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Irish Business Tax Proposals No Silver Bullet, Says CPA Ireland

Monday, February 22, 2010

The Institute of Certified Public Accountants in Ireland (CPA) has questioned the wisdom of the report published by the Public Accounts Committee on February 17, which calls for a change in company law to make company directors personally liable for the non-payment of certain types of taxes.

”With respect to the Public Accounts Committee, which undertakes valuable work, they have got this wrong. Calling for yet more legislation when there are already adequate provisions under existing laws to protect Revenue and prosecute errant company directors is simply unnecessary. It will invariably add to the burden of doing business in Ireland,” said John White, President of the CPA.

“Where there is evidence that some directors are ‘manipulating limited liability status to circumvent their tax responsibilities’ there are already company law safeguards open to Revenue which can result in personal liability on directors," White continued. "For example, Revenue can have the directors charged with reckless trading or fraudulent trading, which can result in personal liability where the limited liability protection has been abused.”

White also pointed out the very strong powers of the Revenue, including enforcement procedures and priority creditor rights not available to other creditors. “Revenue also has access to more information than most other creditors in that they get details of trading activities (on VAT returns and corporation tax returns) that is not available to other creditors and therefore are better positioned to protect their asset. Revenue usually have 'local' information and have powers of inspection/audit which are used very effectively in identifying those that may be defaulting on their tax liabilities,” he said.

“The CPA does not condone any actitivies related to non-payment of fiduciary taxes. We are however concerned about the practicalities of introducing such a law and fail to see how it would work in practice. Would all proprietary directors and shareholders be obliged to provide personal guarantees to the Collector General? The practicalities of this recommendation and the potential consequences have not been thought through.“

White concluded: ”We recognize the imperative for revenue collection; however we have to achieve a balance between the necessity to collect taxes and a working economy that is pro enterprise. More legislation is not the silver bullet which will increase the tax take, rather the Revenue needs to be properly resourced to enact the existing powers available to them”.