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THE BRUISED APPLE

You would have been hard pushed to miss the recent upset in the taxation camp in the last couple of days as it was announced that a ruling took place on August 30th in relation to the tax arrangements of tech giants Apple in Ireland, the ruling stated that the company had been offered special treatment in Ireland. The European Commissioners will be required to raise a tax assessment on Apple in the coming months as the EU rules that the company’s Irish tax arrangements were illegal under state aid rules. This ruling is expected to come in the next couple of days. It is likely that the company could face a bill for back taxes of up to €13billion. Both the Irish government and Apple’s CEO Tim Cook have insisted that Apple were not in fact offered any special deal on taxation.

Whilst from the outward appearances a gain of this magnitude for Irish finances may seem like a bonus for important spending like hospital, schooling and housing, it has been stated that should all appeals be lost and this cash revert to the Irish state, it has been suggested by experts that it be immediately be used to pay down the national debt instead. Finance Minister Michael Noonan insisted that Ireland would appeal the ruling in order to;

“Defend the integrity of our tax system; to provide tax certainty to business and to challenge the encroachment of EU state aid rules into sovereign member state competence of taxation.”

Whilst Apple CEO Tim Cook has staunchly denied that there was any special treatment given, stating that:

“We now find ourselves in the unusual position of being ordered to retroactively pay additional taxes to a government that says we don’t owe them any more than we’ve already paid. […]  We are committed to Ireland and we plan to continue investing there, growing and serving our customers with the same level of passion and commitment. We firmly believe that the facts and the established legal principles upon which the EU was founded will ultimately prevail.”

As well as stating that Apple are not only the biggest tax payer in Ireland, but the biggest tax payer in the world. The issue that arises here would be the damage that could be done to the business reputation of Ireland should this ruling come to pass and Ireland be ruled to have given illegal state aid to Apple in this case. Whilst the cash would be a boon to our debts, the government will not want to damage our international reputation with top global corporations with Minister Noonan going as far as to say that to collect the tax would be like “eating the seed potatoes” as the ruling could have far reaching implications for EU member states and their taxation systems as well as causing havoc for Ireland which has long been a haven for global companies due to the very nature of the taxation system in place.

Should you require any help or guidance with your own business or tax matters (the October 31st deadline for filing is approaching faster than you might think!) please don’t hesitate to contact us here at DCA Accountants where we will be happy to help.

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DCA PARTNERSDECLAN DOLAN & EAMONN GARVEY

THE POWERS THAT BE…MORE POWERFUL

It was announced in the recently published Finance Bill that tax officials would be granted a whole new level of powers. In a move which has been considered by some to be of questionable moral grounding, as of now, tax officials will be permitted to access private financial information about individuals without being forced to inform those involved that their finances are being looked into.

 

Once a court appeal is granted, these tax officials will be able to access previously secure information from banks or other financial institutions without the knowledge of those affected.

 

Revenue themselves have also been granted additional powers in relation to searching properties and belongings for information when engaged in an investigation. Revenue have also been given more powers to utilise when dealing with those attempting to avoid Capital Gains Tax.

 

These measures are all part of a previously announced plan to increase the power afforded to the Revenue Commissioners and increase the ease and effectiveness of an extra clamp down on tax defaulters.

 

Previously, it was required that the Revenue would both need to know the identity of the suspected defaulter and that they would be required to inform those affected that their finances are being looked into, particularly when accessing secure information from parties such as banks and building societies. Now, however, these measures will no longer be necessary, providing the Revenue with a greater ease of access to the information. This may cause some boot quaking for some defaulters, which indeed may be part of the hope.

 

The only requirement with these new measures is that there must be “reasonable grounds” to keeping the information from the suspected defaulter which, given the circumstances will rarely be difficult to provide.

 

If you require assistance with your own tax and financial matters, please don’t hesitate to contact us at DCA Accountants.

AIRBNB – TAX TROUBLE IN THE NEIGHBOURHOOD?

Short-Term rental website Airbnb has become a go-to staple for travel in recent years. Airbnb acts as somewhat of a middle man between the ‘hosts’ who wish to rent a room or home on a short term basis, and the holidaymaker seeking accommodation. The Airbnb website is one of the easiest travel websites for users of all ages to navigate. The user simply enters the area they wish to stay, and they are given all of the advertisements in this area, complete with pricing, pictures and information about the property. In harder financial times, Airbnb has blossomed as it offers users something different, more transparent, and often cheaper than the usual hotels, without having to pay the host directly.

 

In recent months however, there has been some concern over tax issues with the website, as Airbnb recently stated that they had been asked by the Revenue Commission to provide information on all transactions for the previous year. This revelation caused confusion among many Irish Airbnb hosts who believed themselves to be exempt from tax under the ‘rent-a-room’ scheme. This scheme ensures that those renting out a room in their home are exempt from paying tax on income they earn by doing so, up to a designated threshold. The small-print on this scheme does however specify that it is not applicable to those renting rooms on a short-term basis, which is of course Airbnb’s main ethos.

 

Declan Rigney, assistant secretary of the Revenue’s planning division has stated that there will now be a larger focus on digital marketplaces and peer-to-peer trading in terms of tax payments.

“There are a huge number of businesses trading online. We need to make sure during the course of our audits that all income is returned.”

 

It has been advised that those who feel they may be affected by this information should voluntarily submit the required information ASAP to avoid issues.

 

The Revenue Commissioners have stated that this confusion over the rent-a-room scheme was clarified by them earlier in the year as they view businesses such as Airbnb as a trade. Airbnb’s website currently states that they expect all hosts to adhere to the tax demands of their respective areas.

 

We would advise that any Airbnb hosts keep detailed and correct records of all income and expenses gained through their dealings with the website. If you should require any assistance or advice in this matter please contact us at DCA Accountants.

CREDIT CARD INFORMATION AND TAX EVASION

It was reported earlier this month that the Revenue were to begin targeting credit card transactions as a way of uncovering tax evasion. This new endeavour came to light after it was revealed that over 2000 Irish companies had made payments to the Revenue Commissioners after failing to declare tax in full.

The Revenue Commissioners say that the practise of examining credit and debit card data to investigate tax payments is now active. The information is being released by merchant acquirer firms. These firms process credit card payments on behalf of the merchant you purchase from. Their data will then be compared to the data submitted by the individual or business in order to assess any issues or differences. Any discrepancies found would be flagged as a potential risk of evasion, to be given a closer look.

How is this information being released, you may ask? Legislation enacted two years ago states that these merchants are obliged to divulge information on transactions over a certain threshold. The Revenue are currently making an attempt to ramp up its digital focus as concerns grow regarding the easier tax evasion in this area.

The general idea here, is to ensure that The Revenue Commissioners have all the information they possibly can, in order to assess effectively. In order to do this, As the Revenue Commissioners have now increased their digital focus, they are now engaging new teams in the advanced analytics area. This process utilises a wealth of digital resources in order to flag potential tax evasion.

Declan Rigney, assistant secretary in the Revenue’s planning division has stated that the information has been of great benefit to their research into potential evaders:

“We are able to match information up with our records and see firstly, do we know about them, and secondly, have they registered with us and have they declared income and so on. After that, we can examine if that cumulative figure for the year matches what they have told us in their income tax or corporation tax returns”

Revenue have now stated that their advanced software, known as the Risk Evaluation Analysis and Profiling (REAP) system – (which sounds a lot more violent than it is we promise), can now accurately predict whether someone is potentially evading tax payments or not. This system can also compare cases in order to highlight potential issues that may otherwise have gone unnoticed.

So, it would seem that the ‘Tax Man’ has now well and truly entered the modern age, and with all this technology at the Revenue’s disposal it hopes to ensure that tax evasion becomes a thing of the past.

If you require any assistance or advice on managing your own or your businesses taxes and finances, please don’t hesitate to contact us at DCA Accountants.

DCA Q&A: HOW DO I REPORT MY CONCERN?

Q: I have been working at my employer for a few years, and recently got promoted to a position where I see the company accounts on a month-to month basis. What I’ve seen has me very concerned.

I’m not an expert, but it appears that there is income coming in to the company that is not reported – in the most recently-filed accounts, I’ve identified several discrepancies. Now, I’m worried that my employer is engaging in tax evasion, and quite stumped as to what I do next.

Do I have a legal obligation to report this matter? Could I face prosecution if, having failed to report the issue, it subsequently comes to light? What should my next move be?

 

A: You’re right to be anxious, and to seek advice – the wrong move at this point could be damaging for you. To answer your first question, the legal obligations on reporting evasion fall largely on accountants and tax advisers. If you’re not in this role at your employer, then the situation is a little less clear, and any prosecution for sitting on your hands is less likely.

 

However, if you are a Director in the business, you could face restriction from acting as a Director in another firm if this comes to light and the company collapses – quite apart from the impact on your career and reputation. That’s even before you consider the moral imperative not to let tax evasion stand unchallenged.

 

There is one caveat, however: as you say, you’re not an expert, and this could be a simple misunderstanding on your part. Is there a person in the organisation who you trust, who also has access to the accounts and a level of expertise to understand them? If you can, ask them if everything is kosher. This may call for some subtlety, and there is a risk of your employer lashing out against you – for that reason, be careful not to share information with anyone who shouldn’t officially have access to it, as that could form a pretext for disciplinary action or dismissal. If your employer does look to get rid of you, having evidence that you dealt with the perceived problem internally and through proper channels will be important.

 

If you are not getting satisfactory answers – or if your employer goes on the defensive, then you can of course report the matter to Revenue. You can find contact details here for the Investigations and Prosecutions Division to pass on your concerns.

 

Do you have a question for DCA’s experts? Contact us or connect with us on Twitter.