THE ECONOMIC downturn and falling living standards tend to increase the incidence of tax evasion and growth in the black economy. According to the Irish Small and Medium Enterprises (Isme) tax lost in this way now amounts to about €4.5 billion. That is bad news for a Government that is struggling to pay for necessary services while retaining people in employment. It is also bad news for an economy that had become more tax compliant in recent decades.
Some groups have always struggled with the notion of paying their due taxes. It has not been confined to farmers, builders, landlords or tradesmen. Ansbacher accounts, off-shore Dirt arrangements and other tax-evasion scams between 1980 and 2000 showed just how ingrained and pervasive this anti-social behaviour had become. A succession of government “tax amnesties” contributed to the problem. But tribunal investigations, public outrage, reforming legislation and more aggressive action by the Revenue Commissioners facilitated a slow process of change. On the basis of Isme’s black economy estimate, however, and a report from the Private Residential Tenancies Board (PRTB), more remains to be done.
In 2004, residential tenancies legislation provided new rights and obligations for both landlords and tenants. It became obligatory to register rental properties with the PRTB. Seven years later, however, the law is being widely ignored and only half of those landlords who receive State rent allowance payments are registered with the board. That figure reflects tax compliance problems that have traditionally affected this sector.
Minister of State for Housing Willie Penrose proposes moving responsibility for the payment of rent allowances from the Department of Social Protection to the Department of the Environment and making payments directly to landlords, rather than to their tenants. Because State payments amounting to €500 million are made indirectly to landlords, along with poor official record keeping, the PRTB has great difficulty in identifying non-compliant landlords. It issued 16,000 enforcement letters last year and secured seven criminal convictions. It will now share the information it has gathered with the Revenue Commissioners and with local authorities.
For decades, large chunks of poor-quality rented accommodation have been an effective “no go area” for the tax authorities.This should now change.