Revenue is about to kickstart its latest digital initiative with enhanced employer reporting (EER), first introduced in the 2022 Finance Act and set to launch in 2024.
EER has already proved controversial with tax commentators, who characterise it as unnecessarily time-consuming for employers and potentially disadvantageous to employees.
When it goes live on 1 January 2024, EER will require employers to provide data in real-time related to three categories of non-taxable remuneration made to employees and directors.
‘The requirement to report payments “on or before” they are made is unrealistic and unreasonable’
The relevant information (see boxout ‘How will EER work?’) is to be provided through ROS and, critically, Revenue says, ‘must be made by you on, or before, the payment date to the employee’. Revenue’s ultimate ambition of EER is three-pronged: to ‘direct resources away from compliant employers’, to support ‘informed policy decisions by the Department of Finance’, and to ‘increase visibility and assurance for employees in relation to non-taxable payments’.
Unrealistic and unreasonable
Since the announcement, however, questions have been raised around its practical implementation. PwC’s assessment notes that EER ‘will bring challenges to employers to be able to collate and report the required information on time in the right format’. EY agrees, adding: ‘The requirement to report payments “on or before” they are made puts unrealistic and unreasonable administrative pressure on employers.’
Aidan Clifford FCCA, advisory services manager for ACCA Ireland, says: ‘It is hard to understand why this information is required “on or before” the date the payment is made. It would make more sense to require it at the same time as the PAYE return is made or even annually in arrears, and it needs a de minimis disregard. The state should not need to know that an employer paid for a modest gift voucher for an employee on the birth of their baby, before the voucher is delivered.’
‘Employees could have to wait longer for the repayment of genuine business expenses’
Unexpected consequences
In August, Colm Browne, then president of the Tax Institute of Ireland, wrote to Michael McGrath, the minister for finance, as ‘it has become clear that Revenue plans to proceed with a real-time reporting requirement … regardless of the difficulties raised’.
In addition to the challenge for employers, Browne pointed to unintended consequences for employees. ‘Many employers are likely to reduce the frequency of reimbursement to perhaps a single date each month. This means employees could have to wait longer for the repayment of genuine business expenses … a disproportionate amount of disruption at a time of heightened cost of living pressures.’
How will EER work?
- A return is required each time any employee receives a reportable EER element. This return must be made ‘on or before’ the date the benefit is provided to the employee.
- The company can upload a file or key individual details into an online form in ROS.
- General data required will include:
- employee details
- date of payment
- tax year
- employer reference
- employment ID
- Data specific to the element must be reported:
- small benefit exemption – value per employee
- remote working relief – amount paid and number of days covered
- travel and subsistence – amount paid: for travel vouched, travel unvouched, subsistence vouched, subsistence unvouched, site-based employees (includes ‘country money’), emergency travel, and eating on site.
Source: PwC
The Consultative Committee of Accountancy Bodies – Ireland (CCAB-I), of which ACCA is a member, expressed similar concerns to the minister in September. In both letters, the minister was asked to consider amending the real-time reporting requirement before signing the commencement order for EER.
To date, that commencement order has yet to be signed. Revenue is pressing ahead with implementation plans and, between September and November, hosted a series of webinars to give employers an overview of how EER will work.
To be successful, a digital tax code ‘must enlist a broad coalition of stakeholders’
It has also provided technical specifications and a test facility for those developing software solutions. Ken Killoran, tax partner with Mazars, says: ‘Employers concerned about whether their payroll software supplier is engaging and developing an EER reporting solution are advised to contact their software supplier to clarify the matter.’
Hit or miss
Revenue’s determination to pursue EER reflects its statement of strategy 2023–25, which emphasises the ‘migration to real-time systems’ and the requirement to ‘expand real-time engagement and reporting by taxpayers’.
These goals match the collective mega trends driving ongoing investment by taxation authorities identified in European Commission research from 2022 (see boxout ‘Digital tax mega trends’).
Digital tax mega trends
EU research suggests:
- Digitalisation is simplifying tax management and reducing costs.
- Digital preparation of taxes is 27% faster than traditional methods.
- Time to comply has fallen 30% since 2004.
- Digital reporting requirements differ but are always effective.
- Digitalisation is central to the fight against fraud – and has raised tax revenues by 1.9%.
Writing in 2021, World Bank economist Marcello Estevão summarises the upside of digitalisation as ‘making life easier for authorities by easing the administrative burden, which gives officials more time to focus on higher-value activities’.
However, he sounds a note of caution against idealising digital processes – ‘a pathway towards seamless and frictionless taxation’, as bodies such as the OECD view it. He points to research that shows ‘most digital transformation initiatives don’t succeed’ and suggesting that, to be successful, making the tax code digital ‘must enlist a broad coalition of stakeholders’.
Getting ready
As the clock ticks to 1 January, there remains a possibility that EER will receive a last-minute course correction through ministerial intervention. If not, the pressure is on for employers to prepare by assessing:
- whether they provide any reportable benefits to employees
- what internal systems/processes/policies apply to them
- how the data on these benefits is recorded and how it will be extracted for EER reporting
- who is responsible for reporting the data to Revenue
- whether the company will utilise software or complete manual filings.
