Tax Responsibility
Address by Revenue Chairman, Frank Daly at the Leinster Society of Chartered Accountants Published Accounts Awards 2005
Introduction
Ladies and Gentlemen, may I begin by expressing my appreciation to your Chairman, Lorcan Colclough for the invitation to speak at this year's ceremony. I place great value on building and developing the links that make up a healthy professional relationship between Revenue and our customers.
And the opportunity today to speak to members of the business community, the charity and not for profit sector and the accountancy profession is a useful occasion to build such links.
Speaking at last year's ceremony, Dr. Patricia Barker commented that it was unlikely that published accounts would ever take the Booker Prize. I have to say on behalf of Revenue that I was relieved to hear this, as I sincerely hope that none would qualify as works of fiction (or worse still that the authors would come along claiming artist's relief!). Indeed, I am very pleased to note from the judging criteria that in no category (except design) is creativity specifically recognised or encouraged in any way!
Published Accounts - More than regulatory compliance
Today's awards recognise excellence in a challenging field - challenging because not just the winning entries, but indeed all entries for these awards fulfil the sometimes divergent roles of honest objective financial analysis, dutiful compliance with regulatory requirements and vibrant and readable corporate presentation (without the creativity bit!).
This is not an easy balance to achieve. The awards recognise that it is possible to lift regulatory compliance above the dull and dutiful, and to engage with it in a positive spirit. Today's winners recognise that publishing accounts is not merely a regulatory chore - by engaging with the underlying purpose and importance of these accounts and seeing the broader picture you produce something that is of added value and a real asset to your organisations, their stakeholders and the general public.
Tax Compliance - More than just a cost
In the relatively short space that a pre lunch speech should always occupy, I would like for a moment to extend that idea - of lifting something beyond its basic level to a higher one - to the matter of tax compliance. Most of you here will know that Revenue's core objective is to promote voluntary compliance with tax requirements and that we aim to do that by providing the best possible service on the one hand and swift effective enforcement on the other.
But I'd like to advance the view that voluntary tax compliance - paying what is due when it's due without coercion - should be seen not just as a matter of meeting regulatory requirements but in a broader framework. That broader framework might be what is generally referred to as "corporate social responsibility" but I would like to talk about it in a tax focused framework labelled "tax responsibility".
Tax Responsibility
The reality of course is that, unlike those winners here today who see published accounts as having a value beyond satisfying the basic regulatory requirements, many (probably most) businesses still regard complying with their tax obligations as simply satisfying regulatory requirements and no more. Indeed most regard tax as a dead cost - and indeed some of them regard compliance as something to be delayed, avoided and ultimately only met either grudgingly or under duress.
So is the concept of "tax responsibility" a bit remote - an idealistic notion perhaps (or worse still a clever plot by Revenue to make it's own job easier!)?
Tax in the Boardroom
I'm encouraged lately by signs that we are moving in the right direction.
It's certainly a very positive development to see that tax is at least becoming an integral part of the fabric of corporate governance - it is becoming a serious Boardroom issue, with Company Directors taking a greater interest and the tax function in businesses now seen as having an impact right across the organisation.
But has this new found place of tax in the Boardroom been in any way driven by what I have labelled "tax responsibility"?
As with a lot of questions like this the answer is yes and no.
No, because the reality is that tax in the boardroom is largely driven by reaction to past scandals, impact on shareholders, risk management and the requirements and scrutiny of a tougher regulatory framework (in itself partly a reaction to those same past scandals). Dare I say also driven by a recognition that a damaged reputation will damage your brand with potentially expensive consequences.
Yes, because there are hopeful signs of a different philosophy emerging in general debate about the place of tax in society and in new thinking about the place of tax within particular businesses. It seems to me that a growing number of businesses now are taking a broader view of tax compliance and that this view is being positively reinforced by their professional advisers. These businesses, alert and sensitive to the needs of the economy and society in which they operate, see tax compliance as an ethical and social responsibility - informed by an appreciation of where tax goes and an understanding of what it does. They see tax not as a dead cost that reduces their bottom line but as an investment in building and maintaining the type of country in which their business can flourish. They understand that the type of country that produces an educated workforce, which has good infrastructure, which provides security and certainty, which is good to live in, which attracts foreign investment and encourages indigenous development needs a sound and effective tax system to do so.
They see that their tax contribution builds this type of environment and that, far from being a dead cost reducing their bottom line, tax is an investment from which they as players in an economy and citizens in a society will ultimately receive a tangible return.
This is the broader view of tax compliance - the concept of "tax responsibility". So let's hope this concept grows and let's appreciate just how much better it would be for everybody - business and individuals - if "tax in the boardroom" was driven not by the push of "regulatory requirement" but by the pull of "tax responsibility"?
What could we do together - Revenue, Business, Professional Advisers - to advance the cause of "tax responsibility"?
Role of Business and Practitioners
Let me look firstly at what I think your role could be.
I believe that Revenue can talk about tax responsibility for ever and make some progress but that a really valuable input could come from yourselves as key influencers in the Community if you to acknowledge the purpose and function of taxation in a positive way and lead the way in articulating this positive view publicly.
In other words to convey the message that all democracies operate on the basis of a type of social contract; citizens enjoy rights such as security, proper legal process, access to education and health services. Business expects that the infrastructure will support its operations and its further development. All these public goods are bought through taxation, and failure to pay our fair contribution is nothing short of depriving ourselves and our fellow citizens of our rights and selling ourselves short on our legitimate expectations.
Of course we may all have our views on what our fair share is. I have no doubt that everyone in this room has their own views of which particular taxes or duties are too high (probably less of you have views on which ones are too low!) But we must remember that we all enjoy the freedom to influence tax policy through the democratic process. And remember too that the democratic process is, in turn, funded by taxation, or if I can put a new spin on an old slogan - you get no representation without taxation.
I believe that it is essential that business leaders and accountancy practitioners are vocal in recognising tax compliance as a civic responsibility, encouraging your peers to do likewise and promoting by example and by attitude the notion of tax responsibility. I am really encouraged by the extent to which this is beginning to happen in this country.
I am not by the way trying in any way to hand over the tasks and responsibilities of Revenue to you. But it must be clear that Revenue would have real difficulty either imposing tax compliance, much less foisting tax responsibility, on an unwilling and resistant business community. Our objectives cannot be achieved without your visible commitment and support. If that support can be somewhat evangelical in support of "tax responsibility" so much the better!
Revenue's responsibilities
In return for that support there is much that Revenue can and must do for you.
Revenue must be fair and even-handed in the administration of the tax regime. We must be open and responsive to the needs of our customers and to the economy in general. And we must provide a stern deterrent to those who fail to recognise their responsibilities and who engage in evasion, fraud or artificial schemes of avoidance - in fairness to everybody else.
We must (and do) commit to continuing to develop a customer service ethos;
to make voluntary compliance as easy and attractive as possible; to organise
ourselves to this end (as we've recently done with the most fundamental
restructuring in our 83 year history); to continue to develop our range
of self-service options with the Revenue Online Service (ROS) including
the extension of this to PAYE taxpayers early next year; to provide a
range of payment options to suit the needs of particular businesses and
to provide tailored services to meet particular needs.
Liaison and Co-operation
We must continue to work with tax and customs practitioners through our various liaison forums to ensure that the needs of business are met. For example, the Tax Administration Liaison Committee (on which Revenue and Tax Practitioners work together) is currently working to identify ways to simplify a number of major tax return forms.
More recently we have embarked on a programme of co-operative compliance agreements with businesses. These agreements providing a means whereby we can work together to achieve high levels of compliance balanced with greater certainty for business in relation to tax exposure. We're still at the early stages of this initiative but I believe that they have the potential to form the basis of a new and very positive relationship between Revenue and business and to really advance the concept of "tax responsibility".
It would be remiss of me on the last day of XBRL week - a series of activities designed to spread the word about XBRL to regulators, financial institutions, practitioners and business - not to emphasise Revenue's interest and support for this development - and acknowledge the leading role of the ICAI in this project. We strongly believe that a widely shared standard for financial reporting will be of real benefit, not just to Revenue but as a means of reducing the costs of compliance for business.
Supporting Economic Development
Finally Revenue also has a wider role in the economic development of Ireland. This means that we must remain sensitive to the impact of our actions on trade and investment and work alongside our colleagues in other Government Departments to ensure that Ireland remains an attractive destination for investment activity. While Ireland's tax policies have been, are and will continue to be, a key factor in our success in attracting investment, it is also true that access to advice and support at a senior level from Revenue and other Government agencies has been an influential factor in investment decisions and we must continue with that approach.
All of this ladies and gentlemen is practical stuff that we can do to make tax administration more effective and transparent - and this is essential if we are to credibly promote the concept of tax responsibility.
Conclusion
Ladies and gentlemen that's a flavour of my personal thinking on "tax responsibility" and the respective roles of yourselves and Revenue working together to promote that concept as the fundamental driver of tax compliance in Ireland. I think we have started on the road but there is a long journey ahead.
I'll leave you with a final thought. About 15 years ago one Leona Helmsley, hotelier and sometime jailbird, infamously remarked to the effect that tax is for little people. Well my theory is that the people who pay their taxes are the BIG people - they the ones who care about the rights and entitlements of their fellow citizens, they are the ones who have vision for the type of society that can be built with their taxes, they are the ones who understand the concepts of equity and responsibility, they are the good citizens - the BIG people who see the big picture. Tax is for BIG people.
Thank you.