Irelands society is more tax compliant than many other countries worldwide. With reported levels of compliance standing at over 85%, that means the largest proportion of people that live and work in Ireland pay exactly what they should.
This is no accident; it is down to the complex tax systems that give workers and consumers no choice. If you are employed your tax is deducted from your salary before you receive it. If you are buying something in a local store you are not given the choice about whether to pay VAT or not. If you receive interest on savings the bank will take the tax off before they add it to your account, and the list goes on.
Really, the only people that can avoid paying the correct amount of tax are the self employed and business owners. This is exactly why, although the Revenue has the ability and legal right to investigate anyone, they tend put all their efforts into these two groups of people.
Most people in Ireland would agree tax evasion is wrong. As more than 85% of them are paying it correctly, why should some of the remaining 15% get away with not paying their dues?
Consistency Of Information
Investigating every business and self employed person would be costly and inefficient, so Revenue looks at ones where there are inconsistencies in the information they already have and what is declared on the tax returns. A portion of these inconsistencies is because of genuine mistakes, something that is far less likely to happen if you use bookkeeping services Ireland.
Ireland has a highly automated tax system and all returns and payments are submitted electronically. This does not just make it very tax efficient, it also lets the technology Revenue has compare and check the information. This usually shows thing up like too many allowances being claimed or a source of income disappearing. As the tax returns request more information, so the instances of errors will become more apparent, which will start more alarm bells ringing at Revenue headquarters.
Financial Details Revenue Has About YOU
You may be surprised to realise just how much information Revenue already has before your return is submitted. They have an automated analysis process called Risk Evaluation Analysis and Profiling system. This looks for mismatches with the information they already have.
For instance, if you purchased a top of the range car they would know about it from the vehicle registration tax documentation. If you then declare a low income, questions would be asked about how you could afford the vehicle.
Financial institutions have to send them information about your accounts and about any suspicious transactions that may involve money laundering. The Anti Money Laundering laws can alert them to tax evasion and monies that might come from crimes. There are several other places they get information from, such as auction houses, when you have been involved in a high priced purchase or sale.
Businesses have to inform them which contractors they have paid, and how much. This can get quite involved for some business owners, which is just one of the reasons some of them opt to outsource the work to bookkeeping services Ireland. Having the information about contractors compiled correctly and submitted when it should be reduces the risk of an investigation into either party.
The introduction of property taxes means that data regarding utility bills and payments to and by other government departments also reaches their hands. Departments such as Agriculture and schemes like the Home Renovation Incentive all pass information to Revenue.
Information From And To Other Countries
The information Revenue receives is not limited just to Ireland. Tax authorities across the EU share information on income and property deals all the time, as well as data on investments. They also swap information with the Internal Revenue Service in the US.
Data Input By Bookkeeping Services Ireland And Revenue
When you use bookkeeping services Ireland you are less likely to come under the scrutiny of Revenue, because everything will be in order before it is submitted to them. If by any chance they do decide to look at you more closely, and there are a few random checks made each year, bookkeeping services Ireland will be there to help you every step of the way.
Just as bookkeeping services Ireland have to input all your data, so a lot of data input is handled by Revenue. The difference is that they are inputting for data analysis, data matching, and circumstantial evidence to decide who they will raise enquires with, who they will investigate more closely, and whose premises they will visit. They will sometime target specific industries, and because there should be some similarity in gross profit margins, that gives them another reason to investigate if yours are much higher or lower to comparable businesses.
Information Received
Another reason they might start an investigation is because of information received. If a disgruntled ex-employee, an ex-partner or spouse, or someone you have upset decides to pass information to Revenue they cannot ignore it. It could be incomplete information and totally wrong but they still have to launch an investigation. If they are satisfied with your records, and if you have used professional bookkeeping services Ireland, you can be pretty sure they will be satisfied, and they can close the investigation and walk away.
The Key Role Of Businesses With Tax Compliance
Nearly 80% of tax in Ireland is collected by and from businesses so they have a key role in tax compliance, and the majority of them do everything as and when they should. If they are uncertain they use bookkeeping services Ireland, or maybe company secretarial services to ensure they to not fall foul of the rules and regulations.
You just need to be aware that if you do a property deal anywhere in the developed world, if you have investments, a commercial activity or income from any other source, it will already be on the Revenue database before you submit your returns, and you will be challenged about it at some point.
If you need help with a revenue investigation, or anything else to do with your business affairs, give us a call at Kane Bergin & Company on 01 969 6306.