VAT debacle in Taxi Industry / + Target and the Haulage Crisis

[Baron von Biffo]

The owner of the firm was on Joe Duffy's programme a few minutes ago.

He said the same as here - that all similar firms are now liable for VAT - which they never collected - going back to 2003.

As we are in times with no bank loans available and low profit margins, these firms are not likely to survive, if the VAT is levied as a lump.

Bearing in mind that we only know one side of this story:-

VAT is, or should be, collected by businesses and passed on to the revenue. It isn't working capital for businesses.

Businesses that are not tax compliant can operate at an unfair advantage to their compliant rivals.

[Baron von Biffo]

It will amount to 21-23% of their earnings over the last 9 nine years. I think that even if they tried to pay this over the next 9 years it would probably break many of them. It seems they will not be allowed (for some bizarre reason) to put VAT they have paid on inputs against this. 21% of turnover probably exceeds the profit margin of most small businesses. Then of course there are the penalties and interest. I doubt they could pay off all of this over 15 years and still make a living out of their companies over that period.

On a related matter, I was quite shocked by the story on the front page of the IT today that a transport company has been put out of business by Revenue over an outstanding amount, according to the owner, of 125,000 euros. 398 people are without work today because of this. The cost to the state will surely exceed the 125,000 by multiples. There has to be a better way of handling cases like this. It makes no sense to me.

According to that story the amount involved is €1.3m of which €1m was recently paid. We don't know how long the case has been going on or what the circumstances are.

The company operates in the North and the UK so all 398 jobs are not a cost to the state today. The work hasn't gone away so other hauliers will take it on and they'll likely have to recruit to do it.

To view this as just a story of the immediate job losses is short-sighted. As I said above, non-compliance gives businesses a competitive advantage over their rivals. It also pushes an unfair slice of the tax burden onto others, particularly the easy targets in the PAYE sector.

A better way to deal with VAT is to have it automatically deducted from electronic payments and remitted directly to the Revenue. That improves exchequer cash-flow, reduces compliance costs and cuts the potential for fraud.

[Baron von Biffo]

The Examiner is reporting that the owner of Target Express contacted three ministers about the tax issue.

"Mr McBrien said he had contacted Jobs Minister Richard Bruton, Finance Minister Michael Noonan and Transport Minister Leo Varadkar to make representations, but claimed they would not get involved."

Hopefully the report is accurate about the ministerial reaction.

Unsurprisingly FF is whinging that the ministers didn't do things the traditional Irish way:-

"Senator [Daragh] O'Brien said: "I would like to know from the ministers who are saying that they are all about creating and protecting jobs as to why they felt they did not need to make any representations at all or could not assist Target Express in any way, shape or form to try to save the 390 jobs."

http://www.breakingnews.ie/ireland/s...ue-564714.html

[C. Flower]

Bearing in mind that we only know one side of this story:-

VAT is, or should be, collected by businesses and passed on to the revenue. It isn't working capital for businesses.

Businesses that are not tax compliant can operate at an unfair advantage to their compliant rivals.

None of these taxi companies collected VAT as they (and their accountants) believed themselves not to be liable for VAT.

So, there was no revenue pocketed, and no competitive advantage.

[Baron von Biffo]

None of these taxi companies collected VAT as they (and their accountants) believed themselves not to be liable for VAT.

Allegedly.

So, there was no revenue pocketed, and no competitive advantage.

Not collecting VAT if rivals are collecting it gives a 23% advantage.

[Baron von Biffo]

One of the Target Express workers on RTE news now saying that wages haven't been paid for the last two weeks. It may be that things are not so straightforward as the one-sided view we have so far would suggest.

[Sam Lord]

One of the Target Express workers on RTE news now saying that wages haven't been paid for the last two weeks. It may be that things are not so straightforward as the one-sided view we have so far would suggest.

I have read that workers were not paid because the Revenue froze the companies accounts.

[Baron von Biffo]

I have read that workers were not paid because the Revenue froze the companies accounts.

The man said they're owed two weeks wages but the Revenue only attached the accounts on Thursday.

http://www.irishexaminer.com/breakin...de-564728.html

The IT reports that the firm had shareholder funds of £7.3m at year end and that it made a pre-tax profit of £1.9m

http://www.irishtimes.com/newspaper/...reaking18.html

Hard to understand from those numbers why wages and tax can't be paid.

[C. Flower]

Maybe a separate thread for the haulage industry?

@Baron - Haulage, like a lot of business, is slack in the summer and very busy up to Christmas - most profit comes at the year end.

I heard today from two separate sources, one RTE and another, a person who uses the services of haulage companies, and it seems that there is a ferocious price war in haulage, due to lack of work, and that prices have been dropped by nearly a third.

As petrol prices have gone up, haulage firms have very narrow profit margins, or are running at a loss in the hopes of knocking out competitors and gaining market share.

Whereas in a normal economy, a firm that was caught in a pinch of that kind might have got a bank loan or overdraft to allow it to try to trade its way back into profit, these days, it will very likely be refused.

Target apparently got a last minute bank loan, but the day before it was to be paid in to Target's account, the Revenue had the bank account frozen.

These are the joys of living in a catastrophically shrinking economy.

[Baron von Biffo]

Maybe a separate thread for the haulage industry?

I heard today from two separate sources, one RTE and another, a person who uses the services of haulage companies, and it seems that there is a ferocious price war in haulage, due to lack of work, and that prices have been dropped by nearly a third.

As petrol prices have gone up, haulage firms have very narrow profit margins, or are running at a loss in the hopes of knocking out competitors and gaining market share.

Whereas in a normal economy, a firm that was caught in a pinch of that kind might have got a bank loan or overdraft to allow it to try to trade its way back into profit, these days, it will very likely be refused.

Target apparently got a last minute bank loan, but the day before it was to be paid in to Target's account, the Revenue had the bank account frozen.

These are the joys of living in a catastrophically shrinking economy.

Not everyone sees this as a bad news story. The manager of one Midlands firm 'danced around the office' at the prospect of new business according to an acquaintance of mine who works there.

[C. Flower]

Not everyone sees this as a bad news story. The manager of one Midlands firm 'danced around the office' at the prospect of new business according to an acquaintance of mine who works there.

Exactly. It's dog eat dog, and a race to the bottom, in terms of wages, conditions, profitability.

[Baron von Biffo]

Exactly. It's dog eat dog, and a race to the bottom, in terms of wages, conditions, profitability.

What the authorities must do though is avoid repeating the obscenity of the last recession where the greatest tax burden was heaped on PAYE workers because business pretty much opted out of the tax system.

[Sam Lord]

What the authorities must do though is avoid repeating the obscenity of the last recession where the greatest tax burden was heaped on PAYE workers because business pretty much opted out of the tax system.

But this surely going to cost the state much more than 125,000. So it is the Revenue putting a burden on taxpayers in this case.

[Baron von Biffo]

But this surely going to cost the state much more than 125,000. So it is the Revenue putting a burden on taxpayers in this case.

For a start we don't know that there's only €125k involved here because we only have one side of the story. That said, even it is the correct amount, why should the Revenue ignore it and in effect give a grant to the firm in question at the expense of its rivals? If this company could use the workers to get a deal from the Revenue then why wouldn't other businesses do the same?

If the tax law is wrong then change it but don't let's keep doing things the same way we've always done them.

Non compliance puts a cost on legitimate businesses, on PAYE workers and on those who depend on public services.

[eamo]

Its a wonder the Barron has not blamed the target express workers of bullying the Revenue commission.

It is a living disgrace that the Government are putting firms out of business and people out of work. Keeping people in work should be up with getting people back to work as the governments top priority.
At the moment that seems to be way down the government "things to do" list.