You, your bank and Revenue: Big Brother or fair play?

Q&A: Dominic Coyle answers your personal finance questions

Technology and a growing determination to clamp down on tax evasion means tax authorities worldwide are getting more aggressive in this area and   are more open to the idea of mutual co-operation and better able to deliver on it

Technology and a growing determination to clamp down on tax evasion means tax authorities worldwide are getting more aggressive in this area and are more open to the idea of mutual co-operation and better able to deliver on it

 

Following your article about what foreign tax authorities/institutions share with Irish Revenue, it does seem as if Big Brother is watching us. It also begs the question as to what information Irish banks give to Revenue? Are details of every account we now open, or have, sent to Revenue? I appreciate that we have nothing to worry about if we are compliant but it does smack of infringing the rights to privacy of the citizen. What do you think?

Mr JH, Kilkenny

As you say, compliant taxpayers have nothing to fear from the transfer of information on their financial assets between tax authorities, and indeed between financial institutions and those authorities.

You are also quite correct in your suspicion that, if Irish Revenue is securing fairly extensive information on financial and other assets held abroad, it is likely they are getting similar information on assets you hold in Irish banks and other financial institutions. Indeed they do, and have been doing for some considerable time.

There are a sheaf of regulations dating back to 2008 that require Irish banks, building societies, credit unions and even An Post to hand over certain information in relation to money paid on investments by way of interest, dividend or whatever.

More recently, similar rules have been put in place for life insurers and other investment undertakings.

The first regulations in this area were activated by then finance minister Brian Cowen in May 2008 the day before he took over as taoiseach under a provision made in the 2006 Finance Act.

The key part – section 125 (3)(a) of that Finance Act – states: “The Revenue Commissioners, with the consent of the Minister for Finance, may by regulations provide that a specified person be required to make to the Revenue Commissioners a return of information relating to relevant payments made by or through the specified person concerned for or by reference to such period or periods, other than a period beginning before 1 January 2005, as may be specified in the regulations.”

Exemptions

When it refers to a “person” it defines that within the section as a financial institution. It also specifies that powers under the act can only be activated via regulation under a statutory instrument which is published in Iris Oifigiúil, hence the initial move in 2008 under what was called the Return of Payments (Banks, Building Societies, Credit Unions and Savings Banks) Regulations 2008.

The regulation was amended under Brian Lenihan in July 2009 to include other EU banks operating in Ireland.

They required reporting of income from investments dating back to 2005 where that income amounted to more than €635 in any tax year. That threshold was reduced in 2015 to €300, dating back to 2014.

As is often the case, the measures were phased in. So, for instance, under the original regulations, only interest on which Dirt was paid was relevant for the back years – 2005 and 2006 – before being extended to virtually all payments from 2007 onwards. Credit unions were not brought under the rules until 2008 on interest payments and credit union dividends till 2009 despite their being named under the original regulation.

There are also, as always, certain exemptions but these are very restricted.

So what actually has to be reported? In general, Revenue requires details of the institution itself and, in relation to the customer:

– Their name , address and date of birth;

– The amount of income by way of interest or otherwise;

– Their PPS number and/or, where relevant, their tax reference number;

– The account number(s) and sort code;

– “All other relevant indicators,” a catch-all phrase that includes the split between joint account holders, the amount of Dirt already deducted and other issues.

Interestingly, the €300 limit (originally €635) was per account, not per institution – although for join accounts it was the aggregate amount paid to the multiple account holders. To avoid people splitting accounts when the measure was first introduced, there is a specific measure that requires reporting of all interest paid or credited in the first year on any account opened on or after January 1st, 2008.

Question of balance

The reporting rules were extended to life insurance companies in 2011 and to other investment business in 2012. The details required, and payments covered, are broadly the same although there is a wider range of exemptions under the Investment Undertakings regulation.

Anyone looking to get the fine detail of the measures can find the precise wording and intent of the relevant regulations at:

– Statutory Instrument No 136 of 2008 – original Return of Payment regulation;

– Statutory Instrument No 254 of 2009 – extension to other EU banks operating here;

– Statutory Instrument No 641 of 2011 – extension to life insurers;

– Statutory Instrument No 245 of 2013 – extension to investment undertakings;

– Statutory Instrument No 56 of 2015 – reduction of threshold to €300.

In relation to your worries about Big Brother and also data privacy, rights in society generally are a question of balance. There are very few absolute rights and certainly no absolute right to privacy.

Technology and a growing determination to clamp down on tax evasion means that tax authorities worldwide are getting more aggressive in this area and are both more open to the idea of mutual co-operation and better able to deliver on it.

On the issue of data privacy, financial institutions are very tightly prescribed as to what they can share of your personal information and with whom. Revenue itself mandates, under the relevant regulations, that tax reference or PPS number details, for instance, can only be used for complying with reporting legislation between the institutions and Revenue itself.

Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.

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