Irrational Attitudes to Taxation?

[amgd28]

Somethings been bothering me for a while about our atitude to taxation and tax dodgers in this country, which often occurs to me when browsing this site.

If you post as a landlord, there is an almost deafening cacophony of (excellent) advice to ensure best taxation avoidance measures are taken while fully meeting taxation obligations
If you post as beneficiary in a will, there is great advice on how best to minimise your tax bill, while fully meeting your taxation obligations
If you post as a company owner, you can get great advice on making sure your company are keeping straight with the revenue, and that as a director or sole trader, you are staying within taxation rules
and so on.......

YET

If you post as a person building a new house, or doing renovations, you get many posts such as the following

got a quote yesterday for our three storey house (just under 3,000 sq feet) and a garage (25ft x 33ft) for 13,000 euros (cash).

and no-one bats an eyelid

Why is it that instead of the common myth of "tax being only for the workers", it is generally the middle-income and high-earners in the state that are paying their full whack of tax, and anyone in the building trade has carte-blanch to completely bypass the tax net. And worse thing is that the same people who object to the Taoiseach and other politicians engaging in tax evasion, the very next day, their agreeing cash deals with builders.......

I'm not immune to this, but sometimes I think crikey - the very people not paying tax (e.g. construction workers doing cash-only deals) would be first in line to criticise the health service, state of the roads, etc etc

Am I just having a bad day or does anybody else find this situation odd?

 

[mathepac]

..Why is it that instead of the common myth of "tax being only for the workers", it is generally the middle-income and high-earners in the state that are paying their full whack of tax...

Statistics produced by the CSO from tax-figures supplied by the Revenue certainly bear this out. These figures show, and were the subject of lots of comment at the time, that the more you earn in this lovely little country of ours, the less tax you pay, with the result that the highest earners essentially pay zero tax on their incomes. In other words they do pay their full whack, which is nothing, but do draw child benefit and other entitlements, which we pay for.

I'll look for a reference and post it here later.

 

[Dee101]

I agree with you Mathepac, the highest earners in this country pay little or no tax - sure FF have it set up that way for them, isn't it a grand little country we have!. I'm not condoning tax evasion , but the way I see it if the "ordinary joe soap" can benefit a little from some loopholes, similar to those available to the rich or whatever they may be, then I say good luck to them.
In my opinion, we pay far too much tax in this country and get relatively little benefit.

 

[ubiquitous]

Am I just having a bad day or does anybody else find this situation odd?

Probably both!

For what its worth, the building trade, and the construction industry in general, is subject to the strongest and most severe Revenue regulation, of any occupational sector in the country. Anyone who knows anything about Relevant Contracts Tax will confirm this.

The problem from the State's point of view is that Relevant Contracts Tax, by its nature, can only be effectively applied to business-to-business or more particularly contractor-to-subcontractor transactions and cannot be properly applied to contractor-to-householder deals.

That is why householders and contractors can conspire between them to defraud the Exchequer on a massive scale, in terms of VAT evasion by the householder and evasion of other taxes by the contractor.

This "elephant in the room" has been tolerated for too long in this country on the basis of a number of myths that continue to be peddled on a widespread basis:

1. the myth that responsibility for tax compliance, and the imposition of penalties for evasion, should solely be a matter for the business and self-employed sectors and not for private individuals.

2. the myth that the only tax being paid in this country is by "hard-pressed" PAYE workers.

3. the myth that high-earning individuals pay little or no tax.
eg

Statistics produced by the CSO from tax-figures supplied by the Revenue certainly bear this out. These figures show, and were the subject of lots of comment at the time, that the more you earn in this lovely little country of ours, the less tax you pay, with the result that the highest earners essentially pay zero tax on their incomes. In other words they do pay their full whack, which is nothing, but do draw child benefit and other entitlements, which we pay for.

The "statistics" cited here are nothing of the sort. It came to public attention some years ago that very small numbers of very wealthy people were abusing tax relief and exemption schemes and paying very little tax as a result. The numbers of people doing so were statistically insignificant in the context of the numbers of high-earning taxpayers as a whole. The loopholes that permitted such abuses were swiftly and effectively removed by the Minister for Finance and this phenomenon is now a thing of the past.

(By the way, every time I read someone using the expression "this lovely little country of ours", its always in the context of a rant about tax and the rich. Gene Kerrigan has a lot to answer for )

4. the myth that it is okay for ordinary individuals to defraud the state individually on a small scale but collectively on a massive scale because "we all know that the big guys are paying no tax"

eg

I'm not condoning tax evasion , but the way I see it if the "ordinary joe soap" can benefit a little from some loopholes, similar to those available to the rich or whatever they may be, then I say good luck to them.
.

 

[shnaek]

The attitude to tax is the same whether one is rich or poor - nobody likes it! Nobody has ever liked it, whether it was the government, the king, or the local lords doing the collecting. There may be a small percentage who are of good conscience when it comes to tax matters, and who would not seek to lower their tax liability for the good of the country. Michael O'Leary still pays his tax here, even though he could live abroad and pay a lot less. U2 move certain royalty payments to Holland so they can avoid paying higher tax here. There are more people on the U2 side of the fence than there are on Michael O'Leary's. It is just human nature.

 

[ClubMan]

If you post as a person building a new house, or doing renovations, you get many posts such as the following

got a quote yesterday for our three storey house (just under 3,000 sq feet) and a garage (25ft x 33ft) for 13,000 euros (cash).

and no-one bats an eyelid

Plenty of people here have drawn attention to suspected, actual or imminent tax evasion such as this but often get their heads bitten off for their troubles...

 

[amgd28]

Touché - I've noticed you staying out of such issues in the last while!

Ubi's post is very informative and confirms a lot of my suspicions about commonly held misperceptions on taxation.

....but I've had a better day today so I'm not as upset about it

 

[Brendan Burgess]

Hi Ubi

Great post. But there are a few other myths:

In my opinion, we pay far too much tax in this country and get relatively little benefit.

We have comparably very low income taxes and social security taxes in this country.

We get little benefit? There is, of course, some waste of money. But overall we get reasonable value for our taxes.

There are more people on the U2 side of the fence than there are on Michael O'Leary's.

Don't forget that Ireland is a tax haven for artists and authors and companies. I suspect that we have got a lot more from tax immigrants than tax emigrants.

I don't have problems with people arranging their tax affairs legally, to minimise their tax. I do object to the likes of Bono doing so and then telling us we should be giving more to the Third World. But that is debated elsewhere on AAM.

Brendan

 

[Purple]

Great post Ubi, I completely agree.
Brendan also makes good points. When I started work on a pound an hour I paid about 25% of my income in tax. I now earn quite a bit more than that but I still only pay about 30% in tax. In many ways the rates of direct taxation are too low and the rates or indirect taxation are too high. This means that middle income earners, who have well used up their tax credits, have the heaviest tax burden.
I have never worked in a cash industry so I have never been paid in cash. Because of that I have never got a cent that was not above board. Therefore I could get all moralistic about people who evade tax but the truth is that I have never been exposed to temptation so it was easy for me not to dirty my bib.
That said I regard tax evasion as stealing and see no difference between someone who evades VAT by paying cash and someone who steals cash from a till in a shop.
As citizens we have rights but we also have obligations. One of the main ones is to pay our taxes.
I also thing that people should place more value on their integrity.

 

[Vanilla]

I think too that in general attitudes have changed in relation to tax in the last twenty years. When I started work in earnest in the early 90's ( before that as a student ) there was still a fair bit of that cash culture around. Nowadays it is most unusual to have a client suggest they pay their bill in cash so as to get both a reduction and also avoid the VAT but you do still get the odd one or two- needless to say it's an offer I would never take up. But in the early 90s and presumably before that it was rife. Although ( pinning my colours to the mast) I am not a fan of Fianna Fail it is because of this that I have some sympathy for Beverly Cooper Flynn and other unmentionable personages...if everyone who was working in the 80s and early 90s were completely honest I feel there would be very very few who didnt see something going on of this nature. Perhaps as an employee but without the balance of power to do anything about it.

 

[GeneralZod]

3. the myth that high-earning individuals pay little or no tax.
eg

The "statistics" cited here are nothing of the sort. It came to public attention some years ago that very small numbers of very wealthy people were abusing tax relief and exemption schemes and paying very little tax as a result. The numbers of people doing so were statistically insignificant in the context of the numbers of high-earning taxpayers as a whole. The loopholes that permitted such abuses were swiftly and effectively removed by the Minister for Finance and this phenomenon is now a thing of the past.

Can you provide any evidence to back up this being a thing of the past? I've heard of loopholes being closed but nothing on this feeding through to a substantially reduced number of high earners managing their tax bill down to near zero. Could you provide a link to the evidence that the measures taken have been effective in reducing the already statistically insignificant (relative to the total tax take) figures down further. I'd like to see that they or others in different sectors haven't found new loopholes to exploit so that the numbers of people involved are not roughly the same as before.

 

[Brendan Burgess]

When the statistics were published, it was clear that the vast majority of big earners were paying a lot of tax. Of course, the media and the opposition focused on the few who were paying very little.

I disagree with Ubi's use of the word "abused". They used tax planning to minimize their tax. There were mainly property incentives which were designed to help urban and rural regeneration. They did very well out of it, and I don't agree with these incentives. But, I would consider "abuse" to be evasion, not avoidance.

 

[Ghodadaba]

That said I regard tax evasion as stealing and see no difference between someone who evades VAT by paying cash and someone who steals cash from a till in a shop..

How is this tax evasion? Paying in cash money, the nation's legal tender, for building works (the OP's gripe) isn't illegal. If the contractor doesn't declare it and keeps the VAT foregone, that's illegal of course. But paying in cash is a million miles from stealing. It is up to the builder to hand over the tax, not the customer.

 

[ubiquitous]

How is this tax evasion? Paying in cash money, the nation's legal tender, for building works (the OP's gripe) isn't illegal. If the contractor doesn't declare it and keeps the VAT foregone, that's illegal of course. But paying in cash is a million miles from stealing. It is up to the builder to hand over the tax, not the customer.

Its evasion on the part of the consumer if/when the consumer requests a cash price meaning a price that is discounted to exclude VAT on the basis that no VAT is being remitted to the Revenue. Its by no means unknown for consumers to expect/demand such discounts from service providers.

 

[Purple]

How is this tax evasion? Paying in cash money, the nation's legal tender, for building works (the OP's gripe) isn't illegal. If the contractor doesn't declare it and keeps the VAT foregone, that's illegal of course. But paying in cash is a million miles from stealing. It is up to the builder to hand over the tax, not the customer.

If you get a quote with 21% VAT included but you agree to pay cash for the figure less vat then you are complicit in tax evasion. You will probably get away with it but it's no less wrong.
I find people who engage in such activities and then criticise other tax evaders, or worse the idiots who criticise Irish people who live and pay tax in another jurisdiction for not paying tax here, utterly hypocritical.



Post crossed with Ubi

 

[z103]

That said I regard tax evasion as stealing and see no difference between someone who evades VAT by paying cash and someone who steals cash from a till in a shop..

My opinion is that tax is theft.

I would not agree that we get good value for money. How could we? - We have to support a disproportionately large public sector. There's only about 4.4 million people living here.

 

[Purple]

My opinion is that tax is theft.

I would not agree that we get good value for money. How could we? - We have to support a disproportionately large public sector. There's only about 6 million people living here.

No country would function if the payment of taxes was discretionary
It does not follow that a large public sector is necessarily bad value for money, but I agree that the public sector is inefficient (and there are only 4.1 million people here).

 

[z103]

It does not follow that a large public sector is necessarily bad value for money, but I agree that the public sector is inefficient (and there are only 4.1 million people here).

We have to pay more tax, because there are fewer tax payers to support our public sector. Why isn't this bad value for money, compared to other countries?

(I wrongly included the North in my 6 million figure, but wasn't quick enough to rectify it.)

 

[Purple]

We have to pay more tax, because there are fewer tax payers to support our public sector. Why isn't this bad value for money, compared to other countries?

OK but that still doesn’t explain why you think taxation is theft. Do you think that transport infrastructure, policing, the legislature, the judiciary, the armed services, civic amenities and state regulatory bodies etc should be privately funded? If not then how do you suggest they be funded?

 

[z103]

OK but that still doesn’t explain why you think taxation is theft.

Simply by its method of collection. An arbitrary amount is taken, with menaces, whether you agree with what it is spent on, or not. This, in my mind is theft.

If someone robs me at knifepoint, and gives the money to charity, it's still theft.