Strategy 4 - Contribute to Ireland's economic development
- Objective - Provide high quality policy advice and legislation
- Objective - Extend tax treaty network
- Objective - Contribute to successful EU Council Presidency in 2013 & Advance Ireland’s tax and customs policy agenda at EU, OECD, WCO and international fora
Objective - Provide high quality policy advice and legislation
Revenue plays a pivotal role in both the formulation of tax policy and the drafting of legislation. We analyse and cost Budget and Finance Bill proposals, advocate policy changes based on our experience in administering the tax code, and prepare draft legislation and associated briefing materials.
Budget and Finance Act 2012:
Revenue assisted the Department of Finance in the delivery of Budget and Finance Act 2012 through the provision of policy advice, technical support and draft legislation on a broad range of measures. These included:
- Clarification of the tax treatment of transactions in carbon credits under the EU Emissions Trading Scheme;
- Extension of unilateral relief for double taxation on leasing income;
- Enabling treasury companies to receive a tax deduction for interest paid to companies established in non-Treaty territories;
- Amending the Research and Development tax credit to a volume basis (i.e. total expenditure rather than increase in expenditure qualifying) for the first €100,000 R & D expenditure and to enable surrender of R & D tax credit to key employees;
- Amending the Film Relief Scheme to ensure companies provide compliance reports to Revenue before any return to investors is paid;
- Making provision for a Vehicle Registration Tax Export Repayment Scheme.
- To address the problem of fuel laundering, the introduction of new Mineral Oil Tax provisions for the licensing of fuel traders and to require them to maintain records on fuel receipts, deliveries and sales and provide monthly returns to Revenue of movements in their fuel stocks.
- Making provision for the application of a reduced rate of VAT on charges for Open Farms & Built and Natural Heritage Facilities.
- A Reverse Charge on Supplies of Construction Services between connected persons.
- Changes to pension taxation, including an increase in the annual imputed distribution applying in certain cases to Approved Retirement Funds and the extension of the imputed distribution regime to vested Personal Retirement Savings Accounts.
- The introduction of a restriction in the use by passive investors of accelerated capital allowances under any of the property or area-based tax incentive schemes.
- The modernisation and simplification of the pre self-assessment assessing rules and the self-assessment rules relating to direct taxes - Income Tax, Corporation Tax and Capital Gains Tax - in order to provide for a common integrated set of rules for those taxes.
- Moving to a system of full self-assessment for Income Tax, Corporation Tax and Capital Gains Tax (subject to exemption for certain smaller cases).
- Self-Assessment for Stamp Duty together with sundry reliefs and exemptions.
- Measures relating to Capital Gains Tax. These included amendments in relation to: the location of assets, contingent liabilities, relief for disposal of a business or farm on retirement, relief for disposals within a family of a business or farm. An anti-avoidance provision in relation to non-resident trusts was also introduced.
- The Capital Acquisitions Tax (CAT) measures included the extension of Discretionary Trust Tax to foundations, the application of Discretionary Trust Tax from the date of death in the case of a discretionary trust created in a will, as well as anti-avoidance provisions for CAT and Discretionary Trust Tax.
- A number of measures relating to Revenue powers were contained in the Act. These included requirements for certain persons to provide security in respect of taxes, and to enable a Revenue officer to apply to the District Court for an order requiring certain persons to provide information /documents. The Act strengthened Revenue’s powers to require returns of information from investment undertakings as well as details from merchant acquirers of all payments for goods and services received by businesses through payment cards (credit/debit cards etc.) whether in respect of online or the more traditional forms of business transaction.
Revenue provided extensive advice to the Department of Finance on a range of proposals in preparation for the 2013 Budget and assisted in the preparation of Budget Day Financial Resolutions, including:
- Restructuring of Vehicle Registration Tax (VRT) bands and increases in the rates.
- Rate changes in tobacco and alcohol product tax.
- Introduction of a diesel rebate scheme for hauliers.
- Extension of carbon tax to solid fuels.
- Restriction of Top Slicing Relief.
- Amendments to Universal Social Charge.
- Taxation of Maternity Benefit with effect from 1 July 2013.
- Enhancement of the 3-year Corporation Tax relief for start-up companies to allow any unused relief to be carried forward.
- Increase in the de minimis limit on undistributed income which a close company may retain without surcharge and a similar increase in the limit for certain service companies.
- Increased rates of DIRT and exit taxes on investments in life assurance policies and investment funds.
Finance (Local Property Tax) Act 2012
In July 2012, the Government decided that Revenue would have responsibility for all aspects of the new 'local property tax' (LPT), including administration, collection, enforcement and audit.
Details of the tax were announced in Budget 2013 and the Finance (Local Property Tax) Act 2012, which was drafted by Revenue, was enacted on 26 December 2012. It is a substantial piece of work that was completed in a very tight timeframe. It was the result of extensive collaboration between Revenue and several Government Departments. One of the key provisions is for LPT to be deducted at source from certain State payments made by the Departments of Social Protection and Agriculture, Food and the Marine. The Act also provides for the cessation of the Household Charge and for the collection in due course of any unpaid charge at 1 July 2013 by the Revenue Commissioners.
Constitutional Challenge Successfully Defended
Revenue also successfully defended a constitutional challenge to the legislation that provides the mechanism for the valuation of second-hand vehicles for Vehicle Registration Tax purposes. In the action, the plaintiff challenged the legislation on the grounds that it was unconstitutional and in breach of the plaintiff’s property rights under the Irish Constitution, that it lacked fair procedures, and that it was secretive and not transparent. The plaintiff also challenged the legislation under European Union Law. The proceedings commenced in 1995 and ultimately the plaintiff made a claim for alleged loss and damage of €131m in 2011. The case was heard for 33 days in May to June 2012 before the High Court. The case was fully defended by the Revenue Commissioners and the State defendants. Extensive evidence, including expert evidence, was adduced by both the Plaintiff and Defendants in the case. On 15 March 2013, the High Court gave judgment dismissing the plaintiff’s claim in its entirety.
Review of Film Relief
During 2012, Revenue assisted the Department of Finance in carrying out a review of the Film Tax Relief Scheme. As a result of this review, the Minister for Finance announced in his Budget Speech that the scheme will be extended to 2020 and will move to a tax credit model in 2016, replacing tax relief to investors with direct relief in respect of expenditures undertaken on film production.
A list of Statutory Instruments made in 2012 is shown in Appendix 2.
Revenue provided observations and assistance in relation to a wide range of legislation proposed by other Departments, for example:
- Personal Insolvency Bill 2012.
- Civil Registration (Amendment) Bill 2012.
- Health Insurance (Amendment) Bill 2012.
- Companies Bill 2012.
- Credit Reporting Bill 2012.
- Betting (Amendment) Bill, 2012.
Engagement with Other Stakeholders
In 2012, Revenue consulted with the representative bodies of tax practitioners and other interested parties on a number of important initiatives to speed their progress through the legislative process. We avail of formal and informal contacts, including the Tax Administration Liaison Committee and the Customs Consultative Committee.
Some of the major consultation exercises involving Revenue during 2012 are listed below:
- The Foreign Account Tax Compliance Act (FATCA) is a new United States reporting and withholding regime, the aim of which is to ensure tax compliance among US persons who hold offshore accounts. The Act requires all Financial Institutions outside the US, who carry on business in or with US Financial Institutions, to report to the US tax authorities (IRS) in respect of financial accounts held with them by US persons. Direct reporting by foreign financial institutions to the IRS would result in a significant administrative burden for such companies and would also result in data protection issues. As a result, a number of countries decided to enter bilateral intergovernmental agreements with US to enable the exchange of such information. Along with the Department of Finance, Revenue participated in negotiations with the United States Treasury to conclude an Intergovernmental Agreement on the application of FATCA to Irish Financial Institutions. The agreement provides that Irish Financial Institutions will report to Revenue in respect of US account-holders and, in exchange, US Financial Institutions will be required to report to the US Internal Revenue Service in respect of any Irish-resident account-holders. The two tax authorities will then automatically exchange this information on an annual basis commencing in 2015 in respect of transactions undertaken in the 2013 and 2014 calendar years. The agreement was signed by the Minister for Finance, on behalf of the Government, on 21 December 2012.
- Tax practitioners, financial institutions (including NAMA) and insolvency practitioners on the tax treatment of receiverships.
- Revenue participated actively in the consultation undertaken in 2012 by the Department of Finance on tax relief for donations to approved bodies under section 848A of the Taxes Consolidation Act 1997. Approved bodies are eligible charities, educational institutions, bodies approved for education in the arts by the Minister for Finance and other entities listed in Schedule 26A Taxes Consolidation Act 1997.
Contributing to Cross-Departmental Policies and Programmes
Revenue supports the implementation of Government policies and programmes by working closely with a wide range of Departments, agencies and other national forums, such as:
- The Advisory Group on Tax and Social Welfare, which is addressing specific issues around the operation and interaction of the tax and social protection systems,
- The Tax Strategy Group, an interdepartmental committee tasked with examining and developing proposals for measures in the areas of taxation, PRSI and levies for Budgets and Finance Bills within agreed Government parameters.
- The Inter-Departmental Group on Property Tax – Established in January 2012 by the Minister for the Environment, Community and Local Government, Phil Hogan TD, and chaired by Dr. Don Thornhill, the Group was tasked with considering the design of a property tax to replace the household charge.
- The Irish Auditing and Accounting Supervisory Authority (IAASA), where Revenue is a Board member.
- The IFSC Clearing House Group - mandated to identify and consider issues of importance to the long-term development of the international financial services industry in Ireland, including the strategic development of new business areas and opportunities.
- The Company Law Review Group - a statutory expert body charged with advising the Minister for Jobs, Enterprise and Innovation on the review and development of company law in Ireland.
- Oversight Forum on Drugs - The primary role of the Oversight Forum on Drugs chaired by Alex White, TD, Minister of State with special responsibility for Primary Care (Department of Health), is high level monitoring of the implementation of the Government's National Drugs Strategy for 2009 - 2016. Revenue continues its commitment to supporting the National Drugs Strategy as a member of the Forum, advising on illicit drug/medicine supply reduction issues and emerging threats.
- The Export Trade Council, led by the Department of Foreign Affairs and Trade, which was established in 2011 to strengthen co-operation and co-ordination across key Departments, State Agencies and the private sector, with a view to further developing and promoting trade and exports.
Objective - Extend tax treaty network
Double Taxation Agreements (DTAs) seek to eliminate or minimise double taxation that might arise for taxpayers operating across national borders. They cover direct taxes, which in the case of Ireland are Income Tax, Corporation Tax and Capital Gains Tax. DTAs encourage economic ties between countries by making it easier for companies to trade and invest internationally. They also provide for more certainty for companies with cross-border operations and are important enablers for encouraging linkages between economies.
By the end of 2012, Ireland had signed comprehensive Double Taxation Agreements with 68 countries. Progress in 2012 on extending the tax treaty network was as follows:
- Irish ratification procedures were completed for 3 new Double Taxation Agreements in March 2012. These were with Armenia, Panama and Saudi Arabia. Ratification procedures were also completed in March 2012 for a replacement Double Taxation Agreement with Germany.
- 3 new Double Taxation Agreements were signed in 2012. These were with Egypt (on 9 April 2012), Qatar (on 21 June 2012) and Uzbekistan (11 July 2012). In addition, a Protocol to the existing Double Taxation Agreement with Switzerland was signed on 26 January 2012.
- Negotiations were held with Thailand to finalise a long-standing draft Double Taxation Agreement that had stalled for some years. Negotiations were also held with the Netherlands (on the replacement of the existing treaty) and with India (on a Protocol to the existing treaty). A Protocol to the Double Taxation Agreement with Belgium was finalised in 2012.
Work also continued in 2012 on the extension of Ireland's Tax Information Exchange Agreement (TIEA) network.
- Ratification procedures were completed for 2 new TIEAs in March 2012 with Grenada and Vanuatu.
- 2 new TIEAs were signed in 2012 - with San Marino on 4 July and with Montserrat on 14 December.
- Negotiations for 2 new TIEAs – with St. Kitts & Nevis and with Costa Rica - were advanced in 2012.
Ireland has a wide network of agreements that provide for exchange of information in tax and customs matters. Most exchanges take place on foot of a request for information. The majority of requests received were dealt with within the timeframes laid down by the relevant international standard. See Table 22: Mutual Assistance Requests.
|Mutual Assistance requests
||Received 2012||Received 2011||Sent 2012||Sent 2011|
|From/to EU Member States||2,705||3,872||925||1,247|
|From/to other countries||131||78||29||46|
Objective Objectives - Contribute to successful EU Council Presidency in 2013 & Advance Ireland’s tax and customs policy agenda at EU, OECD, WCO and international fora
Revenue participates at many levels internationally and plays a considerable role in shaping policy development and implementation. Our aim is to advance the Government’s tax and customs policy agenda to support competitiveness and facilitate trade. Our participation also enables us to leverage the experiences and successes of other tax and customs administrations when designing Revenue’s compliance and seizure programmes.
Ireland’s Presidency of the EU in 2013
Revenue is playing an active part in the planning and delivery of an effective EU Presidency. In 2012 we worked closely with the Department of Finance and other Departments in the preparation of an extensive work programme for the Presidency on taxation and customs. We also actively engaged with various stakeholders in this regard, including the Commission, Council Secretariat, Trio Partners and other Member States. During the course of the Presidency, Revenue is chairing 8 Council Working Groups covering various taxation and customs issues and we are providing technical support for a further 7 Council Working Groups. Issues being examined by these Groups include proposals for a Common Consolidated Corporate Tax Base (CCCTB), a Financial Transactions Tax, the European Commission’s Action Plan on Tax Fraud and Evasion, a Quick Reaction Mechanism in relation to VAT Fraud and a new Customs Code for the Union. We also hosted a high-level seminar in Dublin on Customs Risk Management. Our overall approach will be to advance the EU agenda and facilitate progress, where possible, on the various taxation and customs dossiers.
Revenue plays a significant role in assisting and advising the Department of Finance in the formulation of Ireland’s stance in relation to taxation policy and legislative developments at EU level. During 2012, Revenue participated in discussions on a number of key initiatives, including:
The Commission White Paper on the Future of VAT
The European Commission published a Communication on the Future of VAT in December 2011. The purpose of the Communication is to set out a blueprint for the reform of the VAT system in the EU with a particular focus on the single market. The Communication includes specific proposals on addressing fraud, the structure of VAT rates, standardising VAT returns and proposes that the definitive system of VAT is based on the destination principle i.e. taxed where consumed.
The Commission has established a Group on the Future of VAT, in which Member States contribute to the policy discussions for the implementation of the Commission Strategy. Revenue participated in two meetings of this Group in 2012.
A Quick Reaction Mechanism to address VAT fraud
The Commission published a proposal in July 2012 to provide Member States with the option of applying to the Commission for a Quick Reaction Mechanism to enable a tax authority to address the risk of sudden and massive fraud. The EU Council Working Party on Tax Questions has discussed this proposal on a number of occasions. This proposal will continue to be progressed during the Irish Presidency.
Financial Transactions Tax
The draft Financial Transactions Tax (FTT) Directive published by the EU Commission in September 2011 is designed to harmonise Financial Transaction Taxes at EU level and create a new revenue stream for the EU budget. Revenue engaged in the technical analysis at EU level while liaising with the Department of Finance and the financial services sector in relation to policy concerns. In the absence of agreement on the Commission’s draft Directive at EU-27 level, the Economic and Financial Affairs Council (ECOFIN), at its meeting in January 2013, agreed to initiate discussions on the introduction of an FTT under the enhanced cooperation procedure and these discussions will be progressed under the Irish Presidency.
Commission proposal for a Common Consolidated Corporate Tax Base (CCCTB)
A Council Working Group of tax experts - at which Revenue, along with the Department of Finance, is represented - is examining the Commission’s proposal for a draft Directive on CCCTB. The Group has completed a first technical reading of the draft Directive and the Irish Presidency is taking forward the work on this dossier with a view to facilitating further discussion and examination of the proposal.
EU Administrative Cooperation in the field of Taxation
Council Directive 2011/16/EU on administrative cooperation in the field of taxation was transposed into Irish law by Statutory Instrument No. 549 of 2012. Revenue continues to take part at EU level in discussions on the practical implementation of the Directive and Revenue is also taking measures to implement the provisions of the Directive at national level.
Code of Conduct Group on Business Taxation
Revenue, together with the Department of Finance, participates in the Code of Conduct Group on business taxation, which is aimed at eliminating measures that are considered to represent harmful tax competition. The Irish Presidency will facilitate the continuing work of the Code of Conduct Group, including chairing a technical sub-group examining issues in relation to hybrid entities that give rise to avoidance opportunities.
EU Transfer Pricing Forum
The Forum is a joint meeting of EU Member States and representatives from business. The Forum works to ensure the smooth operation of the EU Arbitration Convention, the purpose of which is to relieve double taxation where two Member States tax the same profits. Revenue participates in this Forum.
OECD's Committee on Fiscal Affairs (CFA)
The Committee on Fiscal Affairs (CFA), which comprises groups of experts from participating countries, sets and manages the OECD’s work programme in the tax area. In 2012, Revenue continued its participation at meetings of the CFA and its various working parties which cover tax treaty issues, tax policy analysis and statistics work, the taxation of multinational enterprises (transfer pricing), consumption taxes, and exchange of information and tax compliance. Revenue also participated in the steering group on aggressive tax planning and in the Task Force on Tax and Crime which dealt with issues related to money laundering, capacity building and domestic inter-agency cooperation.
OECD's Forum on Tax Administration (FTA)
Comprising of Commissioners from 43 OECD and non-OECD countries the OECD’s Forum on Tax Administration is the premier international body in the field of tax administration and identifies, discusses and influences relevant global trends and develops new ideas to strengthen tax administration around the world. Its aim is to improve taxpayer services and tax compliance by helping tax administrations increase the efficiency, effectiveness and fairness of tax administration and reduce the costs of compliance.
Revenue continues to be an active participant in all aspects of the FTA's work. In November 2012, Revenue Chairman Ms. Josephine Feehily succeeded Mr. Douglas Shulman of the Internal Revenue Service, United States, in the role as Chair of the FTA. Throughout 2012, Revenue contributed to a number of the Forum’s projects. These included:
- Improving tax compliance for Small and Medium Enterprises,
- Using the tools of Lean/ Six Sigma to improve service demand management,
- More effective practices and initiatives focusing on offshore compliance,
- Development of operational methods and procedures for the management of High Net Worth Individuals,
- Further developing risk assessment and the effectiveness of compliance initiatives in regard to Large Businesses.
The FTA 'Small and Medium Enterprise' compliance sub-group, had undertaken a project to explore the possible benefits to a Tax Administration and to a society in general, in evolving a philosophy of 'Engaging and Involving' SME taxpayers and stakeholders in the design and co-production (delivery) of new systems and forms. A final report will be presented to an FTA meeting in Moscow in May 2013.
Global Forum on Transparency and Exchange of Information for Tax Purposes
The Global Forum brings together over 115 countries that are committed to combating tax evasion and implementing standards of transparency and effective exchange of information for tax purposes. Ireland continued to participate in the work of the Global Forum in 2012.
The Intra-European Organisation of Tax Administrations (IOTA)
IOTA is an intergovernmental organisation whose mission is to promote cooperation between tax administrations in the European Region, to provide a forum for the discussion of tax administration issues and to support the development of its 46 member administrations. The theme of the 16th IOTA General Assembly, held in Norway in July 2012, was 'Good Governance - the Way Forward for Tax Administrations Moving from Reactive to Proactive Approaches'. At this Assembly, Ireland was elected onto the Executive Council of IOTA for the 2012-13 term. The main focus of the IOTA work programme is on the sharing of good practice in practical areas of tax administration with the aim of strengthening and modernising all tax administrations. During 2012, Revenue assisted in the preparation of, presented at and participated in workshops on a wide range of topics covering all aspects of tax administration, including the Use of Forensic Tools and Techniques to Combat Fraud; Using Communication to Influence Taxpayer Culture; and the Development and Maintenance of Data Warehouses within Tax Administrations. Revenue was also represented in Area Groups on Debt Management and Strategic Management and Benchmarking, and assisted other member administrations by providing comprehensive answers to numerous technical enquiries.
World Customs Organisation
At its Council Session in June 2012, Revenue Chairman Ms. Josephine Feehily was re-elected Chairperson of the World Customs Organisation (WCO), one of the largest intergovernmental organisations in the world with 179 Member Countries. During 2012 the WCO worked on developing international Customs policy, building trade facilitation mechanisms, enhancing supply chain security, protecting intellectual property rights and assisting in the modernisation of Customs administrations worldwide through capacity building and other initiatives.
Customs 2013 Programme
Revenue participated fully in the Customs 2013 Programme during 2012. This Programme is a tool designed to support strengthened cooperation between national administrations and the European Commission and support the establishment of trans-European IT Systems and EU eLearning modules. It connects customs services across borders, fosters the exchange of information and ensures that EU rules are implemented and applied in a uniform manner.
At EU level, meetings of the Electronic Customs Group, the High Level Steering Group and the Customs Policy Group were held. Pending the implementation of the Union Customs Code, scheduled for 2013, business process modelling of all areas of Customs activities continued, as also did the work on finalising the EU IT Master Plan that will outline the main areas of IT activity up to 2020.
The Working Party on Customs Union (CUG)
The CUG is a preparatory body within the Competitiveness Council and its principal role is to examine and seek agreement on customs proposals put forward by the Commission. In addition it also coordinates a EU position for international customs meetings such as the WCO. In 2012 Revenue contributed to discussions at 25 CUG meetings under the Danish and Cypriot Presidencies. The following proposals were presented and discussed in 2012 and are the principal issues under the Irish Presidency in 2013:
- Union Customs Code (UCC) - The UCC is designed to simplify and modernise customs procedures in support of business and the EU growth agenda. Following detailed discussions in the CUG a compromise text on the proposal was produced in December and discussions towards final agreement will be advanced in 2013.
- Customs 2020 - This is a proposal to establish an action programme in the EU for the period 2014 – 2020. The programme will replace the existing Customs 2013 programme from January 2014. Detailed discussions on the proposal took place in the CUG and a compromise text was agreed. Discussions with the Commission and the European Parliament will be held during the Irish Presidency.
- Intellectual Property Rights (IPR) - The Commission produced proposals to amend the existing legislation in January 2012 and following detailed discussions a compromise text was agreed at CUG. Subsequent discussions with the Commission and the European Parliament resulted in agreement on the proposal and the new Regulation will be finalised during the Irish Presidency.