Irish Taxation Institute Presentation to
Joint Committee on Economic and
Regulatory Affairs
Tax Administration Burden on Irish
Business
Research Focus of Today’s
Presentation
• Key findings of Irish Taxation Survey
The burden of administration
Obstacles and concerns for start-ups
BES Investment
• International trends
• Irish Taxation Institute key proposals
Irish Taxation Institute Survey
June 2010
Methodology
• The survey was completed by Red C through their
telephone centre in Dundalk
• 500 interviews were conducted across three main company
sizes in Ireland, which will allow for analysis across all three
of these sectors. This sample size of 500 provides a margin
of error of 4.5%
• Fieldwork was conducted between 21st May – 2nd June
2010
Tax Burden
Level of administrative burden
Company Size 2010
TOTAL
2010
%
Small
%
16
18
A significant burden (4)
Somewhat of a burden (3)
Not much of a burden (2)
Not a burden at all (1)
Medium
%
26
60%
59%
Large
%
19
61%
41
44
33
33
32
7
7
7
35
55%
36
43
5
Levels remain relatively unchanged to what we saw in 2007, however a slight increase is evident.
Larger companies however, are less likely to agree that it is a burden than smaller companies.
Tax which place an unnecessarily high administrative burden
Company Size
VAT
PAYE & PRSI
Small
Medium
Large
%
%
%
%
72
71
75
66
69
56
60
45
52
48
66
47
Income levy
Corporation Tax
26
22
39
33
Relevant Contracts Tax
25
21
39
26
10
9
15
5
9
9
12
2
10
11
6
10
Capital Gains Tax
Stamp duty
Other
VAT and PAYE & PRSI come out as the top 2 issues which place an unnecessary high administrative
Burden. Those from medium size companies are more likely than average to claim
corporation tax as a burden, as well as relevant contracts tax.
Time spent each month on tax compliance obligations
Company Size
TOTAL
%
Small
%
Medium
%
Large
%
More than 2-3 days
8
6
12
6
2-3 days
22
20
22
28
1 day
28
29
26
27
½ a day
20
21
23
17
Less than ½ a day
22
24
17
23
Average time spent on tax obligations is 1.5 days per month. Medium size companies spend most time each
month on their tax compliance obligations, while small and large spend less time.
Start-Ups
Agreement that state administrative structures make it easy for those
starting up in business
Company Size
TOTAL
%
Small
%
Medium
%
3
Large
%
Agree strongly (5)
Agree slightly (4)
5
12
6
9
20
5
10
Neither (3)
39
39
37
46
Disagree slightly (2)
20
19
21
Disagree strongly (1)
24
27
25
19
14
Almost half disagree that current structures make it easy to start up a business – with small
companies the least likely to agree
Agreement levels that a more co-ordinated and centralised approach by
state related bodies would relieve obstacles starting a business
Company Size
TOTAL
%
Small
%
42
45
Agree strongly (5)
32
26
Agree slightly (4)
20
19
Neither (3)
28
26
Disagree slightly (2)
Disagree strongly (1)
Medium
%
4
6
4
Large
%
35
23
35
30
4
5
6
3
8
Almost 2 in 3 small companies agree that a more co-ordinated and centralised approach
by state bodies would relieve obstacles starting a business.
Tax issues which might be of concern if starting a new business
in Ireland
Company Size
%
Small
%
Medium
%
Large
%
Tax administration procedures can be
complex and daunting
77
70
76
71
Missing tax payment and file deadlines
76
77
75
70
Penalties for making a mistake
75
70
90
77
58
52
55
32
31
33
Requirements to keep records
Difficulty in getting registered for
tax/getting a business registered for
tax for the first time
56
32
Top three issues which might be of concern if starting a new business in Ireland are daunting & complex tax
procedures, missing tax payments and file deadlines and penalties for making a mistake –
the latter of which is of particular concern to medium companies.
Likelihood that new businesses would make mistakes in their tax returns in
first few years
Company Size
TOTAL
%
Small
%
Very likely (5)
36
36
Quite likely (4)
43
44
38
Neither (3)
Quite unlikely (2)
Very unlikely (1)
9
9
8
9
10
9
5
3
2
Medium
%
Large
%
37
37
46
8
4
5
The majority agree that it is likely that business will make mistakes in their tax returns for the first few years,
with both small and large business more likely to agree.
Benefits if Revenue were to provide advance guidance and information on
most common mistakes made by new businesses when filing returns
Company Size
TOTAL
%
Small
%
Very beneficial (5)
75
76
Quite beneficial (4)
21
21
18
Neither (3)
Not very beneficial (2)
Not at all beneficial (1)
2 1
21
-
14
*
Medium
%
Large
%
65
75
33
2
1 1-
Providing guidance and information on most common mistakes made by new businesses when filing
returns is found to be highly beneficial among each of the company sizes, particularly small companies
Issues which might put people off starting a new business in Ireland
Small
%
TOTAL
%
Cost Of Setting Up
A Business
A lot (4)
A little (3)
Not very much (2)
Not at all (1)
58
26
12
4
60
57
24
14
5
30
7
3
56
40
27
11
5
Medium
%
Financial Cost
Tax Compliance
Requirements
44
10
7
44
39
9
8
44
41
10
6
Large
%
Of Failure
36
80
80
13
4
4
14
3
3
79
75
10
5
5
15
41
16
8
2
6
The cost of failure is seen as the main issue for new starts ups among those already running small and
medium companies in Ireland
Summary of Survey Findings
• 59% of all Irish SME’s surveyed consider their tax affairs are
a burden.
• VAT is most burdensome, followed by PAYE/PRSI, income
tax and corporation tax.
• Average time spent on tax administration is 1.5 days per
month
• Almost half disagreed that the current state administrative
structures encourage start-ups
• Complexity of administration and risk of penalties for
mistakes key concerns for SMEs
• 96% of start ups would like more guidance from Revenue on
avoiding mistakes
International Trends in Reducing the
Burden - UK
• UK short tax return a 4 page form
(self-employed with turnovers below £68,000)
• HMRC Business Education and Support Team
free workshops on tax aimed at new businesses
• HMRC website “toolkits”
checklists of issues of potential difficulty or common
mistakes in preparing returns
• Independent Office of Tax Simplification launched in July
"Entrepreneurship should never be stifled because of an
overly complex tax system.”
Rt Hon Michael Jack Chair of Office of Tax Simplification
International Trends in Reducing the
Burden - Australia
• Australian Tax Authority launched Small Business
Assistance Program
• Free workshops for new businesses on tax and record
keeping
• Specific measures for small businesses with difficulty
paying their taxes
Irish Taxation Institute
Recommendations
• Simplify tax returns - introduce a 2 page basic income tax
return
(current income tax return 22 pages)
• Allow micro businesses to submit one return to cover all
business taxes
• Revenue provide guidance on the most common errors
and mistakes in tax returns
• Centralised and co-ordinated approach by State bodies to
start-ups including a business support team
Irish Taxation Institute
Recommendations
• Increase the VAT registration threshold for both goods
and services to a common €85,000
• Extend the VAT cash receipts basis to businesses with a
turnover less than €2million = (cash benefit)
• Simplify start up tax rules for self employed
• Align interest rates on underpaid tax with market rates
• Reform of the Appeals System – clarity and transparency
important