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 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. 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 % 61% 55% TOTAL 2010 % 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 Medium % Small % Large % Company Size Income levy

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

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)

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 approach by 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)

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 Medium % Small % Large % Company Size Penalties for making a mistake

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) 98108

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) *

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 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