Fine-tuning the tax system for all Sunday, June 14, 2009 By Mark Redmond In 2006, the Irish Taxation Institute, in association with The Sunday Business Post, conducted the first national tax opinion poll of Ireland’s PAYE taxpayers.
That poll, conducted at the height of our economic boom, showed that a large number of PAYE taxpayers did not understand how the tax system worked. They did not understand their most basic entitlements under the tax code and how to claim them. It was clear that PAYE taxpayers were overpaying taxes by significant amounts, and addressing this became a national priority.
In the subsequent budget, then finance minister Brian Cowen promised: ‘‘The government is determined to make it easier for ordinary taxpayers to claim and receive their rightful entitlements.”
The Oireachtas Committee on Finance and the Public Service issued a special report on the issue in 2007.
Our second national poll, conducted earlier this month and published today, shows that things have improved. It shows that 5 per cent more PAYE taxpayers now say they are claiming their tax entitlements in relation to medical expenses and service charges. Three out of every ten taxpayers have used the Revenue’s online PAYE refund service, and six out of ten believe it is now easier to claim back their tax refunds.
Importantly, 63 per cent of PAYE taxpayers say they understand how the tax system affects them - a 5 per cent improvement in three years. PAYE taxpayers also realise that they should actively manage their tax affairs - their tax bill is probably the biggest bill they will ever pay, so demands far more scrutiny and checking than credit card or utility bills - especially as it is often overstated. Now 19 per cent of PAYE taxpayers use a tax adviser to help them manage their tax affairs, compared with 7 per cent three years ago.
But we still have more to do. Two out of every five taxpayers still do not understand basic documents relating to tax, including their payslip and P60. Half of all taxpayers are still unsure of all their entitlements and the deadlines for claiming them.
Credit is due to the Revenue and the tax profession for taking up the challenge, and recognising the need to promote greater understanding among taxpayers in the three years since our first national poll. However, there’s a lot more work to be done in this regard, and it is needed now more than ever.
While over 60 per cent of respondents claim to understand the PAYE system in this country, this still leaves almost 40 per cent of taxpayers lacking understanding. This equates to a sizeable section of the population who may be overpaying tax, under claiming refunds or not claiming them at all.
Worryingly, one-third of respondents said they left everything up to their employer when it came to both tax and claiming reliefs, suggesting that they were neither taking control of nor actively managing their tax affairs.
On top of that, as a result of the October budget and the emergency budget in April, we are experiencing significant changes to our personal taxation system, and that’s all the more reason to deliver clarity and understanding of the system to all taxpayers.
All taxpayers need to understand the system and make it work for them. The Revenue and the tax profession have been working hard to address the information gap in recent years, but must step up the effort to make the system more accessible to the ordinary taxpayer, and ensure fairness across the board.
The system has become complicated, with an array of taxes and levies now imposed on taxpayers.
Against that backdrop, two things should be introduced without delay. A customer charter for the PAYE taxpayer which explains the system in an accessible manner and undertakes to meet certain criteria on behalf of the taxpayer should be introduced, along with a taxpayer advocate, with a focus on promoting- and defending- the rights of the ordinary taxpayer.
Unlike other jurisdictions, we do not have a tax advocate in Ireland who could independently assess the position of taxpayers who are dissatisfied with the treatment they have received from the Revenue. While internal and external processes exist for taxpayers to challenge Revenue decisions, these are limited in scope and accountability.
An independent taxpayer advocate would ensure that the rights of individual taxpayers were protected, and that they were entitled to a swift, cost-free administrative appeals mechanism if they felt their rights were being infringed - something taxpayers have every right to expect. The role could also include evaluating the fairness and efficiency of our tax administration at a systemic level, with appropriate reporting and recommendations for change to the Oireachtas.
When it comes to tax and the taxpayer, we have to assume that the system appears opaque and inaccessible, and we must consistently seek ways to break down this perception. It is unfair to place the onus of ‘discovery’, as it were, on citizens. All of us, as taxpayers, should expect to be kept informed, in an open and active manner, of the details of the system.
Furthermore, we would like to see the government and the Revenue continue their efforts to simplify the system for the ordinary taxpayer, with the active support of the tax profession.
This means a radical reform of our personal tax code to phase out the plethora of levies - all with different rules and rates. It means an easily understood and proportionate tax burden on employment. It means a swift and clear provision of information and processing of refunds with protective oversight provided by a taxpayers’ advocate. Our tax system has undergone major reform in the past year - more substantial reform will come in the next two years.
For these reforms to work and be accepted, they must be understood by the most important and largest group of stakeholders in the system - PAYE taxpayers.
The Irish Taxation Institute National Taxpayer Poll tells us the views and priorities of these stakeholders - they deserve to have them addressed.
Mark Redmond is chief executive of the Irish Taxation Institute
|
Text-Only