Ms Cora O'Brien:

Tax administration issues arise from burdens and uncertainties in the tax administration system that lead to higher costs for business. These range from the uncertainty about tax obligations and entitlement to reliefs, such as the research and development tax credit, to Revenue projects, such as PAYE modernisation, and on through to the uncertainty of tax appeals in dispute. We know there are over 4,300 such cases at this point totalling €1.5 billion.

We need to bring home the importance of the tax administration system in the growth of Irish businesses and their employees. I will use the research and development tax credit as real example. Only 1% of small firms and 16% of medium-sized firms consider themselves to be research and development active. These are low percentages in the context of our national ambitions. Innovation is key to driving growth. While Ireland has an attractive research and development tax credit regime administration barriers are weighing heavily on its success in terms of the low take-up among SMEs.

The institute’s research shows that 75% of Irish companies are aware of the research and development tax credit and 20% have availed of it. However, of those that availed of it, 47% said that the process was difficult to prepare for and administer. Only 35% of companies surveyed said that they intend to use it in the next 18 months, although this would rise to 62% if there was more clarity around the criteria for qualification.

In terms of efficiency and the service to Irish business, we need to ensure that Irish businesses are well served by our tax administration system. Businesses and their advisers deserve to be at the heart of a Revenue customer service model that aims to provide a standard of technical support which is best in class internationally. To achieve this, we believe that there needs to be an increased focus on the resourcing and delivery of Revenue’s technical tax supports, and in particular the current model for the Revenue technical service needs to be reformed. Businesses, through their advisers, need a timely, efficient and responsive technical service to provide certainty on their tax position when entering into commercial transactions. Over the budgets of 2015, 2016 and 2017, Revenue hired 226 additional staff with an emphasis on audit and compliance activity. It is just as important that new resources are targeted at supports and customer services to enable businesses to administer with certainty their tax affairs in a cost-efficient manner in these difficult times.

Tax is difficult and as well as calculating their own corporation tax businesses are also responsible for calculating and collecting VAT and payroll taxes. When they get things wrong the cost is very high in terms of both interest and penalties. Interest charged by the State on underpaid VAT and PAYE is 10% and it is charged at 8% on income tax and corporate tax. This compares with the 2.75% charged in the UK and with the 4% which the State pays taxpayers who have overpaid. Interest charged at this level is unfair and urgently needs to be addressed in the Finance Bill 2017.

To conclude, given the challenges and opportunities that lie ahead, the greatest cost of all lies in the opportunity lost to Irish businesses should we fail to have a tax policy and tax administration strategies that serve the needs of Irish business. The impact of this will be felt in terms of their competitiveness, attractiveness, resilience and ability to compete internationally in the export market.