What is the extent of tax evasion these days?

[T McGibney]

The Revenue 2015 [broken link removed] cites a €51 million yield from audits and 'other interventions' into tax evasion in the construction sector, so it's not just the small cash businesses that are at it.

An awful lot of that relates to technical breaches of Relevant Contracts Tax and VAT. Evasion as commonly understood is almost impossible in construction, except for small owner-commissioned extensions etc paid in cash by mutual agreement. Even there, the Home Renovation refund scheme has more or less removed the incentive to dodge VAT.

 

[MrEarl]

Consumers are the main drivers of tax evasion. "Will it be cheaper if we pay cash?"

I think there are two sides to it.

The question "will it be cheaper if I pay cash" could be easily justified because it saves a retailer or service provider from having to lodge funds, wait for a cheque to clear, incur bank charges etc. Sure, it may imply that there is a tax dodge on occasion, but it is not stated (certainly not as you have worded it, anyway). In fact, now as I think about it, I do not think I have ever heard of a customer asking a retailer or service provider to dodge paying the tax on a transaction, have you ?

The flip side of the coin is when a retailer or service provider suggests that they can knock off the vat for cash etc. That's a clear statement of their intent.

Still it's easy to see why they resent paying VAT at a crazy 23% rate.

Agree with that, but in truth I think most people resent paying any form of taxation.

 

[T McGibney]

In fact, now as I think about it, I do not think I have ever heard of a customer asking a retailer or service provider to dodge paying the tax on a transaction, have you ?

I don't know where or at what you work, but I heard it yesterday. It's very common.

Agree with that, but in truth I think most people resent paying any form of taxation.

Unlike other taxes, VAT is easily evaded, and such evasion is free of consequences if you're a consumer.

 

[Brendan Burgess]

Unlike other taxes, VAT is easily evaded, and such evasion is free of consequences if you're a consumer.

I had thought it was the opposite.

Though I suppose if a carpenter does a job and asks for €200, does the customer have any liability to check that VAT was paid?

Brendan

 

[T McGibney]

I had thought it was the opposite.

Though I suppose if a carpenter does a job and asks for €200, does the customer have any liability to check that VAT was paid?

Absolutely none. The consequences fall totally on the supplier.

 

[jjm]

Very realistic example, Brendan. It isn't 1983 anymore.

In 1983 it was the Government who taxed The paye tax payer to the hilt, and and other groups were not required to pay any income tax at all. Not picking on farmers by the way but you could have a farmer in today terms earning 200000 euro they were not required to pay any income tax you could have a single paye tax payer on 2000 and they would be paying income tax at 60% ,
It was the paye workers who went out marching that brought about change, Forcing the government to change ,This lesson should not be missed when we look at government policy on tax evasion ,There is only a half hearted attempt to stamp out tax evasion, Marching forced them to to widen the tax net not a duty to the people who were already paying more than they should , lots of tax evaders could be crossed checked by auditing there suppliers ,government are happy to leave it alone because most are not registered for VAT ,tax evader are paying VAT on his supplies so they are happy enough the only vat they are not collection is on there labour,

 

[T McGibney]

lots of tax evaders could be crossed checked by auditing there suppliers ,

Sure this has been going on since the early 90s and such monitoring is now at an advanced and highly sophisticated level at this stage.

 

[jjm]

Sure this has been going on since the early 90s and such monitoring is now at an advanced and highly sophisticated level at this stage.

they are only interested in the big fish who are registered for vat and checking that they are not claiming more vat back than they should,
I agree with almost everything you say but there is a lot of smaller fish earning a tidy sum on the side , like most things in Ireland I think you gave an example some one getting cought with no tv licence they go out and get a licence they will get away with a slap on the wrist ,they never have to pay anything for all the years the required one and did not have one,

 

[T McGibney]

they are only interested in the big fish who are registered for vat and checking that they are not claiming more vat back than they should,
I agree with almost everything you say but there is a lot of smaller fish earning a tidy sum on the side ,

You don't have to be a particularly big fish to be compulsorily registered for VAT. If your service business takes in €750 per week in gross takings, you're in the net.

Even teachers who do a few grand's worth of work for state bodies can expect to receive a letter with a harp on it if they fail to declare that income on their tax returns. Ditto the small farmer with their single farm payment.

 

[twofor1]

lots of tax evaders could be crossed checked by auditing there suppliers

I believe many small traders only get invoiced by their suppliers for some of their supplies., the rest goes down as cash sales.

Not signaling any one type of business in particular but using the fast food industry as an example, if 100 burgers are invoiced it is reasonable for the taxman to expect 100 burgers to be sold on to the public at €4 each or whatever, but often only 50 burgers are invoiced and the other 50 are paid for in cash, then the cash proceeds of the second 50 can go in the back pocket.

I have walked into catering suppliers and paid cash for catering boxes of burgers for barbeques at home. I have done the same in trade shops while doing DIY at home for electric cable, sockets etc, bought kitchen units the same way and car parts in motor factors etc

No one knows who I am or cares, once I have the cash it’s just another Cash Sale and what I do with the goods is of no interest to them.

I think tax evasion is alive and thriving, probably not in bigger businesses but certainly in smaller family or sole trader businesses across all industries.

 

[T McGibney]

I believe many small traders only get invoiced by their suppliers for some of their supplies., the rest goes down as cash sales.

You mean cash purchases, I presume? How are delivery dockets fiddled to accommodate this? How are product guarantees, warranties and returns handled on such goods? Have these supplies adequate facilities for handling and securing large volumes of cash? How do the suppliers account for the "missing" sales in their own accounts while maintaining their margins at the expected level?

I have walked into catering suppliers and paid cash for catering boxes of burgers for barbeques at home. I have done the same in trade shops while doing DIY at home for electric cable, sockets etc, bought kitchen units the same way and car parts in motor factors etc

No one knows who I am or cares, once I have the cash it’s just another Cash Sale and what I do with the goods is of no interest to them.

That's because in those places you're a consumer and you're paying mickey mouse amounts of money for small volumes of these supplies. What makes you so certain that a similar regime applies to their trade customers whose purchases will amount to a sizeable multiple of yours? Are all these guys sending couriers into places with large sums of cash?

I think tax evasion is alive and thriving, probably not in bigger businesses but certainly in smaller family or sole trader businesses across all industries.

Quite a sweeping statement. How does this all work? How do they cover their margins so that they reflect the industry averages? What do they do with all the excess cash siphoned off? They can't lodge it anywhere as all bank lodgments are monitored. They can't realistically hide it under the bed. If their tax returns reflect a lifestyle that is much more frugal than their neighbours or others of similar social profile, they'll stand out like sore thumbs under Revenue radar.

Not signaling any one type of business in particular but using the fast food industry as an example, if 100 burgers are invoiced it is reasonable for the taxman to expect 100 burgers to be sold on to the public at €4 each or whatever, but often only 50 burgers are invoiced and the other 50 are paid for in cash, then the cash proceeds of the second 50 can go in the back pocket.

The fast food sector is the focus of significant Revenue audit activity and traders in that sector pop up all the time on the Revenue defaulters and prosecutions lists. Revenue monitor operators extremely closely, and often physically. Anyone without robust and fully-tallied sales records including till rolls, audit trails and verifiable reconciliations to lodgments, will be nailed to the wall.

 

[cremeegg]

I believe many small traders only get invoiced by their suppliers for some of their supplies., the rest goes down as cash sales.

Not signaling any one type of business in particular but using the fast food industry as an example, if 100 burgers are invoiced it is reasonable for the taxman to expect 100 burgers to be sold on to the public at €4 each or whatever, but often only 50 burgers are invoiced and the other 50 are paid for in cash, then the cash proceeds of the second 50 can go in the back pocket.

Then on the second full moon after a Wednesday with a q in the month.

What on earth are you on about. The average small trader couldn't possibly manage anything as complex as this, and for what. He avoids income tax on the profit on 50 burgers. Believe me if you are selling burgers 100 at a time you aren't making enough profit to pay tax.

If you are selling more than 9,375 burgers a year you are liable for VAT, and if you buy your burgers for cash then you cannot claim the VAT back which is a much bigger disadvantage that paying income tax on the profit.

As for taxi drivers as mentioned by another poster, I got a taxi recently it cost me €9 and the journey took just over half an hour. I don't know how they make €15k profit a year don't mind €60k. AND everything they do is there to be seen on the meter.

 

[torblednam]

@cremeegg
There is very little input VAT on the majority of the purchases for resale of a fast food type business. The exception being the soft drinks.

Whereas all the (declared) fast food sales will be liable to VAT.

But even leaving that error in your reasoning aside, even taking a business where the resale purchases are VATable at the same rate as the onward supply, you're overlooking the fact that there will always be both VAT and Income tax on the final sale. So the person underdeclaring both their purchases and their sales, evades VAT X gross margin, AND income tax on the (net of VAT) gross margin...

 

[jjm]

@cremeegg
There is very little input VAT on the majority of the purchases for resale of a fast food type business. The exception being the soft drinks.

Whereas all the (declared) fast food sales will be liable to VAT.

But even leaving that error in your reasoning aside, even taking a business where the resale purchases are VATable at the same rate as the onward supply, you're overlooking the fact that there will always be both VAT and Income tax on the final sale. So the person underdeclaring both their purchases and their sales, evades VAT X gross margin, AND income tax on the (net of VAT) gross margin...

Torblednam Don't forget PRSI evasion also

 

[torblednam]

Torblednam Don't forget PRSI evasion also

I'm not forgetting it. IT, USC, PRSI, all get charged on the income tax assessment.

But bear in mind the title of the thread jjm...?

We don't always all want to talk about your favourite topic...

 

[newtothis]

If you are selling more than 9,375 burgers a year you are liable for VAT, and if you buy your burgers for cash then you cannot claim the VAT back which is a much bigger disadvantage that paying income tax on the profit.

You are displaying your lack of knowledge here: burgers, as with most food ingredients, have zero VAT as a purchase. Whilst I've no doubt that there are some operations who do what you're suggesting, in practice, it would be very hard to operate without a very significant risk of getting caught. You'd need a whole supply chain to be complicit. You'd have to ring some sales up through whatever POS system you’re running, but not others. You'd need staff to cooperate. Your (declared) turnover would not have to be too far off comparable businesses to avoid raising a flag with Revenue (they can and do monitor such things in particular sectors). It's hard enough to keep one set of books without having to keep two parallel ones. You might get away with it for a while, but the chances are you'd end up being audited, either because your own returns had been flagged, or one through an audit of one of your suppliers. I'm not saying it doesn't happen - it clearly does, as published Revenue lists prove - but I would not underestimate the difficulty in doing as you suggest and getting away with it for any length.

The interesting point about this thread is of course that it's an evidence free zone, so I guess my opinion is as valid as anything here. For what it's worth, I think it likely the only sector where evasion is likely to be significant is where small operators are selling services to end consumers. Anyone part of a supply chain would find it very difficult to keep it up for any length of time. Of course, the really big evaders are likely to be those in the murky place where aggressive avoidance meets evasion.

 

[newtothis]

I have walked into catering suppliers and paid cash for catering boxes of burgers for barbeques at home. I have done the same in trade shops while doing DIY at home for electric cable, sockets etc, bought kitchen units the same way and car parts in motor factors etc.

This is the limit of your expertise in this area?

I think tax evasion is alive and thriving, probably not in bigger businesses but certainly in smaller family or sole trader businesses across all industries.

That allows you to draw that conclusion?

As I said above, an evidence free zone!

 

[jjm]

You are displaying your lack of knowledge here: burgers, as with most food ingredients, have zero VAT as a purchase. Whilst I've no doubt that there are some operations who do what you're suggesting, in practice, it would be very hard to operate without a very significant risk of getting caught. You'd need a whole supply chain to be complicit. You'd have to ring some sales up through whatever POS system you’re running, but not others. You'd need staff to cooperate. Your (declared) turnover would not have to be too far off comparable businesses to avoid raising a flag with Revenue (they can and do monitor such things in particular sectors). It's hard enough to keep one set of books without having to keep two parallel ones. You might get away with it for a while, but the chances are you'd end up being audited, either because your own returns had been flagged, or one through an audit of one of your suppliers. I'm not saying it doesn't happen - it clearly does, as published Revenue lists prove - but I would not underestimate the difficulty in doing as you suggest and getting away with it for any length.

The interesting point about this thread is of course that it's an evidence free zone, so I guess my opinion is as valid as anything here. For what it's worth, I think it likely the only sector where evasion is likely to be significant is where small operators are selling services to end consumers. Anyone part of a supply chain would find it very difficult to keep it up for any length of time. Of course, the really big evaders are likely to be those in the murky place where aggressive avoidance meets evasion.

There is quite a lot of diesel laundering going on in 2012 cost black market est at 861 million euro 1 in every 8 liters of diesel is illegal not to mention petrol stretching these are no small time operators and they need lots of retailers to make it work,

Google black market and retail crime 'costing Ireland 861 million euro a year and have a read,

I know a shop who sell lawnmowers the biggest problem at present is petrol stretching (lawnmower not running correctly and replacing engines,The first question is where did the customer get there petrol once they know the supplier often all its takes is to change the petrol and the lawnmower is ok if got in time

 

[jjm]

There is quite a lot of diesel laundering going on in 2012 cost black market est at 861 million euro 1 in every 8 liters of diesel is illegal not to mention petrol stretching these are no small time operators and they need lots of retailers to make it work,Google black market and retail crime 'costing Ireland 861 million euro a year and have a read,

 

[newtothis]

There is quite a lot of diesel laundering going on in 2012 cost black market est at 861 million euro 1 in every 8 liters of diesel is illegal not to mention petrol stretching these are no small time operators and they need lots of retailers to make it work,Google black market and retail crime 'costing Ireland 861 million euro a year and have a read,

I think you'll find in these cases (laundering of diesel, smuggling of cigarettes etc.) organised crime is involved. That is, the supplier is rotten to the core and completly outside the regular economy. Same with stolen goods. How scientific or real is the 1 in 8 figure? How many smuggled cigarettes are retailed by regular retailers?

I think this is essentially a different question: "What is the economic value of illegal activity?" rather than "What is the extent of tax evasion these days?"