The Irish tax system was designed for a simpler world. Much of it was inherited from the UK, though in important respects Irish rules differ, too. But like tax systems globally it is having to adapt to deal with ways of doing business and earning income which were never envisaged when the rules were drawn up.
The decision by the Revenue Commissioners to issue guidance on VAT to social media influencers - following advice last month to the same group on tax on their income - is the latest evidence of this. The tax rules were drawn up in an era when income was earned as cash – from an employer or in pursuit of a trade. Its architects would not have considered somebody being gifted a few nights in a posh resort, or the use of a car for a year, in return for advertising the services of the donor.
Properly accounting for this is important in terms of a key goal of the system – fairness. Those who see money deducted each month under PAYE need to see the system applied fairly elsewhere, as do small retailers faithfully filing their VAT returns.
Tax rules can be applied to the world of social influencers, usually in a fairly straightforward fashion, albeit that non-cash transactions can involve some complications. But the basic structures of the tax system can adapt. And there is no excuse for full-time influencers or those using their fame to earn additional income, not to be compliant.
RM Block
In other areas, however, the taxation system is showing its age. In corporation tax, in particular, the complexity of international trade is a world away from when the system of taxing companies was drawn up. Fairness is an issue here, too, as it is the biggest players who have more options to cut their tax bills.
An OECD agreement which was due to set a minimum level of tax for these giant corporations now looks like it is being picked apart. As this story plays out, there will be important issues for Ireland, which has attracted investment for many years by charging multinationals at a relatively low rate. Ireland can lay down its own income tax rules for the modern era, but when it comes to big multinationals it is an international game.
