Taxation traditionally plays an extremely important role in the life of any
country. An effective taxation system can influence the national economy positively
while the low effectiveness of a taxation system can engender negative trends
in economy of a country. In this respect, Ireland is not an exception. At the
same time, it is necessary to underline that the effectiveness of the national
taxation system in Ireland as well as in all other countries of the world highly
depends on the work of agencies responsible for customs, excise, taxation and
similar matters. In the case of Ireland, this is the Office of Revenue Commissioners,
which work nowadays is considered to be quite effective. Nevertheless, it does
not necessarily mean that the Office of Revenue Commissioners does not have
any problems. In stark contrast, it is often argued that within the next few
years it will be extremely difficult for the Office of Revenue Commissioners
to maintain such a high level of income to the national budget since the existing
system of taxation provides certain opportunities to evade taxation in Ireland
that naturally threatens to the increasing level of income of the national budget.
One of the main sources of such a problem, i.e. tax evasion, is the Deposit
Interest Retention Tax, which optimization is probably one of the main challenges
the Office of Revenue Commissioners will face within next few years since it
is Revenue Commissioners that are responsible for taxation in Ireland.
In this respect, it is primarily necessary to point out that the Deposit Interest
Retention Tax constitutes a part of the Capital Gains Tax and basically it is
supposed to help to tax the wealthiest people of Ireland as well as all those
who have deposit in banks operating and Ireland, naturally, if they are supposed
to pay this tax. It is important to underline that traditionally the Irish Deposit
Interest Retention Tax constituted an important part of the Irish taxation system
and, what is more, it was one of the taxes that may be classified as VAT and
income taxes, which constitute about 60% of revenues of the state budget in
Ireland annually. This means that income taxes are strategically important to
the state budget of Ireland and, naturally, the Deposit Interest Retention Tax
is not an exception.
On the other hand, it is worthy of mention that the Deposit Interest Retention
Tax has been applied since 1980 when it was introduced and its relatively long
existence implies that there should not be any serious problems with this tax
for within almost thirty years it has been possible to optimize this part of
taxation and make it even more effective. This is why presumably the Deposit
Interest Retention Tax is not viewed by some specialists as a serious problem
that actually makes the challenge of taxation evasion because of the use of
this tax even more serious.
Naturally, the position of those who stand on the ground that the Deposit Interest
Retention Tax is quite understandable and basically supported by the fact that
initially this tax was introduced exactly to reduce tax evasion on earned income.
However, this goal was rather an ideal which has not been attained in actuality.
To put it more precisely, in recent years, a large amount of tax evasion in
relation to the Deposit Interest Retention Tax has been revealed. This means
that some individuals attempted to “optimize” their taxation and
reduce taxes they were formally obliged to pay. To meet this goal many wealth
individuals had set up secret off-shore bank accounts, the well-known Ansbacher
accounts, in order to avoid paying the Deposit Interest Retention Tax. Alternatively,
thousands of other individuals, being encouraged by their banks, had opened
bogus “non-resident” accounts. As a result, the Deposit Interest
Retention Tax exempt under double taxation agreements and, therefore, it has
not been paid.
Taking into consideration the fact that the national economy of Ireland is growing
to be more and more integrated in the world economy in terms of the process
of globalization, it is getting more and more easier to use off-shore banks
accounts and open new bogus “non-resident” accounts to avoid the
payment of the Deposit Interest Retention Tax. For this tax is an important
part of the VAT and income taxes in Ireland, which constitute about 60% of the
state budget revenues, it is simply vitally important to minimize any kind of
frauds concerning the payment of this tax and this will be one of the major
challenges for the next few years.
In fact, several attempts to optimize the Deposit Interest Retention Tax from
the part of the Office of the Revenue Commissioners have been already made.
To put it more precisely, several investigations have led to heavy fines for
the people involved in the violation of the existing norms. However, the problem
is still far from its solution since no structural changes have been made in
relation to this tax. Moreover, it is still possible to estimate that the Office
of the Revenue Commissioners as well as Irish legislators has not worked efficiently
enough at the optimization of the Deposit Interest Retention Tax. Obviously,
till the present moment, not enough has been made to punish the banks who encourage
the illegal behaviour of their clients and, in such a way, stimulated substantial
taxation evasion.
Thus, taking into account all above mentioned, it is possible to conclude that
currently the Deposit Interest Retention Tax still needs to be improved in order
to make the work of the Office of the Revenue Commissioners more effective and
increases the income of the state budget from this tax. At the same time, in
the nearest future it is important to undertake really effective measures to
prevent any possibility of fraud and taxation evasion, especially with the assistance
of banks which openly helped their clients to exempt taxation. This is why it
is possible to estimate that the solution of this problem will be one of the
main challenges the Office of the Revenue Commissioners will have to cope with
within the next hew years.
