Standing up for taxpayers

Nov 12, 2018

Sunday Business Post, 11 November 2018,

This week's US mid-term elections were a useful reminder that they do things differently over there. The US system of governance may well be better overall. How much more focused would an Irish government be if there was a prospect of losing a core part of its support from elected representatives midway through a Dáil term?

Governance at other levels of the US system is different too. For instance, Stateside, they have an office called the Taxpayer Advocate. It's a role which could be compared to that of a special ombudsman for taxes. The current incumbent, Nina Olson, is vastly experienced and has a lot of interesting things to say generally about the way taxes are administered, and not least about the role of technology in so doing.

Ms Olson's thesis is that even as we use technology to facilitate the calculation and collection of taxes, we distance the taxpayer from the ever increasing complexities of the tax system and thus from an awareness of the law itself. It's not good enough to create a system so complicated that technology has to be used and without which there would be no prospect of the taxpayer being able to comply with their obligations.  It seems though that Ms Olson’s warning goes largely unheeded.  Technology doesn’t just facilitate administrative processes.  It is now becoming an excuse for politicians and administrators to make poor decisions.

This will be more evident than ever when businesses are forced to pick up the pieces of the administrative complexity that Brexit will create.  Bureaucracy cannot be just automated away.  If the reports and counter reports of the Brexit negotiation process illustrate anything this week, it is that no matter what deal is done, there has to be a border somewhere between the territory of the UK and the rest of the EU. The key issues now are how long the establishment of that border can be deferred, and where parts of that border might be situated.

There is little comfort to be had for the Irish cause in any of this week's reporting.  The British can't live with a border within the United Kingdom.  The Irish can't live with a border on the island of Ireland.  A long standing concern of Unionists in Northern Ireland is that border back stop arrangements might in some way distance Northern Ireland from the rest of the United Kingdom. There is a risk now that someone could dream up border back stop arrangements which would distance Ireland from the rest of the EU. 

Could Ireland be obliged to maintain some kind of border controls between the island of Ireland and, for want of a better expression, mainland Europe?  If so, we could lose many of the EU membership advantages of free flowing trade because of additional monitoring despite remaining within the customs union and single market.  That must not happen.

The EU principle of free movement of people is not controlled at ports, airports and border crossings within the EU, but rather at social welfare offices and health centres and by employers.  Similarly the principle of free movement of goods, both for customs and single market purposes, may have to be controlled at Irish business premises rather than at customs checkpoints.

The UK government has already issued directions to business that if there is a no deal Brexit, UK businesses must in essence register as customs operators, and maintain and operate what are de facto customs warehouses on their own premises. It's a short conceptual step from there to any government imposing further additional single market controlling obligations on its own industries.  Enforcement of regulations on packaging, labelling, certification of quality and the like could all happen on the premises of manufacturers and wholesalers, importers and exporters – wherever best it suits a political Brexit border settlement.

That would be a significant overhead for business.  Such controls would have to be sustained via a heavy investment in information technology infrastructures, and it is not apparent that such investment would be made by government.  For instance on the UK side the planned upgrade to the UK's customs systems might not be ready for Brexit purposes, partly because the design had commenced before the outcome of the referendum was known. That’s according to the UK's Comptroller and Auditor General. And on the Irish side even if the Irish Revenue does increase its manpower by 20% to provide for an adequate number of customs officers, that investment won't necessarily help Irish businesses deal with the increased regulatory burden. The focus of those additional Revenue resources would surely be on tackling smuggling.

In the flurry to achieve a politically acceptable Brexit settlement, there is a significant danger that the outcome will be commercially unacceptable to business on this island.  The trade protectionism that Brexit necessitates, both for the EU in securing the Customs Union and for the UK if it is to negotiate its own future trade deals, is enforced by taxation at borders.  Unlike in the US with the Taxpayer Advocate Service, we seem to have no one within the government structures to highlight the implications for taxpayers of political decisions like these.

We might not choose to follow the US example of mid-term elections, but to have an officer like Nina Olson to take a broader perspective on the burden for taxpayers looks increasingly necessary.

Brian Keegan is Director of Public Policy and Taxation at Chartered Accountants Ireland