Tasking Revenue to collect Irish Water bills a wrong move

The focus should first be on water service provision, and if Irish Water is to be seen as a

I was quite happy to see the last cabinet meeting before the summer break taking place at Lissadell House in Co Sligo, to commemorate the work of WB Yeats.

I might have been even happier about this if there wasn’t a Yeats-sized gap in my memory for anything the man wrote.

What I do remember is a mantra of my English teacher that Yeats’ poetry was inspired in part by his unrequited love for Maud Gonne. The only other place I’ve ever seen the use of the word “unrequited” is in discussions about taxation.

A tax payment, in contrast with any form of commercial payment, is not directly requited or rewarded in any way.

Some researchers who study motivation and behaviour often contend that there is a thing called tax morale — the notion that tax gets paid because of people’s innate sense of justice and faith in the system.

Citizens pay their taxes because of the virtue of paying the tax is its own reward.

I’m not so sure about that theory. I think people pay tax because they have to, and fear the consequences if they don’t.

In any case, most of us have no choice. We don’t decide to pay Vat on clothing — the Vat is already added to the purchase price.

We can’t tell our employers not to deduct PAYE from our wages. The system gives us few opportunities for protest. The only direct reward for paying the correct amount of tax on time is that Revenue leave you alone.

This is why it is important that tax is unrequited, at least from the tax administration point of view.

If the system directly links the payment of taxes with the provision of services, taxpayers are given a line of defence for not paying.

In the UK, there have been a number of cases involving people who refused to pay their tax bills because they objected to where their tax money was being spent, for example on nuclear armaments.

None of these cases have resulted in anyone paying less tax.

The links between paying tax and running the country are not sufficiently direct.

Since the Eurostat decision on the categorisation of Irish Water last week and its link to the Exchequer, the suggestion that the Revenue Commissioners could collect water charges has reared its head again.

The argument goes that Revenue has a range of collection powers and procedures which are not available to any other state agency.

At one level, the suggestion that Revenue do the collecting is pragmatic, and based on previous experience. Compliance levels for the Household Charge (the predecessor to Local Property Tax) were not satisfactory.

The Household Charge was administered by the Local Government Management Agency on behalf of City and County Councils.

Local authorities are well able to collect tax, as anyone who has ever paid commercial rates well knows.

But it was only when Local Property Tax replaced the Household Charge, and Revenue replaced local government as collectors, that compliance levels went up to 90%. This result could be replicated for water charges.

Because Irish Water is a service, a link would be created between the charge that the Revenue might collect and the provision of water services.

If the water coming out of your tap is dirty, that’s a reason for not complying with the charge. You might not be successful ultimately in the argument, but it’s a valid argument because products and services should be fit for purpose.

Revenue is not geared up for this kind of dispute.

Revenue dispute resolution procedures are designed to deal with tax amounts at issue, not whether the taxpayer is getting a good service in return for the tax paid.

At another level, the suggestion that Revenue takes over another collection duty would ring alarm bells for many in the business community who rely on their services.

Revenue service levels aren’t great at present.

Many businesses rely on a speedy turnaround of tax correspondence so that they can obtain tax clearance certificates and new business Vat registrations.

Without these, deals won’t close and transactions can’t happen. Also delays in processing queries can result in delays in obtaining tax refunds.

Businesses would be right to be concerned if Revenue were assigned additional collection duties of any description without being resourced to do the work.

In the nature of things, there is always a delay between the announcement of a new strategy, and the resourcing to make it happen.

If Irish Water is ultimately to be seen and treated as a commercial entity, devolving its collection powers to a state agency such as Revenue is the wrong first step on that road.

One of the first principles of commerce — that you should only charge for goods or services you can actually provide — seems to have been overlooked.

The starting point for any business is service provision, not charge collection. Business isn’t poetry — you have to provide a bit more for the money.

Brian Keegan is director of taxation at Chartered Accountants Ireland