# Is tax evasion still endemic in Ireland?



## Howitzer (20 Apr 2006)

I notice a lot posts where people alude to non payment of tax. This is most noticable on property transactions (stamp, cgt, rental income) but this is possibly due to property's prominance as the investment du jour. 

I personally know of people renting out, and not living in, their newly bought PPR, taking huge risks for what I perceive to be a relatively low return (untaxed rental income only just above rent a room threshold v having to pay stamp + fines/interest). People who've fiddled the numbers paid for a property to stay below stamp thresholds with the apparent complicity of the solicitors.

This is in spite of the highly prominant tax amnestys and prosecutions stemming from the 80's.

Despite the fact that we've one of the lowest PAYE tax regimes around there still seems to be a compulsion to avoid paying tax where possible. 

I'm not referring to legitimate tax avoidance schemes, whether they are merited or not.


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## z107 (20 Apr 2006)

I suspect that tax evasion is rampant in Ireland. Problem is that if the goverment starts cracking down on dodgy property investors, it wont do much for the price of property. It could be the catalyst that sparks the bust.

Wait until 5-10 years time when the economy has collapsed. Then the revenue will start claiming their kgs of flesh.

Another area where tax evasion seems to happen is tradesmen.


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## bearishbull (20 Apr 2006)

had to laugh when i heard burlesconi talking in the italian election campaign recently.when questioned on the poor performance of the italian economy he claimed that the offical economy may be doing bad but the black economy is booming! i'd say italy is similar to ireland in that tax evasion and corruption are accepted by many, look at yer man lowry reelected after being found guilty of tax evasion etc.revenue publish lists every few months and the evasion seems to be rife in every area of profesional life (doctors publicans farmers) and it seems to be the ordianry paye worker bearing the burden and paying his/her taxes etc.


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## Purple (20 Apr 2006)

umop3p!sdn said:
			
		

> I suspect that tax evasion is rampant in Ireland. Problem is that if the goverment starts cracking down on dodgy property investors, it wont do much for the price of property.


 I suspect that the majority of the evasion is done by the investors who have one or two properties. The big guys have no need to do this with section 23's etc to white off their potential liability. 



			
				umop3p!sdn said:
			
		

> Another area where tax evasion seems to happen is tradesmen.


 and solicitors, and doctors and teachers who give grinds and shop keepers and car dealers and anyone and everyone else who has a cash or part cash business.


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## ubiquitous (20 Apr 2006)

bearishbull said:
			
		

> look at yer man lowry reelected after being found guilty of tax evasion etc..



Just for the record, Michael Lowry has technically never been "found guilty of tax evasion "


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## Glenbhoy (20 Apr 2006)

Th building trade in general is pretty bad, the main culprits are all the 'self employed' subbies.  Although as Purple stated, anyone with a cash business is liable to fiddle a bit, most people would'nt even consider paying tax on 'teacher's grind type money'.  Small property investors are also probably major evaders.
In general we have'nt come to terms with the fact that we are actually a nation governing ourselves yet, we still think it's ok to withold taxes and we justfy it by saying 'but sure they'll only waste it on voting machines....'.
Although given our former justice minister has done time for evasion is it any wonder the rest of the country follows suit??


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## z107 (20 Apr 2006)

> and solicitors, and doctors and teachers who give grinds and shop keepers and car dealers and anyone and everyone else who has a cash or part cash business.



Yep... I forgot about those people.


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## Eurofan (20 Apr 2006)

Rampant does seem to be the word doesn't it. When i was growing up it used to be said "Cash is king" with the obvious 'benefits' of tax evasion.

Nothing seems to have changed and i know some of the most upstanding and honest business owners who deal even partly with cash who don't give a second thought to the 'fiddle'.

It's very Irish... (and Italian it seems)


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## ubiquitous (20 Apr 2006)

Eurofan said:
			
		

> Rampant does seem to be the word doesn't it. When i was growing up it used to be said "Cash is king" with the obvious 'benefits' of tax evasion.


Not exactly true - btw the expression is still in common use internationally in contexts that have absolutely nothing to do with tax evasion.

http://en.wikipedia.org/wiki/Cash_is_king



> From Wikipedia, the free encyclopedia
> 
> Jump to: navigation, search
> 
> Cash is king is an expression sometimes used in analyzing businesses; it refers to the importance of cash flow in the overall fiscal health of the business. The phrase has sometimes appeared in Motley Fool articles and commentaries. For example, if a company has a large amount of account receivables, its balance sheet will give the appearance that the company is increasing equity, but the company can still be short on cash with which to make purchases, including paying wages to workers for labor.


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## ubiquitous (20 Apr 2006)

Glenbhoy said:
			
		

> Th building trade in general is pretty bad, the main culprits are all the 'self employed' subbies.



This statement doesn't make sense as all subbies are subject to the RCT/C2 system. 35% of gross earnings is deducted at source without taking into account tax credits, bands etc and refunds of overpaid tax are made only where the tax office are satisfied that the individual's affairs are fully in order. It is possible to circumvent this system only by getting a C2 certificate from Revenue. It is extremely difficult to get this cert unless Revenue are again 100% satisfied that everything is in order. Even then, Revenue still have power to reject C2 applications without even having to justify their decision. Once issued, C2s are subject to regular review by Revenue and can be withdrawn without notice by Revenue

It is misleading to label subbies as "culprits" in the context of the debate as to whether or not they are actualy self-employed or employees, given that it is the principal contractor/employer who benefit most from a subby's designation as self-employed - given that they then avoid having to pay employer's prsi, holiday pay, sick leave etc for the subby.


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## markowitzman (20 Apr 2006)

on ulster tv they now run a revenue ad with anonymous freephone number to report suspected tax evasion etc.........
evasion is rife as far as I can see
tradesman refusing work unless all cash and no receipt
as regards revenue fuelling a property downturn.....could not see it happen.
I get all my rental income tax free due to section 23 property so in my book revenue in a way are fuelling property investment.
even without sec 23 with all the deductible items against rental income there is no good reason to evade tax.
I think the tax laws here for this reason are very much pro-property investment.
Compare this to Spain where there is a blanket 25% on GROSS rental income with NO allowable deductions!
Income tax is another issue.....
I am not a hang them and flog them merchant but a period behind bars is the only solution to tax defaulters over a certain figure.
Publishing names in papers is futile as a deterrent in my view.
Bottom line.......if you evade (or perhaps more aptly steal money from the health service etc etc) tax you should go to jail and pay for the priviledge.


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## Glenbhoy (20 Apr 2006)

Fair point Ubiquitous, however is it not still common practice for subbies to be paid a portion of the money owed to them in cash?  That was really what I was alluding to, as the C35 system is pretty restrictive alright (but there's a reason as to why the rate was 35% as opposed to 20% for PSWT).
As for the employee/self employed argument, I agree that the builders are the big winners there.


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## conor_mc (20 Apr 2006)

Eurofan said:
			
		

> Nothing seems to have changed and i know some of the most upstanding and honest business owners who deal even partly with cash who don't give a second thought to the 'fiddle'.


 
Having said that, we all turn a blind eye when we get a couple of grand knocked off a car cos we're paying cash, or save ourselves 20 or 30 quid when we pay the plumber/electrician/etc in cash.

We all know why its cheaper to pay cash - we're just splitting the difference with the businessman/tradesman.


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## ubiquitous (20 Apr 2006)

Glenbhoy said:
			
		

> Fair point Ubiquitous, however is it not still common practice for subbies to be paid a portion of the money owed to them in cash? .


Dunno if it is widespread enough to be described as common practice, but only a fool would deny that it happens.

That said, there are a few reasons why I suspect that under-the-counter  payments by contractors to their registered sub-contractors is less of a problem than it used to be:

- the necessity to observe industry rates of pay to subbies. If a skilled subby is (officially) getting less than the specified minimum, there are easily accesible State-backed mechanisms that allow them to pursue the contractor to recover the difference. If the difference has been paid in cash, there is a double jeopardy for the contractor who will have no means of proving that cash payments have been made

- the operation of tight anti-money laundering procedures of banks and auditors means that it is now quite difficult for businesses to handle large sums of undocumented money in the course of their day-to-day operations. 

To pay a modest sum of €300 per week to a gang of 20 subbies would require a cash financing requirement of €6,000 weekly, or €25,000-odd each month. Any businessman trying to surreptitiously withdraw or move around sums of  that magnitude on a regular basis would be quickly reported to the authorities by their bank, and would then have the CAB to deal with.

Any variations in the amounts officially paid each week/month would raise suspicions of auditors, who are also obliged by law to report suspicious trends/activity under anti-money laundering rules.


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## Purple (20 Apr 2006)

conor_mc said:
			
		

> Having said that, we all turn a blind eye when we get a couple of grand knocked off a car cos we're paying cash, or save ourselves 20 or 30 quid when we pay the plumber/electrician/etc in cash.
> 
> We all know why its cheaper to pay cash - we're just splitting the difference with the businessman/tradesman.


 The justification for that is that it's not your responsibility to ensure the person you pay pays their tax. That said from an ethical point of view I agree with you.


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## Eurofan (20 Apr 2006)

Purple said:
			
		

> The justification for that is that it's not your responsibility to ensure the person you pay pays their tax. That said from an ethical point of view I agree with you.



The problem is that being ethical about these matters in Ireland can cost you a substantial euro amount. It's very difficult to stomach (never mind compete with) watching those happy to take advantage of the cash economy while you 'ethically' pay their share of taxes etc.


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## beattie (20 Apr 2006)

Do the revenue follow up when they get a report of a landlord not paying tax? I remember talking to a few non-irish residents who reported their landlord for not paying tax (they had requested the landlords pps # to claim their rent relief but were refused it). Two years later she was still renting to non-nationals so it would seem (from afar) that she wasn't tax compliant


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## bearishbull (20 Apr 2006)

there should be a phone line /email address where you can confidentially report people you know in black economy.of course its the big fish that the revenue should be concentrating on and not a bloke with one investment property but the big fish have ways and means and tell no one their business so no one could  inform on them except maybe business partners/accountants/lawyers


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## Howitzer (20 Apr 2006)

beattie said:
			
		

> Do the revenue follow up when they get a report of a landlord not paying tax? I remember talking to a few non-irish residents who reported their landlord for not paying tax (they had requested the landlords pps # to claim their rent relief but were refused it). Two years later she was still renting to non-nationals so it would seem (from afar) that she wasn't tax compliant


 
This is the thing with reporting someone to the revenue, if you're looking for some sort of instant retribution it just won't happen. 

Every day that this person is not tax compliant is a bigger fine and an extra days interest. The renvenue are quite happy to let people dig themselves into a hole and just continue to gather evidence until they've a cast iron case. 

For specific areas they are quite happy to allow years to pass before catching everyone at once in a wave of publicity. They're not too bothered about timeframes as they get the money in the end, with interest (charged at a daily rate). Even if you die in the interim they go after the beneficiaries of your estate.

It was mentioned on another thread that there's a planned crackdown on stamp duty dodgers once the SSIAs have all been paid out, April/May next year, anyone hear more on this?

I always kinda figured that the whole point of the S23, S50s was never urban regeneration but an exercise in bringing property investors back into the tax net in a painless manner (carrot). And I think it's no coincidence that with the end of these schemes finally in sight that registering with the PRTB is now a prerequisite for getting mortgage interest relief (stick).


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## beattie (21 Apr 2006)

Howitzer said:
			
		

> This is the thing with reporting someone to the revenue, if you're looking for some sort of instant retribution it just won't happen.
> 
> Every day that this person is not tax compliant is a bigger fine and an extra days interest. The renvenue are quite happy to let people dig themselves into a hole and just continue to gather evidence until they've a cast iron case.


 
Agree that they don't mind waiting as it is the evader will pay in the end, it is just in the case I cited this person has now gone home so if they needed to contact them they would not be able to do so. 
I personally know of a case where they went after the estate of a deceased person. It was very very painful and resulted in a 'For Sale' sign being erected. Luckily for them the property had appreciated in the meantime


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## Winnie (21 Apr 2006)

conor_mc said:
			
		

> Having said that, we all turn a blind eye when we get a couple of grand knocked off a car cos we're paying cash, or save ourselves 20 or 30 quid when we pay the plumber/electrician/etc in cash.
> 
> We all know why its cheaper to pay cash - we're just splitting the difference with the businessman/tradesman.


 

Exactly - I think it is a bit hypocritical to be going on about all these people who don't pay tax on their earnings & then gladly facilitate this by paying tradesmen in cash - we all know why this is done.........


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## Glenbhoy (21 Apr 2006)

> then gladly facilitate this by paying tradesmen in cash - we all know why this is done.........


Exactly, for cash flow purposes - as we all know "cash is king"


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## RainyDay (23 Apr 2006)

conor_mc said:
			
		

> Having said that, we all turn a blind eye when we get a couple of grand knocked off a car cos we're paying cash, or save ourselves 20 or 30 quid when we pay the plumber/electrician/etc in cash.
> 
> We all know why its cheaper to pay cash - we're just splitting the difference with the businessman/tradesman.


Speak for yourself. We don't ALL turn a blind eye.


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## z107 (23 Apr 2006)

The reality of the situation is that it's hard to get a tradesperson, and many of them simply wont entertain anything other than cash.

Once you've got someone to actually show up, are you going to frighten them away with a cheque?



> we're just splitting the difference with the businessman/tradesman



I disagree with this. I'm most certainly paying full whack! It's up to the tradesperson to correctly declare their earnings and pay the appropriate taxes. I'd never feel like I getting some kind of 'bargain'.


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## conor_mc (24 Apr 2006)

RainyDay said:
			
		

> Speak for yourself. We don't ALL turn a blind eye.


 
Okay, I'll rephrase it....



> Having said that, we all turn a blind eye _*if*_ we get a couple of grand knocked off a car cos we're paying cash, or save ourselves 20 or 30 quid _*if*_ we pay the plumber/electrician/etc in cash.


 
If you haven't taken advantage of a bit of a bargain by paying in cash, you're duly absolved of any hypocrisy...!!!!




> I disagree with this. I'm most certainly paying full whack! It's up to the tradesperson to correctly declare their earnings and pay the appropriate taxes. I'd never feel like I getting some kind of 'bargain'.


 
I'm not sure whats to disagree with - what if a tradesperson provides a service to you and tells you it'll cost €200, but he could do it for €180 in cash? He's effectively saying this - if you pay me cash, I won't have to pay €40/50 in tax, so this way you get €20 knocked off the price and he gets €20/30 in his back pocket.

If you refuse to pay in cash and choose to pay the full whack, then fair enough. But *if *you accept the cash price, you really shouldn't be surprised to think that this guy is fiddling his taxes, nor should you believe that you're not taking advantage of his willingness to do so.

For the record folks, I'm not defending the cash economy or anything like that. I'm just calling it as I see it.


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## z107 (24 Apr 2006)

> what if a tradesperson provides a service to you and tells you it'll cost €200, but he could do it for €180 in cash?



The way I look at this scenario is that the service is only worth €180 to start with. The tradesperson is using this as a tactic so you'll only pay in cash. If you still wanted to pay with a cheque, I'd expect that the tradesperson would probably not want to know.


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## ubiquitous (24 Apr 2006)

umop3p!sdn said:
			
		

> The reality of the situation is that it's hard to get a tradesperson, and many of them simply wont entertain anything other than cash.
> 
> Once you've got someone to actually show up, are you going to frighten them away with a cheque?



Do remember that there is a very good reason why many tradesmen, shops etc refuse to accept cheques - the risk of cheques bouncing. 

There is nothing wrong either with situations where shops etc give small discounts for cash as opposed to credit card payment, where there would otherwise be a credit card charge to the retailer.

The bottom line is that there is nothing wrong with cash payment or receipts provided a receipt is issued to the customer.


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## conor_mc (24 Apr 2006)

umop3p!sdn said:
			
		

> The way I look at this scenario is that the service is only worth €180 to start with. The tradesperson is using this as a tactic so you'll only pay in cash. If you still wanted to pay with a cheque, I'd expect that the tradesperson would probably not want to know.


 
I agree exactly with what you say, except you have to ask why he wants to be paid in cash? There are two different costs of doing the job for the supplier - the cost of doing it above-board and the cost of doing it under the radar.

If you're getting a cash price and a receipt for the service/goods, then fair enough, you're absolutely spot on (as is ubiquitous). But if you're not getting a receipt, the provider is costing the job differently which is why its only worth €180 now - because he doesn't have the extra cost of paying tax on his earnings.

To be fair, it's only an ethical distinction for us as purchaser. Legally we have no interest in how a businessman puts together his taxes - if he fiddles his taxes, it's his risk or his "reward". As cash purchasers, we facilitate this, we benefit by it, though we have no responsibility for it in the eyes of the law.

It's only whether we ourselves recognise the role we play in the transaction.


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## Howitzer (24 Apr 2006)

Once you recieve a receipt with a VAT No. then it doesn't matter what you pay with.


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## Purple (24 Apr 2006)

Howitzer said:
			
		

> Once you recieve a receipt with a VAT No. then it doesn't matter what you pay with.


 you're right, it's all about the VAT number. A receipt without this is not worth much.


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## ubiquitous (24 Apr 2006)

Purple said:
			
		

> you're right, it's all about the VAT number. A receipt without this is not worth much.



Again this is a generalisation - many small businesses are legally exempt from VAT and as such would not have a VAT number.


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## Howitzer (24 Apr 2006)

ubiquitous said:
			
		

> Again this is a generalisation - many small businesses are legally exempt from VAT and as such would not have a VAT number.


 
It would have to be very small. The limit is around 30K. Not many tradesmen these days would be earning less than that.


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## ubiquitous (24 Apr 2006)

Howitzer said:
			
		

> It would have to be very small. The limit is around 30K. Not many tradesmen these days would be earning less than that.



Again not necessarily - for example a plumber, electrician or other tradesman in PAYE employment can earn another €600 per week (or thereabouts), every week in the year, from other (self-employment) work before they are obliged to register for VAT. This is relatively commonplace.


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