4 minute read 12 Aug 2019
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5 reasons why the burden on Ireland’s HR and Tax functions is growing

By

Michael Rooney

Ernst & Young — Ireland (EY Ireland) Tax Partner

Tax professional with extensive experience.

4 minute read 12 Aug 2019

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HR and Tax functions, as the repository of employee data, will inevitably bear the burden of this increase in employer reporting responsibility.

Globalisation, growing tax regulation and the sharing of data by tax authorities across jurisdictions is increasing the complexity and reporting requirements for HR and Tax functions. It is more complicated than ever before to accurately assess and respond to the many risks that businesses are now faced with.

With a growing population, the Irish Government is under increasing pressure to fund large scale infrastructural projects such as hospitals, schools and affordable housing developments, and to deliver these projects on time and within budget. The recent furore surrounding the projected overspend on the National Children’s Hospital bears testament to this.

In light of these pressures, the importance of income tax and social security to the Irish Exchequer cannot be understated, and Irish Revenue are active in ensuring employer compliance in this area. It is consistently the biggest contributor to Ireland’s budget, making up more than 38% of the €55.6 billion tax take in 2018. 

All of this is creating additional pressures for HR and Tax functions, and I will outline below some of the key factors driving this.

1. New Short Term Business Visitor rules

Irish Revenue has published revised guidelines on the tax treatment of foreign employees working temporarily in Ireland. The changes increase the obligation on employers to operate PAYE for foreign employees and place a greater cash flow and administrative burden in respect of short term business visitors, even if they spend only a few days working in Ireland year after year.

Revenue contend that their revised guidance is in line with OECD guidelines, however the economic employer principles on which their guidance is based are open to interpretation.

2. PAYE modernisation

PAYE Modernisation is the biggest shake-up of the PAYE system in over 50 years. As of 1 January 2019, employers are required to report their employees’ pay, benefits and deductions in real time.

Under the new regime, employers must ensure that business processes and practices are adequate to enable reporting in real time. This can cause added complexity for businesses operating internationally. For example, the real-time reporting requirements extend to any bonuses, share awards or other benefits provided by an overseas parent company to an employee working in Ireland.

The risk of a payroll audit has significantly increased for any Irish companies that have poor payroll practices in place, due to the increased visibility that Revenue has under the new reporting regime.

3. Brexit

In preparation for Brexit, many Irish companies, notably in the agri-foods sector, are seeking to diversify into new markets. This brings with it increased complexity and risk for HR and Tax functions.

Investing in new overseas markets will inevitably involve sending people to work in those locations, where the compliance landscape can often be very different to the Irish equivalent. For example, we are seeing huge growth in markets like China, Singapore and Malaysia, with each having vastly different tax and reporting requirements to our own.

It is worth bearing in mind that Ireland offers tax relief to employees working in many developing markets through the Foreign Earnings Deduction, to encourage growth and investment.

4. BEPS and country-by-country reporting

The picture is being further complicated by new data sharing requirements, country-by-country reporting under the BEPS agenda, FACTA and foreign bank account reporting.

There is now a greater focus on employment taxes, reward and expatriate tax compliance for businesses, and many are struggling to accurately track their people when they go overseas. End-to-end processes should be mapped out to manage this risk and businesses should understand the options in terms of technology and automation in tracking their people.

5. Focus on immigration security

As the concerns about the impact of Brexit grow and with the increasing focus globally by tax and immigration authorities on cross-border workers, the role of HR and Tax functions in ensuring compliance is becoming increasingly complex and onerous. In addition to this, further employee reporting is on the horizon with impending Gender Pay Gap legislation and pension auto enrolment.

HR and Tax functions, as the repository of employee data, will inevitably bear the burden of this increase in employer reporting responsibility.

Summary

With the increasing focus globally by tax and immigration authorities on cross-border workers, the role of HR and Tax functions in ensuring compliance is becoming increasingly complex and onerous.

About this article

By

Michael Rooney

Ernst & Young — Ireland (EY Ireland) Tax Partner

Tax professional with extensive experience.