FINANCE
THE RECESSION HAS LED TO A DROP IN TAX COMPLIANCE; HOWEVER,
THERE IS LIGHT AT THE END OF THE TUNNEL FOR COMPANIES THAT APPROACH REVENUE IN TIME. SORCHA CORCORAN REPORTS
The main message Gerry Harrahill, collector general of the Revenue Commissioners, has for small businesses is the importance of identifying tax compliance problems early and coming to talk to Revenue about them. “We’ve always had the message of willingness to work with
Taxing times
businesses to overcome difficulties. It’s fair to say that since the third quarter of 2008 the first real signs of difficulty in terms of tax compliance because of the economic environment were evident,” he says. “At that time it became very clear that the extent of the dif-
ficulties were of a scale not experienced by many in recent times.This reiterated the critical importance of engaging with Revenue on a proactive basis and we would continue to stress identifying problems at an early stage as a critical factor in determining our ability to work with a business to get it back to timely compliance.” Up to 2008 there was a very strong compliance culture across
all businesses. “Among the riskier or bigger tax payments due, there was anywhere between 88–94pc timely compliance, which compares well internationally. Clearly this group came under significant pressure and there was slippage of perhaps
26 OWNER MANAGER VOL 3 ISSUE 4 2010
2–3pc in 2009. Interestingly, in 2010 we are seeing a recovery in those rates. Our message of timely engagement has been responded to,” says Harrahill. The level of collectable Revenue debt from businesses was
€1.2bn in March 2009 and has risen to €1.4bn in 2010, which reflects the continuing tough environment. “By international standards there has been a good level of compliance perform- ance, but there has been significant pressure on compliance rates and this continues to be the case, with some sectors find- ing things extremely difficult,” says Harrahill. “Over the past 18 months the construction industry, motor
trade, retail sector, hotels and hospitality industry have been feeling the pinch. It hasn’t been intensive for the whole of the past two years and some businesses are really hitting in now.” Regarding compliance,Harrahill says there is another ele-
ment to consider apart from the need for receipts by the Exchequer. Businesses that withhold or delay payment are achieving an unfair competitive advantage over those trying to make payments on time. “We are trying to ensure a level play- ing pitch so as not to facilitate businesses that are undercutting others by being tardy,” he notes.
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