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Paying Your Dues
(Business & Finance Via Thomson Dialog NewsEdge) Paying Your Dues
Taxation
Ireland's unique tax system is attracting foreign talent and global firms to a vibrant, if somewhat understated, industry, writes Mikey Stafford.
Let's be honest, very few of us like to think about taxation. We know it's there, we know why it's there and for the most part we accept it. But beyond that, it doesn't bear thinking about. Because the majority of individuals and businesses cannot exit the Irish tax system stage left, like Bono and his U2 partners, it's fortunate that the country boasts a comprehensive and highly skilled coterie of tax professionals. From IT companies to educational institutes to recruitment firms, Ireland's tax-base is very competently served.
Our low rate of corporation tax has made this island the darling of large corporate organisations, both domestic and foreign. Just recently Experion PLC, who own retailers Argos, announced they're relocating their head office from Manchester to Dublin, simply for corporate tax reasons. Beyond provoking the ire of politicians on Washington's Capitol Hill, the rising number of "brass plate" operations, as well as the more conventional corporate presence in Ireland, means that corporate tax compliance has become big business.
Hence the arrival of British firm Computer Tax Systems, and their marketleading Alphatax product, four years ago.
Daran Gibney of Computer Tax Systems says Ireland was a "greenfield site" when they arrived, now seven of the top 10 accountancy firms use their corporation tax software, along with a great deal of corporate clients ranging from ISEQ listed companies to family run businesses. Alphatax offers a complete solution to an organisation's tax compliance needs, with the whole process from data collection to computation preparation to integration with the revenue online incorporated into the software.
"It helps ensure that statutory and other deadlines are met," explains Gibney. "Our customers have found that it has very detailed audit trail, it has brilliant change control mechanisms in it. Each release undergoes a huge control and assurance test to ensure the accuracy of the computations are correct."
The software is designed to be easily upgraded while the company also offer a comprehensive support service - staffed by tax professionals. "It's not IT people who call us with queries, it's tax people, and we're there to help them out. When we meet clients that's what they're most enthusiastic about," says Gibney.
The popularity of their product has seen the IT company named in the Sunday Times Tech Track Top 100 for the past few years. "It's a niche industry we're involved in, but we dominate it," says Gibney.
"We're new to the Irish market, we have great penetration in it and people really appreciate the effort that has gone into it. The product itself is fundamentally very easy to use and very robust."
Not that its dominant position has seen Tax Computer Systems rest on its laurels - quite the opposite is true, with 30% of the company's annual turnover being reinvested in the shape of research and development.
The Alphatax package has two releases each year; one to incorporate all the changes that are contained within the Finance Act and another to update the software to prevent it becoming redundant.
Our rate of corporation tax may be historically low, but the standards of its resultant cottage industry are sky high.
Although taxation ranks as one of the smallest fields in the finance sector, its integral role in every business transaction and commercial decision in Ireland makes the recruitment of the highest quality tax professionals of vital importance. The recent strong growth in the Irish economy has put increasing strain on the relatively small pool of talent available.
Leading the hunt for the best and brightest tax professionals is recruitment firm Brightwater, who employ some 100 people between their offices in Dublin, Belfast and Cork.
According to Mike Shoebridge, head of taxation in Brightwater, the demand for qualified tax professionals in Ireland remains exceptionally high particularly in the areas of personal wealth management and corporate tax.
"The way it works in the Irish market is that if at any one time there were 100 tax jobs, 95 of those would be in professional practice and five would be outside of that. The market outside of practice - in the banking sector, insurance and financial services and also in general industry - has definitely been growing over the past 18 months."
As a result of this demand the Irish tax recruitment market has for the first time demonstrated a willingness to accept qualified tax professionals with experience gained in international jurisdictions. "It's always been very resistant to taking people from outside markets - even the UK," says Shoebridge. "Over the last year we've started to see the beginning of a trend where the bigger employers are looking at people, not only from the UK, but from further afield - Europe and what you would call UK-related tax system countries' like India, Pakistan and Australia. So what's it's saying is demand is leading the Irish tax system to be far more flexible and open than it has ever been in the past."
Despite the first trickles of this global influx the Irish tax recruitment market is still very much one where demand outstrips supply. This means that there's considerable upward pressure on salaries, not least in "niche" areas such as VAT "It may not be considered a very 'sexy area but VAT is certainly a lucrative area to work in," Shoebridge points out. "It is worth noting that a VAT manager would get on average a salary of Eur 60,000 to Eur 80,000 in industry, which is comparable to what a senior manager would get in practice."
Increased tax compliance laws introduced in the past few years, along with the runaway growth of Ireland's financial services and banking sectors mean that demand for tax professionals is unlikely to wain anytime soon. Almost all of Ireland's 2,800 tax professionals would have qualified via the same route: university, followed by an accountancy qualification, followed by a taxation qualification - attained from the Irish Taxation Institute (ITI).
According to Shoebridge the increased demand has resulted in a change of tack from the ITI. "Their challenge is that traditionally the ITI qualification was something you did after you'd already qualified as an accountant," he told Business and Finance. "Their big challenge is to get more people straight from university into that qualification, which is working but obviously it takes a number of years for those people to come through, the system.
So even though there are more people coming into tax the demand is still ahead of that."
The ITI has seen a trebling of its student numbers in the last five years. There are now 1,600 people studying for their Associateship of the Irish Taxation Institute (AITI) or their tax technician qualification (TMITI).
The former is a three-year programme covering all of the major taxes, tax management, ethics and legislation, and provides the necessary skills and knowledge to excel as a qualified tax adviser. The latter is a part-time one-year scheme that gives an overview of the Irish tax and legal systems, an introduction to accountancy and practical guidance on the preparation, calculation and correct filing of the various returns necessary for tax compliance work.
For forty years not only has the ITI been training Ireland's tax professionals but it has also been the industry's leading representative body - with its membership comprising tax consultants, accountants, barristers, lawyers, and other corporate and business professionals. Boasting over 3,000 qualified tax advisers among its membership the ITI should be the first port of call for any individual or company in search of a tax professional.
Through its website, www.taxireland.ie it provides a comprehensive listing of qualified tax advisors practising in each county of Ireland.
Beyond representing the interests of their members, the ITI also campaigns for the good of their members customers - taxpayers. Earlier this year the ITI called for the establishment of a Taxpayer Advocate - an independent individual or entity with responsibility for the protection of-taxpayers' rights.
This came after an-ITI commissioned survey found that one in two PAYE earners do not understand the tax system. This is reflected in the cold hard fact that Eur 50m goes unclaimed each year in medical allowances alone. In June the chief executive of the ITI, Mark Redmond called for an independent protectorate for the average PAYE worker. "Currently, there is no dedicated voice to represent the ordinary taxpayer, which is not acceptable," he said.
"Taxpayers are entitled to expect that their rights are independently protected and they are also entitled to a swift, cost-free administrative appeals mechanism if they feel their rights are being infringed. We believe that an independent individual or entity with responsibility for the protection of taxpayers' rights should be established without further delay."
Also lending a hand to PAYE workers is the Irish Revenue Commissioners, who are currently rolling out a suite of on-line selfservice facilities for PAYE taxpayers at www.revenue.ie.
This initiative is a major investment in improving customer service to over two million employees. It will help PAYE taxpayers to claim their tax credits, claim repayments such as medical expenses, update their address details or request a review of their tax liability. All of these can be carried out at a time and place that best suits the employee.
This useful new service has been launched following the success of the Revenue On-Line Service (ROS), which businesses have been using successfully for the past number of years to file tax returns, make payments and obtain details of their Revenue account. The service will mean that individual PAYE workers will be able to avail of a similarly useful online resource for their own tax obligations.
The rollout of the service is being undertaken on a phased basis. Over the coming months Revenue are writing to each PAYE taxpayer giving details of the new service and including their unique Revenue PIN to allow them to avail of the new service. The new facility provides two options, namely a full internet service and a limited internet service.
The full internet service, as you may have guessed by the name, is the best option and allows employees to view details of their own tax record from the comfort of their own home. To help pay for the broadband connection they will also be able to claim a wide range of tax credits on-line, as well as apply for refunds of tax, including health expenses. The latter may help to reduce the Eur 50m in unclaimed medical expenses that the ITI has highlighted. Online users will also be able to request a review of tax (balancing statement/P21) for 2005 onwards. The reallocation of credits between spouses will also be possible online. Finally users will be able to notify Revenue of a change of address or supply any other personal information deemed necessary or useful.
To avail of the full internet service customers will need a Reachservices username and password and their Revenue PIN. Customers can register with Reachservices, the Government service set up to provide secure and confidential access to public services through the internet either at www.revenue.ie or at www.reachservices.ie. This is a once off process that will not have to be repeated after registration is complete.
Rather than register for a Reachservices user-name, PAYE workers will also have the option of the limited internet services. As this requires just the customer's Personal Public Service Number (PPSN) and Revenue PIN it is a limited version of the PAYE On-Line service.
It allows employees to claim a small number of tax credits, notify Revenue of a change of address, and track the progress of written correspondence with Revenue. PAYE employees who do not have access to the internet can also avail of a small range of services via text message or using a touchtone telephone.
The benefits of this new initiative go beyond individual employees. The selfservice facilities will also be of considerable benefit to payroll departments since employees will be now be able to change their tax credits with minimum delay and this will help to reduce the demands on payroll staff.
Companies can actively encourage employees to avail of the new service and facilitate them in availing of the on-line option by allowing them access to Revenue's website, www.revenue.ie. Using these new services will allow employees to claim their correct tax credits and refunds of tax easily and quickly.
So what does the future hold for Ireland's taxation industry? There are fears being expressed, by the ITI among others, that interference from Europe could upset the applecart. The European Commission is proposing a common tax base for all 25 member States, known as the Common Consolidated Corporation Tax Base or CCCTB. This would result in two major changes. Firstly a common set of rules for the calculation of taxable income for companies operating in multiple member states. Secondly such companies would take their total EU taxable income and apportion it among whichever of the 25 countries they operate in.
The Minister for Finance, Brian Cowen and Mark Redmond of the ITI agree that CCCTB does not serve the interests of Ireland or the EU. Redmond recently noted, "CCCTB flies in the face of achieving greater competitiveness.
Big multi-nationals, faced with growing costs in Europe, are increasingly looking to the Far East. CCCTB will merely serve to hasten this trend." Whatever the future holds it would appear that Ireland's rapidly developing taxation industry is ready for the challenge. It would almost make you want to think about taxation.
Copyright 2006 Belenos Publications Ltd Source: Financial Times Information Limited - Europe Intelligence Wire.
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