Thursday, 3 October 2019

Questions (74)

Willie Penrose

Question:

74. Deputy Willie Penrose asked the Minister for Finance if his attention has been drawn to an anomaly by which if a self-employed person that files an income tax return and has not paid their local property tax, the Revenue Commissioners apply a 10% penalty to their total tax liability (details supplied); if he will make appropriate adjustments to the legislation in this regard; and if he will make a statement on the matter. [40487/19]

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Written answers (Question to Finance)

I am advised by Revenue that, similar to the position that applies in the case of other taxes and duties, penalties can be imposed for various offences relating to local property tax (LPT), such as failure to submit a return or other documentation or the provision of false information. Thus, all taxpayers who fail to submit an LPT return, or who submit an incorrect LPT return, are liable to a penalty of the amount of the LPT that would be payable with a correct return, subject to a maximum penalty of €3,000.

In the normal course of events, a self-employed person is penalised for the late submission (or non-submission) of an income tax return by the imposition of a surcharge on his or her income tax liability. However, a self-employed person who has submitted his or her income tax return on time can also be liable to an income tax surcharge in respect of the late submission of his or her LPT return or the failure to pay LPT.  Where such a person has not submitted his or her LPT return by the time that he or she submits an income tax return, the income tax liability is increased by 10% up to a maximum increase of €63,485.  However, where the LPT return is subsequently submitted and the associated LPT liability is paid, the income tax surcharge is capped at the amount of the LPT liability.

Unlike self-employed taxpayers, PAYE taxpayers are not generally required to submit an annual income tax return. Therefore, it is not possible to impose a similar type surcharge on PAYE taxpayers for failure to submit an LPT return on time. While PAYE taxpayers and self-employed taxpayers are treated the same in terms of the amount of their LPT liability, the same treatment is not necessary, and not always possible, in relation to how Revenue addresses non-compliance by such taxpayers.  Revenue’s compliance actions are tailored according to the type of taxpayer involved and the most effective way to ensure compliance. This is illustrated by the use of the facility to enforce the collection of LPT liabilities from PAYE taxpayers through mandatory deduction at source from a PAYE taxpayer’s salary or pension.  As such an enforcement option can apply in the case of PAYE taxpayers, it is considered that linking non-compliance with LPT by self-employed persons with a surcharge on their income tax liabilities is both fair and proportionate. 

Given the relatively low level of LPT liability for most property owners, the application of a 10% surcharge on a self-employed person’s LPT liability alone would be unlikely to act as an effective deterrent to non-compliance.  As I have already stated, having incurred a surcharge, a self-employed person has the opportunity to cap the surcharge at the amount of the LPT liability due by submitting an LPT return and/or paying the LPT liability.  Compliance is not just about ensuring the submission of returns and the payment of outstanding tax liabilities; there is also a timing aspect to compliance.  Returns must be submitted and payments must be made by specified dates.  It is considered that reducing a surcharge or penalty to nil following the late submission of returns or payments would serve only to incentivise such late submission.

Finally, it should be noted that the vast majority of property owners pay their LPT on time. There is no reason for property owners to put themselves in a position where they become liable to a penalty or surcharge.  If an individual has particular financial circumstances which cause difficulties in meeting his or her LPT liability, he or she may be entitled to a deferral of the tax or may avail of one of a number of payment methods to discharge the liability evenly over the course of the year.