40% of PAYE earners don"t understand tax system

A high percentage of Irish workers are still unaware of the tax credits available to them, the Irish Taxation Institute (ITI) said this week. Mark Redmond, chief executive of the institute, was speaking at the start of Tax Week, a campaign running from 14th to 19th June to raise awareness of the key issues around taxation. To mark the week, the ITI commissioned a national survey with Red C of attitudes towards tax issues which showed that almost 40 per cent of workers do not fully understand the PAYE tax system in this country, and while over two-thirds claim to understand their payslip following the recent supplementary budget, over 50 per cent do not understand how the levies are calculated. 'This is our second national survey, the first was conducted with Red C in 2006, and, encouragingly, there has been some improvement with 63 per cent of PAYE taxpayers now saying they understand how the tax system impacts on them - a five per cent improvement in three years,' said Mr Redmond. 'PAYE taxpayers realise that they can and should actively manage their tax affairs - their tax bill is probably the biggest bill they ever pay and therefore demands far more scrutiny and checking than their credit card bills or any utility bill - especially as it is very often overstated. Nineteen per cent of PAYE taxpayers now use a tax adviser to help them manage their tax affairs, compared to seven per cent three years ago.' However, while over 60 per cent of respondents claim to fully understand the PAYE system in this country, this still leaves a massive almost 40 per cent of taxpayers with a gap in understanding and this equates to a sizeable section of the population who may be over-paying tax, under-claiming refunds, or not claiming them at all. Worryingly, one-third of respondents said they leave everything up to their employer when it comes to both tax and claiming reliefs, suggesting that they are neither taking control of nor actively managing their tax affairs. 'One out of every two taxpayers is still unsure of all their entitlements and the four-year deadline for claiming them. There is room for a lot more improvement in this regard, and it is needed now more than ever. On top of that, as a result of the October budget and the emergency budget in April, we are currently in the middle of massive changes to our personal taxation system, and that"s all the more reason to deliver clarity and understanding of the system to all taxpayers,' added Mr Redmond. On that basis, the Irish Taxation Institute is calling for the introduction of a Taxpayer Advocate who would ensure that the rights of individual taxpayers were protected. The role could also include evaluating the fairness and efficiency of our tax administration at a systemic level with appropriate reporting and recommendations for change to the Oireachtas. The survey does show a pragmatic attitude among taxpayers, a majority of whom have accepted that the recent increases introduced in the supplementary budget are necessary for economic recovery. In fact, it looks like Irish taxpayers are bracing themselves for more increases in the December budget this year, as approximately 60 per cent have indicated that they expect a property tax to be introduced at that stage. Another strong message for Government from the Irish Taxation Institute National Taxpayers Poll is not to remove tax reliefs for pensions, with over half of all employed adults saying they would be likely to stop or reduce pension contributions if tax relief was removed.