# Do We Need To Simplify The Irish Tax System ?



## MrEarl (12 Sep 2014)

Hello,

I was wondering, do we need to simplify the Irish Tax System ?

Personally, I think the answer is Yes, because:

There are far too many tax rates applicable to different types of gains, along with varying thresholds, exemptions etc.

For example, Income Tax has two rates but then both the thresholds and rates differ for Income Tax, PRSI & USC which are all effectively similar direct taxes on individuals. The complications continue it seems, when we consider the person's age etc.

I believe our over complicated system results in a higher risk of error, coupled with (and probably a greater issue) people being intimidated and delaying or possibly failing to submit a tax return - or having to employ someone to prepare their tax return, even though it may be a relatively straight forward situation.

What do others here think ?


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## Protocol (12 Sep 2014)

Yes, income tax and the USC should be merged.


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## DB74 (12 Sep 2014)

MrEarl said:


> I believe our over complicated system results in ... people ... having to employ someone to prepare their tax return, even though it may be a relatively straight forward situation.



Nothing wrong with that!


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## mandelbrot (12 Sep 2014)

MrEarl said:


> Hello,
> 
> I was wondering, do we need to simplify the Irish Tax System ?
> 
> ...



Great idea in theory, but not so easy to execute.

When you try and apply any simple rule in the real world, things quickly become complicated by the myriad quirks and unique scenarios that the real world throws up. 

The principles of most of the taxes are very simple to understand, but they've become labyrinthine over the years as various peculiarities need to be overcome, including the unintentional loopholes that those so inclined will always manage to find...

So yes, you could simplify the whole system, and start from scratch, but you'd be collecting much less tax until you close all the loopholes again, and that would require adding complexity... you see where I'm going here..!!!


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## dereko1969 (12 Sep 2014)

I don't think our tax system is that complicated. Have you compared it to other jurisdictions?


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## Bank Manager (12 Sep 2014)

dereko1969 said:


> I don't think our tax system is that complicated. Have you compared it to other jurisdictions?



The Taxes Consolidation Act is c. 3,700 pages long..... (does not include CAT, VAT, Stamp Duty - to be fair they are smaller tomes)....


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## Brendan Burgess (13 Sep 2014)

Hi Mandlebrot

While the system is necessarily complex, that does not mean that it could not be made simpler. 

We could abolish employees prsi and the USC and raise the income tax rate accordingly.  

There would be some downsides. For example, we would lose the Revenue from USC and PRSI on pension contributions.  

Talking about pensions, are the various schemes not ridiculously complicated? Could they not be simplified?


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## Marc (13 Sep 2014)

Brendan,

When pensions simplification was introduced in the UK they decided to retain all of the original rules for prior service with the new rules only applying for future service.

We called it "complification"


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## Bronte (15 Sep 2014)

mandelbrot said:


> The principles of most of the taxes are very simple to understand,


 
That may be so for you and accountants but not for most people.  

I believe that a tax form for income tax should be so simple that a child could do it.  And there is no reason other than to hire massive amount of staff in revenue and keep accountants in business that it is any other way.  

Americans fill out a tax form every year, so they must I assume have a simple system.


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## losttheplot (15 Sep 2014)

They could start with simplifying the language and maybe introduce it in schools. People are fearful of tax as it looks complicated, so they either don't claim all they're entitled to or don't pay all they're supposed to.


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## Jim2007 (15 Sep 2014)

Bronte said:


> Americans fill out a tax form every year, so they must I assume have a simple system.



Did you ever try to fill out a US tax form???  Americans have to pay both State and Federal taxes and in some cases city or community as well!  HR Block has made a fortune out of filling out US tax returns...

In Switzerland, we pay most of taxes to the local community, so we pay at local, Kanton (state) and Federal level in arrears on a preceding year basis (there is no PAYE system). And everyone is required to submit their taxes returns as well.  We do not have a HR Block, but the accounting profession is split into two divisions, one specialising in tax returns and the other in services for businesses.

Proving a fair system for everyone means that it will have to be complex to address all the different situations.


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## mandelbrot (15 Sep 2014)

Bronte said:


> That may be so for you and accountants but not for most people.
> 
> I believe that a tax form for income tax should be so simple that a child could do it.  And there is no reason other than to hire massive amount of staff in revenue and keep accountants in business that it is any other way.
> 
> Americans fill out a tax form every year, so they must I assume have a simple system.



What's complicated about the principle of paying tax on one's income?

Or on the gain when you sell an asset?

Or on the value of a gift or inheritance?

Or a set % VAT on a product or service?

Or a set % Excise duty per unit / volume of fags/booze?

That's >95% by value, of all the taxes levied. IMHO none of those taxes are complicated in principle: but how to legally construct a system which ensures that those simple-in-principle taxes can actually be extracted from a population who given a chance will (as is universal human nature), do their best to avoid paying them, is where complexity arises.

Bright and well intentioned people all over the worlds of academia, public policy and business, all over the world, have devoted their lives' work to tax simplification - so if it hasn't been simplified yet making it so can't be that simple..!


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## Bronte (16 Sep 2014)

mandelbrot said:


> What's complicated about the principle of paying tax on one's income?


 
Indeed Mandelbrot, you make me laugh.  

There was an interesting piece on BBC Radio 4 this morning, Wake up to money programe,  about tax simplification, cannot remember the woman's name now, but I was reminded of you, she basically said simplification is never going to happen.  She knew her stuff though.


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## T McGibney (16 Sep 2014)

The only tax that is ridiculously complicated is VAT. The principles of Income Tax, CGT and CAT are reasonably straighforward. A child could understand and explain the principles behind Corporation Tax.

That said, the imposition of USC on top of income tax & PRSI  is an utter dog's dinner, and this needs urgent reform.

It's untrue actually that complex taxes keep accountants in jobs. They used say that of compulsory company audits, yet when they were scrapped for 96% of companies, turnover and employment within the accountancy sector increased sharply as accountants found better and more productive avenues for their efforts.


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