Revenues will have to entice businesses on IT plans

We’ve picked up many habits during the pandemic that we’ll happily give up, but some aspects of how we now behave regularly – contactless payments, online reservations, and giving up separate documents, tickets and tokens in favor of the app ubiquitous for smartphone will persist. These make our lives easier.

Smart companies gain market share, not necessarily because they are doing something new, but because they are applying technology to require less effort from their customers.

Last week the Office of the Revenue Commissioners released their annual report for 2021.

Revenue had, as far as anyone could claim, pandemic good. He was successful in ensuring a steady flow of money to the Treasury, while also acting as a bursar of preference for salary supports and business supports.

Revenue paid somewhere in the order of 10 billion euros in support of the pandemic over the past two years. This is not typical behavior of a tax collection authority.

His proposed plans for the next few years, as expressed in the revenue submission to the Tax and Welfare Commission, make for more interesting reading.

The revenue plan, which was released alongside the annual report, borrows in some ways from the Organization for Economic Co-operation and Development’s thinking about how revenue authorities might operate in the future.

It is well known that tax authorities exchange information with each other on the behavior of their taxpayers when it comes to cross-border activities.

The extent of collaboration and sharing of ideas between tax authorities regarding the design and management of their own work processes is less well known.

The thinking behind Tax Administration 3.0, as it has been dubbed, is very close to the business thinking behind the most successful service providers in the private sector.

It’s about making life easier for the customer while charging the same amount for the service. The private sector motive is cost effectiveness — the public sector motives may have more to do with accuracy and efficiency.

Revenue proposals involve tight integration of corporate IT systems with revenue collection systems. The integration has already started as part of the PAYE modernization program, starting in 2019.

In summary, the revenue proposals involve tight integration of corporate IT systems with revenue collection systems. The integration has already begun under what was known as the PAYE modernization program, which began in 2019.

This has not come without challenges, as employers have had to modify their payroll systems to connect with the new revenue systems. The benefit of this effort, however, became apparent during the pandemic as it allowed the PAYE system to be overturned when providing wage subsidies.

The next stage of integration is to link business VAT accounting collection systems and ultimately to link a company’s accounting software to revenue assessment systems so that company profitability can be identified and taxed on the fly.

There will be some setback to this grand plan. Some tax authorities around the world are already taking this route, with varying degrees of success.

In the UK, VAT integration has started, but it is not without problems. Irish Revenue has the advantage of dealing with a relatively small cohort of taxpayers, most of whom are already relatively sophisticated and compliant.

Any large-scale IT project is fraught with pitfalls, and taxpayer attitude is one of the biggest threats to Tax Administration 3.0.

We happily give up private matters—details of our location, access to our financial records, and even our medical records—in exchange for convenience.

Revenue will need to convince the general public, and the business community in particular, that simplifying day-to-day tax compliance obligations will justify the cost and effort required. This will be at least as important as having the right technology.

Brian Keegan is Director of Public Policy at Chartered Accountants Ireland