The re-emergence of the black economy could be a threat to Ireland’s economic recovery, according to the newly-elected president of the Institute of Certified Public Accountants in Ireland (CPA).
Gail McEvoy, who is managing partner of Drogheda firm McEvoy and Associates, said that immediate steps must be taken to ensure the under-the-counter payments culture, which was prevalent in the 1980s, does not re-emerge
McEvoy said that an increasing number of businesses were now ‘undeclaring’ their income for tax purposes and some were not even registering for tax at all.
She said clients of accountancy firms were complaining about this and many were concerned about how they could continue to compete with firms which were paying little to no tax.
‘‘In times of recession, there is a reversion to cash-based transactions, which is extremely damaging economically," she said. ‘‘The danger is that, with the increase in personal taxes and income levies, the temptation will be too great - and sole traders, contractors and companies will revert to cash if they think they can get away with it."
She said the Revenue Commissioners ‘‘must continue to target cash-based businesses as it has done in the past 12 months’’.
‘‘There must be a compulsion to provide Vat invoices for services and the penalty must be severe on those who fail to do so," she said.
McEvoy speculated that many businesses which hadn’t registered for tax tended to fall into the practice. ‘‘I think what can happen is that somebody starts a small business and they want to see how it’s going to go - they don’t want to give up their income from the social welfare," she said.
‘‘Before they know it, a couple of weeks turns into a couple of months and it is very hard to get out of that loop. A lot of them may not be aware that there are massive incentives available for starting a business."
She also believed that the banking crisis had contributed to the rise of the cash economy. Since banks were no longer providing credit to businesses, she believed some firms were not bothering to lodge money, thus removing one key part of the audit trail.
Although many businesses were now complaining about rivals not paying tax, she believed most would not report this to the Revenue.
‘‘I think it would be unusual," she said. ‘‘Accountants are obliged to report them, but these people don’t come near us. I think the Irish culture is that they don’t squeal. They complain to everyone, but don’t report it."
She said the government should undertake an information campaign aimed at the wider public which demonstrated the damage to the wider economy and the impact this activity had on the ability of government to provide public services.
She pointed out that there was now little or no tolerance for false insurance claims following a sustained campaign by the industry to demonstrate how such fraud affected every individual.
A similar campaign focusing on the black economy should be implemented by government, she said. ‘‘A culture of zero-tolerance will empower people to refuse to pay cash if asked to do so by a service provider," she said.
McEvoy warned that any initiative to reduce unemployment would fail unless the new government tackled the reemergence of the cash economy.
‘‘The jobs initiative published by government included a decision to reduce the Vat rate for certain industry sectors. While welcome, this will ultimately lead to zero jobs being created if the culture of under-the-counter payments is allowed to flourish," she said.
Source: www.sbpost.ie
Gail McEvoy, who is managing partner of Drogheda firm McEvoy and Associates, said that immediate steps must be taken to ensure the under-the-counter payments culture, which was prevalent in the 1980s, does not re-emerge
McEvoy said that an increasing number of businesses were now ‘undeclaring’ their income for tax purposes and some were not even registering for tax at all.
She said clients of accountancy firms were complaining about this and many were concerned about how they could continue to compete with firms which were paying little to no tax.
‘‘In times of recession, there is a reversion to cash-based transactions, which is extremely damaging economically," she said. ‘‘The danger is that, with the increase in personal taxes and income levies, the temptation will be too great - and sole traders, contractors and companies will revert to cash if they think they can get away with it."
She said the Revenue Commissioners ‘‘must continue to target cash-based businesses as it has done in the past 12 months’’.
‘‘There must be a compulsion to provide Vat invoices for services and the penalty must be severe on those who fail to do so," she said.
McEvoy speculated that many businesses which hadn’t registered for tax tended to fall into the practice. ‘‘I think what can happen is that somebody starts a small business and they want to see how it’s going to go - they don’t want to give up their income from the social welfare," she said.
‘‘Before they know it, a couple of weeks turns into a couple of months and it is very hard to get out of that loop. A lot of them may not be aware that there are massive incentives available for starting a business."
She also believed that the banking crisis had contributed to the rise of the cash economy. Since banks were no longer providing credit to businesses, she believed some firms were not bothering to lodge money, thus removing one key part of the audit trail.
Although many businesses were now complaining about rivals not paying tax, she believed most would not report this to the Revenue.
‘‘I think it would be unusual," she said. ‘‘Accountants are obliged to report them, but these people don’t come near us. I think the Irish culture is that they don’t squeal. They complain to everyone, but don’t report it."
She said the government should undertake an information campaign aimed at the wider public which demonstrated the damage to the wider economy and the impact this activity had on the ability of government to provide public services.
She pointed out that there was now little or no tolerance for false insurance claims following a sustained campaign by the industry to demonstrate how such fraud affected every individual.
A similar campaign focusing on the black economy should be implemented by government, she said. ‘‘A culture of zero-tolerance will empower people to refuse to pay cash if asked to do so by a service provider," she said.
McEvoy warned that any initiative to reduce unemployment would fail unless the new government tackled the reemergence of the cash economy.
‘‘The jobs initiative published by government included a decision to reduce the Vat rate for certain industry sectors. While welcome, this will ultimately lead to zero jobs being created if the culture of under-the-counter payments is allowed to flourish," she said.
Source: www.sbpost.ie
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