent           further then, from a competi-       be accompanied by a reduction      random digit dial sample to
tax burden in Ireland was high       creased in the wake of the re-      the lowest tax rate in the world,   ginal rate of tax and levies for     would prefer to pay this tax        tive point of view, the introduc-   in stamp duty rates on residen-
compared with the rest of Eur-       cent changes, the tax burden in     because of the amount paid          all taxpayers, beyond which          rather than face higher income      tion of a property tax would        tial and commercial proper-        ensure all households, includ-
                                                                                                             the entrepreneur’s drive to          tax. Minister for Finance Brian     certainly be a less harmful, if     ties. Again, we need to avoid      ing ex-directory, were covered.
                                                                                                             earn further profits, or the em-     Lenihan has already signalled       not a very popular, option.         penal double tax on the same       The research covered those
                                                                                                             ployee’s drive to earn further       that there is no room for              The IrishTaxation Institute’s    asset.                             who are full-time or part-time
                                                                                                             income, will be eroded. Going        further increases in personal       position is that, if a property     & A ny new prop erty ta x          employees or self-employed.
                                                                                                             beyond the tipping point could       taxation, and the IrishTaxation     tax is to be introduced, it         should be introduced on a          The survey was conducted
                                                                                                             become a serious disincentive        Institute agrees that it could be   should have the following key       phased basis and after appro-
                                                                                                             to economic activity, produc-        detrimental to impose such in-      features:                           priate consultation with rele-     between June 1 and 3, 2009.
                                                                                                             tivity and recovery. Shifting        creases, on the basis of the tip-   & It should be simple to under-     vant stakeholders to ensure its
                                                                                                             the emphasis to the spending
                                                                                                             side of the equation is critically
                                                                                                             important to ensure our pro-
                                                                                                             ductivity is maintained and in-
                                                                                                             creased, and our international
                                                                                                             competitive position is im-
                                                                                                                The survey shows a gap in
                                                                                                             understanding among tax-
                                                                                                             payers regarding the calcula-
                                                                                                             tion of the various levies, the
                                                                                                             income levies and the health
                                                                                                             lev y. The increased levies,
                                                                                                             along with the change in mort-
                                                                                                             gage interest relief, were the
                                                                                                             two major policy changes an-
                                                                                                             nounced in April ^ and there
                                                                                                             is still confusion among many
                                                                                                             taxpayers as to how these are
                                                                                                             calculated and applied.
                                                                                                                The Irish Taxation Institute
                                                                                                             is of the view that, while the le-
                                                                                                             vies are an unfortunate but ne-
                                                                                                             cessary short-term solution,
                                                                                                             they should not become a per-
                                                                                                             manent feature of our system.
                                                                                                             In correcting our public fi-
                                                                                                             nances, we must return to low
                                                                                                             taxes on labour and a simple
                                                                                                             and well-understood personal
                                                                                                             tax system. While our survey
                                                                                                             shows that the majority of tax-
                                                                                                             payers understand the ‘bottom
                                                                                                             line’ impact of the budget
                                                                                                             changes on their take-home
                                                                                                             pay, they do not understand
                                                                                                             how this bottom line is calcu-
                                                                                                                How could they be expected
                                                                                                             to? As it stands, we are cur-
                                                                                                             rently dealing with a raft of in-
                                                                                                             come tax rates, income levies,
                                                                                                             health levies and PRSI. Some
                                                                                                             employers may shortly also be
                                                                                                             expected to administer a com-
                                                                                                             plex car park levy. The upshot
                                                                                                             of all this is a hugely confusing
                                                                                                             system of taxation, not only for
                                                                                                             taxpayers but also for the busi-
                                                                                                             ness community ^ which is ex-
                                                                                                             p e c te d to ad m i n ister the
                                                                                                             system for firms and employ-
                                                                                                             ees.The complicated nature of
                                                                                                             the new levies is placing an un-
                                                                                                             necessary burden on busi-
                                                                                                             nesses at a time when they
                                                                                                             need all the help and support
                                                                                                             they can get from the govern-
                                                                                                                It is also increasing the
                                                                                                             workload of the Revenue,
                                                                                                             which is most unhelpful at this
                                                                                                             point, since the more time Rev-
                                                                                                             enue has to spend on added
                                                                                                             complexity on the collection
                                                                                                             side of the house, the less time
                                                                                                             it has to devote to processing
                                                                                                             claims and refunds, and pro-
                                                                                                             viding support to viable busi-
                                                                                                             nesses struggling to pay their
                                                                                                             taxes on time. At all levels, tax-
                                                                                                             payers should rightfully expect
                                                                                                             the unwieldy system to be sim-
                                                                                                             plified, in the interests both of
                                                                                                             clarity and transparency ^ two
                                                                                                             elements that should be key to
                                                                                                             the way in which taxes are col-
                                                                                                             lected in any modern economy.
                                                                                                                                                                                                                                               THE SUNDAY BUSINESS POST
n14          1                                                                                                                                                                                                                                                               JUNE 14 2009

Fine-tuning the
tax system for all
There has been
an improvement
in people’s
of personal tax

  Mark Redmond

          n 2006, the IrishTaxation Insti-
          tute, in association with The
          Sunday Business Post, con-
          ducted the first national tax
          opinion poll of Ireland’s PAYE
          taxpayers. That poll, con-
ducted at the height of our economic
boom, showed that a large number of
PAYE taxpayers did not understand
how the tax system worked. They did          The government and the Revenue should continue their efforts to simplify the tax system
not understand their most basic entitle-
ments under the tax code and how to
claim them. It was clear that PAYE tax-
payers were overpaying taxes by signifi-
cant amounts, and addressing this
became a national priority.
                                                  Tax survey: key findings
   In the subsequent budget, then fi-
nance minister Brian Cowen promised:
‘‘The government is determined to              & Almost two-thirds claim to un-            & Those aged 18-24 and 65-plus               to claim a relief/refund.
make it easier for ordinary taxpayers to         derstand the PAYE tax system                are more likely to disagree with         & Six in ten agree that the pro-
claim and receive their rightful entitle-        ^ slightly more than in 2006.               certain statements about the               cess of claiming tax is now ea-
ments.’’ The Oireachtas Committee on           & Females aged 18-24 are more                 recent budget and impact it                sier.The Revenue’s online
Finance and the Public Service issued a          confident than males when it                has had on their tax.                      service to claim tax relief is
special report on the issue in 2007.             comes to understanding the                & Half of all taxpayers believe              used by almost four in ten.
   Our second national poll, conducted           PAYE tax system.                            that Ireland has a high tax bur-           There is uncertainty as to
earlier this month and published today,        & One-third claim to leave every-             den.This is down from 2006,                whether it now takes longer to
shows that things have improved. It              thing to their employer when it             despite the significant in-                receive a tax refund than it
shows that 5 per cent more PAYE tax-             comes to tax and reliefs which              creases in personal tax since              used to.
payers now say they are claiming their           they can claim.                             that time.                               & Six in ten believe that a new
tax entitlements in relation to medical        & Almost two in five are not con-           & Although more than half agree              annual property tax will be in-
expenses and service charges. Three              fident they understand all the              that the supplementary budget              troduced in the next budget.
out of every ten taxpayers have used             information on their certificate            tax increases were necessary               More than half of our sample
the Revenue’s online PAYE refund ser-            of tax credits and standard                 to address the economic diffi-             would not prefer a property tax
vice, and six out of ten believe it is now       rate cut-off point ^ very similar           culties, a slightly lower propor-          to further tax income in-
easier to claim back their tax refunds.          to 2006.                                    tion believe the current tax               creases.
   Importantly, 63 per cent of PAYE            & The 18-24 and 65-plus age                   rates are fair in the current en-        & Lower social classes are more
taxpayers say they understand how the            groups are less likely to under-            vironment.                                 likely to believe that a new
tax system affects them ^ a 5 per cent           stand all the information on              & There is mixed acceptance of               property tax will be introduced
improvement in three years. PAYE tax-            their certificate of tax credits            the supplementary budget tax               in the next budget.
payers also realise that they should ac-         and standard rate cut-off point             increases.Those aged 18-24               & Over half of all employed adults
tively manage their tax affairs ^ their          and how tax credits work, as                and 65-plus are more likely to             would like to stop or reduce
tax bill is probably the biggest bill they       well as the tax information on              agree with the justification for           their pension contributions if
will ever pay, so demands far more scru-         their P60.                                  taxes.                                     tax relief on these payments is
tiny and checking than credit card or          & Over two-thirds claim to under-           & While more people are now                  removed.
utility bills ^ especially as it is often        stand their pay slip following              claiming the reliefs they are            & The standard rate of tax is seen
overstated. Now 19 per cent of PAYE              the supplementary budget;                   due, more than two in five do              as the fairest tax today. Opi-
taxpayers use a tax adviser to help them         however, over half do not un-               not claim tax relief on refuse             nion on the income levy sees an
manage their tax affairs, compared               derstand how income and                     charges, and a similar propor-             even split on whether it is a fair
with 7 per cent three years ago.                 health levies are calculated.               tion do not know the time limit            or unfair tax.
   But we still have more to do.Two out
of every five taxpayers still do not un-
derstand basic documents relating to
tax, including their payslip and P60.           The system has become compli-              should expect to be kept informed, in an   sight provided by a taxpayers’ advocate.
Half of all taxpayers are still unsure of    cated, with an array of taxes and levies      open and active manner, of the details        Our tax system has undergone major
all their entitlements and the deadlines     now imposed on taxpayers.                     of the system.                             reform in the past year ^ more substan-
for claiming them.                              Against that backdrop, two things             Furthermore,we would like to see the    tial reform will come in the next two
   Credit is due to the Revenue and the      should be introduced without delay. A         government and the Revenue continue        years.
tax profession for taking up the chal-       customer charter for the PAYE tax-            their efforts to simplify the system for      For these reforms to work and be ac-
lenge, and recognising the need to pro-      payer which explains the system in an         the ordinary taxpayer, with the active     cepted, they must be understood by the
mote greater understanding among             accessible manner and undertakes to           support of the tax profession.             most important and largest group of
taxpayers in the three years since our       meet certain criteria on behalf of the           This means a radical reform of our      stakeholders in the system ^ PAYE tax-
first national poll. However, there’s a      taxpayer should be introduced, along          personal tax code to phase out the         payers. The Irish Taxation Institute Na-
lot more work to be done in this regard,     with a taxpayer advocate, with a focus        plethora of levies ^ all with different    tional Taxpayer Poll tells us the views
and it is needed now more than ever.         on promoting ^ and defending ^ the            rules and rates. It means an easily un-    and priorities of these stakeholders ^
   While over 60 per cent of respon-         rights of the ordinary taxpayer.              derstood and proportionate tax burden      they deserve to have them addressed.
dents claim to understand the PAYE              Unlike other jurisdictions, we do not      on employment. It means a swift and
system in this country, this still leaves    have a tax advocate in Ireland who            clear provision of information and pro-      Mark Redmond is chief executive of
almost 40 per cent of taxpayers lacking      could independently assess the position       cessing of refunds with protective over-   the Irish Taxation Institute
understanding. This equates to a size-       of taxpayers who are dissatisfied with
able section of the population who may       the treatment they have received from
be overpaying tax, underclaiming re-         the Revenue. While internal and exter-
funds or not claiming them at all.           nal processes exist for taxpayers to chal-
   Worryingly, one-third of respondents      lenge Revenue decisions, these are
said they left everything up to their em-    limited in scope and accountability.
ployer when it came to both tax and             An independent taxpayer advocate
claiming reliefs, suggesting that they       would ensure that the rights of indivi-
were neither taking control of nor ac-       dual taxpayers were protected, and that
tively managing their tax affairs.           they were entitled to a swift, cost-free
   On top of that, as a result of the Oc-    administrative appeals mechanism if
tober budget and the emergency budget        they felt their rights were being in-
in April, we are experiencing signifi-       fringed ^ something taxpayers have
cant changes to our personal taxation        every right to expect. The role could
system, and that’s all the more reason       also include evaluating the fairness and
to deliver clarity and understanding of      efficiency of our tax administration at a
the system to all taxpayers.                 systemic level, with appropriate report-
   All taxpayers need to understand the      ing and recommendations for change to
system and make it work for them.The         the Oireachtas.
Revenue and the tax profession have             When it comes to tax and the tax-
been working hard to address the infor-      payer, we have to assume that the sys-
mation gap in recent years, but must         tem appears opaque and inaccessible,
step up the effort to make the system        and we must consistently seek ways to
more accessible to the ordinary tax-         break down this perception. It is unfair                                                                                            Six in ten agree that the process of claiming tax is now easier. Almost four in ten use the Revenue online
payer, and ensure fairness across the        to place the onus of ‘discovery’, as it                                                                                                  service. There is uncertainty whether it now takes longer to receive a tax refund than it used to.
board.                                       were, on citizens. All of us, as taxpayers,

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