That leave be granted to introduce a Bill entitled an Act to create an office of tax simplification for a time limited period of five years to advise the Minister of Finance on such matters.
I am pleased to introduce the Finance (Office of Tax Simplification) Bill 2018. The simplification of our tax code is at the core of the Bill. In an ever-changing global environment, it is essential that Ireland remains ahead of the curve when it comes to a consistent, simple and efficient tax system. The tax strategy group publishes its work in the lead-up to the budget every year. That work offers a valuable insight into possible changes in the various strands of our tax regime, ranging from income tax and corporation tax to value-added tax. The Bill does not seek to replace the group but, rather, to complement it. While the tax strategy group would continue its work on general taxation, the office of tax simplification would specifically look at making the tax system easier for all users, including the Revenue Commissioners. The proposed office would bring forward recommendations on how the tax code could be simplified. Crucially, the Bill has a time-bound element to it to ensure the office does not turn into another quango.
A similar office was established in the United Kingdom. It was asked to advise on ways to simplify inheritance tax in the UK by the Chancellor of the Exchequer. The current tax director of the office in the UK, speaking on inheritance tax, stated, "Some of those who deal with inheritance tax will be private individuals who are already dealing with difficult circumstances, so the complexities of the administrative aspects of this tax may be particularly challenging." That case perfectly sums up the role the office of tax simplification could play and how useful it could be in an Irish setting.
The cost of doing business in Ireland must be closely monitored at all times. We are a small, open economy on the periphery of Europe and it is imperative that we remain competitive in a challenging global environment. If another country has a better offering, it will get the investment and jobs. Taxation is a significant cost for large and small companies, not only in terms of the tax incurred but also the administrative burden. By reducing the compliance costs for businesses, we can reduce the cost of doing business in Ireland.
Behavioural economists often argue that if one wishes for people to comply with something, one has to make it simple. By making the tax code simple for people to understand, we would increase compliance. Most people and companies in Ireland endeavour to be tax compliant but some fail to comply through a lack of understanding. Ignorance is not a defence for non-compliance but we must recognise that simplifying the tax code would bring people into the tax net.
The argument also works the other way. There are a large number of credits, reliefs, exemptions and reductions across many areas of the taxation system. In many cases, people do not apply for such benefits because it is challenging for them to understand whether or not they qualify. That is particularly the position in respect of certain tax credits. As a consequence, some targeted reliefs and benefits are not as effective as they could be.
It is important to note the benefits a simple code would have for the Revenue Commissioners. Under a simpler tax code, it would be easier for Revenue to determine whether an individual or company is tax compliant. A simpler tax code would serve to improve compliance and assist the Revenue Commissioners in focusing on the real tax cheats in our society.
The Bill is not revolutionary. It is straightforward in its objective and tackles a very specific issue. I hope that the House will get behind and support it in order that we can work towards a simple, efficient and consistent tax code that is more competitive than is currently the case.