Revenue’s Headline Results

Jan 13, 2020

Business Post 12 January 2020

It's been a week for job announcements. 

Enterprise Ireland and the IDA announced their results for 2019.  It was apparently full steam ahead for the IDA, which supports foreign direct investment into Ireland, but somewhat less so for Enterprise Ireland which supports Irish exporters and whose results were somewhat muted.  Alongside these announcements of what the private sector does best when it's creating jobs, the headline results of the Revenue Commissioners for 2019 also surfaced.  And guess what, they seem to be in the business of job creation as well. 

In the past 12 months, the headcount at the office of the Revenue Commissioners has increased from 6,129 full-time equivalent staff in 2018 to 6,621 in 2019.  In parallel, the cost of running the Revenue Commissioners increased by some €25 million year-on-year to a total of €450 million in 2019.

A lot of the public service headcount debate in this country tends to focus, rightly, on frontline staff – nurses, teachers and gardai.  If tax receipts are up to the levels achieved prior to the crash in 2008, so now too is the Revenue headcount.  Yet it's not getting any easier for businesses and employers to comply with their tax collection obligations.  So what is the Irish taxpayer seeing for these increases in Revenue staffing and costs?

Much of the rationale for this staffing increase was the prospect of Brexit, particularly a hard Brexit.  Additional customs officers were recruited to deal with the additional checking of goods flowing between this country and Britain.  There was also an element of planning involved to secure against staff shortages from pending retirements.  But now that the threat of a hard Brexit has receded, what will all these additional tax officials do?

For the 200,000 or so businesses employing people in this country, one of the heaviest tax compliance burdens often has to do with operating PAYE on their employees.  When releasing their 2019 headline results, Revenue made much of the success of their modernisation of the PAYE system during 2019 and portrayed it generally as a boon for all concerned.  The costs to employers to replace or upgrade their software for the change were not in fact seen as a boon by many employers. 

There is no doubt that PAYE modernisation has tightened up the PAYE system.  While this can be to the benefit of employees in the long run, the additional cost to employers has gone largely unacknowledged.  There have also been suggestions in the past few months that the vast harvesting of tax data on employees, via their employers, might be further extended to the self-employed.  It's costly enough to do business without having to provide additional statistical data to government.

Law abiding taxpayers will by and large be pleased to see that tax audits and enforcement continues, because business tax evaders – businesses not complying with VAT, PAYE or other obligations - are operating illegally but are also effectively stealing an unfair competitive advantage.  Nevertheless, the tax recovered from policing evasion collected from tax enforcement activity declined in 2019 when compared to 2018.  It's probably a little too early to tell whether compliance levels have actually improved by virtue of the additional Revenue staffing and more rigorous PAYE systems.  Or maybe the Irish taxpaying population at large has got that little bit more compliant. 

The Revenue results also highlight one of the great unsung costs to Irish business, namely employer PRSI.  Employees fare much better than the self-employed under the social welfare system in terms of contributory non-means tested pension benefits, health and occupational benefits.  These additional social welfare benefits come at a heavy cost to employers, who typically stump up an additional 11% or so onto the cost of payroll to cover employers’ PRSI.  In 2019, Revenue collected over €12 billion in PRSI on behalf of the National Social Insurance Fund. 

Those who complain about our welfare state need to remember that over 16% of all revenues collected in Ireland go towards PRSI.  Fully €1 billion more was collected in PRSI in 2019 than in 2018.  Given the scale of the contributions, it's reasonable to ask if PRSI is representing good value for money for the Irish citizen.  For example, how can the health service continue to be in such dire straits given the level of social insurance citizens are paying?

The answer to that of course is not in the gift of the Office of the Revenue Commissioners.  Their mission is to collect taxes fairly and efficiently, not to spend them.  While a bumper year for tax receipts is good for the Exchequer, the increasing compliance costs of doing business are worrying. Amounts collected by employers under PAYE amounted to €31.6bn for 2019.  There is a greater obligation than ever on Revenue to provide better support for those who make the headline tax collection figures look so good.

 

Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland