irish taxation institute presentation to joint committee on economic and regulatory affairs
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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 - PowerPoint PPT PresentationTRANSCRIPT
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 SurveyThe burden of administrationObstacles and concerns for start-upsBES 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
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.
33 33 32
7 7 75
41 4435 36
18 16 26 19
43
Medium%
A significant burden (4)
Somewhat of a burden (3)
Not much of a burden (2)
Not a burden at all (1)
Small%
Large%
Company Size 2010
60%61% 55%
TOTAL2010
%
59%
Tax which place an unnecessarily high administrative burden
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.
%
VAT
PAYE & PRSI
Corporation Tax
Capital Gains Tax
Relevant Contracts Tax
Stamp duty
Other
71
69
22
9
21
9
11
75
56
39
15
39
12
6
66
60
33
5
26
2
10
9
10
25
26
47
66
72
10
Medium
%
Small
%
Large
%
Company Size
Income levy 45 52 48
22 24 17 23
20 2117
23
28 29
27
26
22 20
2822
8 6 12 6
Time spent each month on tax compliance obligations
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.
Medium%
Small%
Large%
Company Size
TOTAL%
Less than ½ a day
½ a day
1 day
2-3 days
More than 2-3 days
Start-Ups
20 19 2125
24 27 1914
12 920 10
5 63
5
Agreement that state administrative structures make it easy for those starting up in business
Almost half disagree that current structures make it easy to start up a business – with small companies the least likely to agree
Medium%
Small%
Large%
Company Size
TOTAL%
Disagree strongly (1)
Disagree slightly (2)
Neither (3)
Agree slightly (4)Agree strongly (5)
39 39 37 46
6 6 4 5
20 1926 23
42 4532 35
4 4 3 8
Agreement levels that a more co-ordinated and centralised approach by state related bodies would relieve obstacles starting a business
Almost 2 in 3 small companies agree that a more co-ordinated and centralised approachby state bodies would relieve obstacles starting a business.
Medium%
Small%
Large%
Company Size
TOTAL%
Disagree strongly (1)Disagree slightly (2)
Neither (3)
Agree slightly (4)
Agree strongly (5)
28 26 35 30
Tax issues which might be of concern if starting a new business in Ireland
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.
%
Tax administration procedures can be complex and daunting
Missing tax payment and file deadlines
Requirements to keep records
Difficulty in getting registered for tax/getting a business registered for
tax for the first time
70
77
58
32
76
75
52
31
71
70
55
3332
56
75
76
77
Medium%
Small%
Large%
Company Size
Penalties for making a mistake 70 90 77
9 9 9 4
43 44 38 46
36 3637
37
3 2 55
Likelihood that new businesses would make mistakes in their tax returns in first few years
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.
Medium%
Small%
Large%
Company Size
TOTAL%
Very unlikely (1)Quite unlikely (2)
Neither (3)
Quite likely (4)
Very likely (5)
9 8 10 8
1 1 4
21 21 1833
75 76 7565
11
Benefits if Revenue were to provide advance guidance and information on most common mistakes made by new businesses when filing returns
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
Medium%
Small%
Large%
Company Size
TOTAL%
Not at all beneficial (1)Not very beneficial (2)
Neither (3)
Quite beneficial (4)
Very beneficial (5)
2 2 2 1 --*
12 14 7 11 10 9 10 165 7 8 6
6
26 24 30 2740 39 41 41
13 14 10 15
58 5760
5644 44 44 36
80 8079 75
854 3254 3
43
5
Issues which might put people off starting a new business in Ireland
The cost of failure is seen as the main issue for new starts ups among those already running small and medium companies in Ireland
Medium%
Small%
Large%
Cost Of Setting Up A Business
Not at all (1)Not very much (2)
A little (3)
A lot (4)
TOTAL%
Tax Compliance Requirements
Financial Cost Of Failure
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 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 - 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