Areas of Strength
- Ireland reports a high level of tax compliance, as evidenced by having one of the lowest levels of tax arrears in the EU. This is supported by efficient IT systems and a centralised recovery process led by the Irish Tax and Customs Administration (The Revenue Commissioners). Key recovery tools include Phased Payment Arrangements (PPAs), third-party payment redirection, court judgements, and the use of government-appointed Sheriffs, with a strong emphasis on early taxpayer engagement to resolve payment difficulties. A daily interest charge on late payments reinforces timely compliance.
- Ireland’s VAT compliance gap was estimated at 7.6% of VAT Total Tax Liability (VTTL) in 2023, below the EU average. This is facilitated by the increased use of e-invoicing and payments and the automated import system. The Revenue Commissioner’s VAT Real-Time Risk system and Risk Evaluation, Analysis and Profiling System (REAP) also allow for the swift identification of VAT compliance risks and targeted compliance interventions.
- Ireland is transparent and published comprehensive documentation about Tax Expenditures and their cost. Detailed tax expenditure reports are produced on an annual basis, with strict evaluation guidelines also in place. Measures falling within the legal definition of Tax Expenditure accounted for about EUR 8 billion in 2024 (2% of GNI, or 8% of tax revenues). Ireland is also transparent with the reporting of tax relief measures that are not defined as Tax Expenditures as per legislation. These reliefs represent significant foregone revenues.
Areas for Improvement
- Ireland does not measure or publish tax gaps for corporate income tax (CIT) or personal income tax (PIT). It is understood that Ireland does not intend to produce any estimates, mainly due to concerns regarding existing methodologies, the accuracy of the tax gap estimates that would be produced in an Irish context, and their potential usefulness at an operational level. Although internal analysis of potential tax losses is performed, the estimation of CIT and PIT compliance gaps would help as a diagnostics tool to see where tax collection problems arise per tax type and to understand the underlying drivers of such collection issues and potential fiscal vulnerabilities.
- There is scope to improve the online VAT registration process for non-established traders in Ireland. Although online registration is available for domestic and intra-EU traders, non-established traders must submit a paper registration, which increases their administrative burden.
Tax Complexity
Ireland ranks 5th out of the 27 Member States in the Tax Complexity Index (‘TCI’) where a higher rank corresponds to lower tax complexity. The TCI is based on the Global MNC Tax Complexity Project, a joint research project of Deborah Schanz (LMU Munich) and Caren Sureth-Sloane (Paderborn University). The TCI 2024 places Ireland 5th among the Member States with regards to Tax Framework Complexity, and 6th with regards to Tax Code Complexity. This suggests that overall, both tax processes carried out by the tax authorities and the structure of the tax regulations are rather efficient. According to the authors, Ireland scores particularly high in areas such as the regulation of additional taxes or the handling of audits.
The full Commission Staff Working Document of the Mind the Gap Report - Challenges and opportunities for tax compliance and tax expenditure in the EU regarding Ireland can be found here.
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