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Irish Taxation Institute Presentation to Joint Committee on Economic and Regulatory Affairs

Irish Taxation Institute Presentation to Joint Committee on Economic and Regulatory Affairs. Tax Administration Burden on Irish Business. Key findings of Irish Taxation Survey The burden of administration Obstacles and concerns for start-ups BES Investment International trends

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Irish Taxation Institute Presentation to Joint Committee on Economic and Regulatory Affairs

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  1. Irish Taxation Institute Presentation to Joint Committee on Economic and Regulatory Affairs Tax Administration Burden on Irish Business

  2. 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 Research Focus of Today’s Presentation

  3. Irish Taxation Institute Survey June 2010

  4. 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

  5. Tax Burden

  6. Level of administrative burden Company Size 2010 TOTAL 2010 % Small % Medium % Large % A significant burden (4) 60% 59% 61% 55% Somewhat of a burden (3) Not much of a burden (2) Not a burden at all (1) 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.

  7. Tax which place an unnecessarily high administrative burden Company Size Small % Medium % Large % % VAT 71 75 66 69 56 60 PAYE & PRSI Income levy 45 52 48 Corporation Tax 22 39 33 Relevant Contracts Tax 21 39 26 Capital Gains Tax 9 15 5 Stamp duty 9 12 2 Other 11 6 10 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.

  8. Time spent each month on tax compliance obligations Company Size TOTAL % Small % Medium % Large % More than 2-3 days 2-3 days 1 day ½ a day Less than ½ a day 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.

  9. Start-Ups

  10. Agreement that state administrative structures make it easy for those starting up in business Company Size TOTAL % Small % Medium % Large % Agree strongly (5) Agree slightly (4) Neither (3) 39 39 37 46 Disagree slightly (2) Disagree strongly (1) Almost half disagree that current structures make it easy to start up a business – with small companies the least likely to agree

  11. Agreement levels that a more co-ordinated and centralised approach by state related bodies would relieve obstacles starting a business Company Size TOTAL % Small % Medium % Large % Agree strongly (5) Agree slightly (4) 28 26 35 30 Neither (3) Disagree slightly (2) Disagree strongly (1) Almost 2 in 3 small companies agree that a more co-ordinated and centralised approach by state bodies would relieve obstacles starting a business.

  12. 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 70 76 71 Missing tax payment and file deadlines 77 75 70 Penalties for making a mistake 70 90 77 Requirements to keep records 58 52 55 Difficulty in getting registered for tax/getting a business registered for tax for the first time 32 31 33 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.

  13. Likelihood that new businesses would make mistakes in their tax returns in first few years Company Size TOTAL % Small % Medium % Large % Very likely (5) Quite likely (4) 9 8 10 8 Neither (3) Quite unlikely (2) Very unlikely (1) 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.

  14. 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 % Medium % Large % Very beneficial (5) Quite beneficial (4) Neither (3) 2 2 2 1 - - Not very beneficial(2) * Not at all beneficial (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

  15. Issues which might put people off starting a new business in Ireland Small % TOTAL % Large % Medium % Cost Of Setting Up A Business Tax Compliance Requirements Financial Cost Of Failure A lot (4) A little (3) Not very much (2) Not at all (1) The cost of failure is seen as the main issue for new starts ups among those already running small and medium companies in Ireland

  16. 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 Summary of Survey Findings

  17. UK short tax return a 4 page form (self-employed with turnovers below £68,000) HMRC Business Education and Support Teamfree 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 - UK

  18. 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 International Trends in Reducing the Burden - Australia

  19. 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

  20. 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 Irish Taxation Institute Recommendations

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