Business Irish

Thursday 19 July 2018

Airbnb hosts and the taxman? It's only the tip of the iceberg

'Airbnb is not a new phenomenon. Revenue have always audited Irish auctioneers and letting agents to identify untaxed rental income of their clients'
'Airbnb is not a new phenomenon. Revenue have always audited Irish auctioneers and letting agents to identify untaxed rental income of their clients'

Aidan Clifford

We have all heard of "big data" and how it will change so much of the fabric of the modern world - and the Revenue Commissioners have heard it all too.

It used to be difficult for Revenue to obtain information, and then more difficult again to match that information to individual tax payers.

Not any more. Airbnb is not a new phenomenon. Revenue have always audited Irish auctioneers and letting agents to identify untaxed rental income of their clients.

These days the Revenue Commissioners' audits of businesses are often as much about data capture of suppliers and customers of the business as identification of irregularities in the business under audit.

By auditing their suppliers, Revenue will know how many potatoes a chip shop bought, how many bottles of shampoo a hair salon used, and Revenue have closed off loopholes such as buying supplies in supermarkets or businesses pretending to not know their customer.

Revenue officers also walk up and down main streets and take down details for the various services that are put up on community notice boards - so called "streetscape audits".

And Revenue officers have extensive powers, including the ability to get owners' details for particular phone numbers - and even if the phone is a pay-as-you-go, off-the-shelf job, they can get the phone mast triangulation details of the address of the bedside table where the mobile phone spends the night hours. (Revenue claim to have never used this latter power.)

There is an international movement to allow more cross-border sharing of tax relevant information. Your Spanish property may already have come to Revenue's attention through international tax information sharing, and they will question why the rent was not returned for tax - and where the initial cash to buy the property came from.

The letting agent in France, even without the company itself returning the information to Ireland, might store that information in an Irish-based data centre. Data comes in and tax bills go out.

The American government is no different, other than the fact that it is a bit more aggressive when pursuing these courses of action. The USA likes to tax its citizens on their worldwide income, and has a system called Foreign Account Tax Compliance Act (FATCA).

In summary, it means that all banks that want to operate in or with any entity in the US need to supply details of all US citizens' bank accounts to the US tax authorities.

In short, it is not Big Brother who is watching you, it's Big Uncle Sam.

And what about the countries that attract foreign tax-dodgers by imposing absolute secrecy over banking? Well, even these countries are starting to toe the line and share details.

Where they still cling to some shade of secrecy, you will find that some of their disgruntled former employees are stealing the data and selling it to foreign tax authorities.

It is reported that the German tax authorities recently paid a Swiss bank employee to obtain data about some German tax-evaders' Swiss bank accounts. The German authorities then reportedly shared the stolen data with other tax authorities in other territories.

Sections of the building trade have a reputation for occasionally operating outside the tax net, but even that is being rapidly regularised.

You can't get the home improvement grant unless the tradesperson is registered for tax. You can't pass a Customs and Excise diesel checkpoint in a white van without opening up the back to show whether you're working or not, and then providing your details.

Revenue are doing audits of PAYE taxpayers who got one-off single-house planning permission and demanding details of all payments to tradespeople - you get the picture? It is not really a PAYE tax audit at all.

Some small construction and maintenance jobs will still operate on a cash-only, no-VAT basis, but they are becoming more and more infrequent.

All the data collected by Revenue is fed into the big data machine that Revenue call REAP: Revenue's electronic risk analysis system. There is matching and mixing and much crunching of the numbers, and then the Revenue auditors arrive on an errant taxpayer's doorstep, armed with full details of how much they under-declared.

Inevitably, an accountant is called, negotiations begin - and often the final settlement is in excess of the original amount evaded.

Of late, Revenue is looking for prosecution and even jail time for the serious evaders. You're on notice.

Aidan Clifford is technical director of the Association of Chartered Certified Accountants) in Dublin

Sunday Indo Business

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