Annual Report 2009
Eighty-seventh Annual Report of the Revenue Commissioners for the year ended 31 December 2009, including progress on the implementation of Revenue's Statement of Strategy, in accordance with the Public Service Management Act 1997, presented to the Minister for Finance.
Board's Review of 2009
The economic and financial environment in which Revenue and its customers operate has changed dramatically over the last two years. Two statistics in particular convey some of the more unwelcome changes. The first is that net receipts have dropped by €14 billion since 2007- from €47.3 billion to €33.3 billion. The second is that the outstanding tax debt, which is a reasonable measure of the financial distress that many businesses and individuals are experiencing, has increased over the past 3 years by 91% from €1.1 billion to €2.1 billion, and this is set to climb further in 2010. The scale of the tax challenge arising from this is very significant.
Revenue is fully aware of the difficulties faced by taxpayers and is also deeply conscious of its overriding duty to protect and enhance the efficacy of the tax system. In this context, a positive trend in our collection programme is that the rate of timely returns compliance held up well in 2009, especially among the large cases. This is very important, as compliance provides the basis for debt management interventions.
Our approach in the current economic circumstances is best expressed in the word 'balance'. We have to balance our concern for taxpayers in genuine temporary difficulties with the requirement not to give them an unfair advantage over those taxpayers who are meeting their obligations and of course, with our absolute priority to safeguard the integrity of the tax system.
Revenue recognises that viable businesses can and do encounter cash flow problems. We have no desire to use the full weight of enforcement powers against innocent victims of the recession, or to drag them through the Courts, but to avoid that, businesses must engage with us honestly, wholeheartedly and early. Revenue cannot act as a banker or lender to businesses in difficulty.
The most difficult internal issue for us in 2009 was the loss of over 500 staff in a single year, principally due to Government schemes to incentivise retirement and career breaks. A loss of expertise and corporate memory of this size in such a concentrated period presents considerable challenges and has an unsettling affect on the organisation. Staff losses will continue in 2010 and consequently, reorganising to manage with less resources and rebuilding capability are key corporate priorities for 2010.
On the positive side, and there is more than one, Revenue has great staff and a culture of openness which includes an internal staff partnership structure that was 10 years old in 2009, and which works very well. We have fostered and developed relationships with many external stakeholders. We listen with great attention to what these and State stakeholders have to say. All of this will stand us in good stead in these more difficult times.
Progress on our Strategic Goals
In early 2009 we reviewed our Statement of Strategy 2008 - 2010 to determine if it remained fit for purpose in a rapidly changing economic environment. Our considered view was that the Goals, Strategies and Outputs set out in the Statement of Strategy remained valid, but that some changes of emphasis were required to help us cope with emerging issues. In particular, we undertook to support compliant taxpayers experiencing temporary difficulties, to continue to improve our on-line self-service channels, to focus more of our compliance effort on real-time intervention and to enhance Revenue’s capability and reduce our operating costs while still delivering our key business programmes of compliance and customer service.
Collection & Compliance
Total net receipts for 2009 amounted to €33.28 billion, down €1.29 billion (3.73%) against the estimate in the Supplementary Budget of 2009 and down €7.79 billion (19%) compared to 2008.
As was the case in 2008, the most significant shortfalls were in Capital Gains Tax and Stamp Duties, down 62% and 43% respectively on the previous year's receipts. This is attributable to the continuing decline in property and share values. Corporation Tax fell by 23.3% year on year. Receipts from Income Tax (PAYE), VAT, Customs and Excise also declined by 15.7%, 20.8%, 15.1% and 12.5% respectively. [Table 2: Total Revenue/Net Receipts]
Debt available for collection at the end of 2009 was €1.443 million, up from €1,233 million in 2008. Debt available for collection as a percentage of total gross receipts was 2.8%, up from 2.1% in 2008.
Despite the severe economic environment in 2009, compliance rates for filing returns and paying tax were only marginally down compared to 2008, thanks in large measure to the diligence of our Debt Management Units. The ability of businesses to meet their tax and duty obligations in a timely manner was seriously compromised by restricted credit availability and dwindling cash flow resulting from difficult trading conditions. Our collectible debt as a percentage of tax receipts remains very low by international standards. We are committed to keeping compliance levels up and debt levels down to the maximum extent possible. To this end, our support for viable businesses experiencing short-term difficulties will continue in 2010 and beyond, if necessary.
Revenue monitors the health of the tax system through a programme of interventions, including assurance checks, random audits and risk-based audits. Our Risk Evaluation and Analysis Programme (REAP) is a sophisticated case selection system that enables us to focus our attention on high-risk customers and to minimise our interactions with compliant customers.
During 2009, our auditors completed 12,419 audits with an overall yield of €602 million, up 5.7% on the 2008 yield. Over 361,000 assurance checks, a less resource intensive form of intervention, were carried out in 2009, an increase of almost 14,000 on the 2008 figure. The yield from assurance checks was just over €66 million. [Table 6: Audit and Assurance Activity]
An investigation into trusts and offshore structures commenced in 2009. Its purpose is to examine the tax treatment of property, assets and funds settled by persons on Irish and foreign trusts and similar structures. At year end, the yield from this investigation amounted to €17.6 million from 94 cases. Enquiries are ongoing.
During 2008, because we were getting access to information about interest earned on deposits in financial institutions, we launched a voluntary disclosure initiative for persons holding untaxed funds amounting to €100,000 or more in deposit accounts. At the end of 2009, 1,214 disclosures had been made and €76.3 million paid. [Table 14: Special Investigations]. The account information is now received annually and will be used for risk analysis.
Our strategy of enhancing risk analysis and case targeting with third party information will continue in 2010. This year, Revenue will receive deposit interest information from credit unions.We will also receive information from the Taxi Regulator about owners of taxi plates, and from insurance companies in relation to vehicles that are not registered in Ireland.
Safeguarding our citizens from the corrosive effects of smuggling in all forms is a core function of Revenue, in cooperation with our Joint Task Force partners, An Garda Siochána and the Naval Service.
Most notable in 2009 was the very substantial increase in the volume and value of smuggled cigarettes seized. In all, 10,600 seizures, amounting to 218 million cigarettes, were made in 2009, up 62% on the previous year. In October, a multi-agency operation, code named 'Samhna', headed up by Revenue's Customs Service, resulted in the seizure of over 120 million contraband cigarettes, the largest ever seizure of its type in Europe. The cigarettes had a retail value of about €50 million and a potential revenue at risk of approximately €40 million. The operation involved the Customs Service, an Garda Siochana, the Criminal Assets Bureau, the Irish Naval Service and Air Corps, officers of HM Revenue & Customs and the PSNI. In addition, the European Anti-Fraud Office was involved. It is estimated that in excess of 150 officers from the various Agencies participated in the field in the operation.
Our Customs Service also achieved some notable successes in the battle against illicit drugs. Overall, the number of seizures of illicit drugs showed contrasting trends, with seizures of cannabis and cocaine/heroin down by 12% and 51% respectively. However, the number of seizures of amphetamines/ecstasy increased by 43%. In addition, there were 34 seizures of suspected criminal cash amounting to €1.35 million.
During 2009, Revenue also made 74 seizures of firearms and 227 seizures of other offensive weapons, including noxious gas, machetes and explosive materials.
We enhanced our capability significantly with the introduction, on 16 October 2009, of Revenue's new purpose-built Customs Cutter, RCC 'Faire'. The 23.6 metre sea-going vessel is the second of its kind for our Customs Service. A second container Scanner was delivered to Dublin Port in November 2009 and following extensive testing went into use on 21 December. The new Scanner will spend the majority of its time operating in and around Dublin Port. The existing Scanner has been redeployed and will be managed from Rosslare.
The application of appropriate sanctions in cases of serious non-compliance with tax and customs legislation is an essential element in maintaining public confidence in the tax system and in customs controls.
Revenue obtained 15 Court convictions for serious tax and duty evasion in 2009. Of these, 6 cases related to serious tax evasion, down from 15 in 2008. In one case, an individual was released on appeal after serving 4 months of a 20 month sentence. There were 9 Court convictions in 2009 for serious Customs and Excise offences, four more than in 2008. At the end of 2009, there were 123 cases at various stages of the prosecution process, an increase of 4% on the previous year. [Table 11: Prosecutions for Serious Evasion 2009]
During the year, a total of 548 summary prosecutions were secured, resulting in fines amounting to over €864,840 being imposed.
Revenue constantly strives to improve the quality and range of services on offer to customers. The prevailing economic environment makes it more important than ever that customers can interact with us quickly and easily. During 2009, we reviewed and updated our Customer Service Standards after widespread consultation with external stakeholders. The quality of our customer service is evidenced by the fact that Ireland is the highest ranked EU Member State for ease of paying taxes, according to 'Paying Taxes 2010 - The Global Picture', a study published jointly by the World Bank and PricewaterhouseCoopers. We are very proud of that ranking and will work hard to keep it.
Online delivery is now the default for Revenue's services and we pay a lot of attention to ensuring that they are fast, efficient, user-friendly and comprehensive. By the end of 2009, almost 500,000 customers had registered for our 'PAYE anytime' service, up 55% on the previous year. The number of transactions increased significantly too, up by 41% to almost 670,000.
A new e-Stamping system was launched in December 2009 following extensive engagement with the Property Registration Authority and the Law Society. The new system enables practitioners to complete the stamping of instruments such as conveyances and leases in a fast and secure way via our Revenue On-line Service (ROS).
Increasingly, e-services will be mandatory for complex transactions. Mandatory electronic filing and paying of certain taxes came into effect in 2009 for Government Departments and Offices, State Bodies and larger companies. All other State agencies and companies which are obliged under the Companies Act to produce audited accounts came within the scheme on 1 January 2010. Under a new EU scheme, cross border VAT repayments between Member States are only available online, and later this year, we will introduce mandatory e-filing of CAT returns where reliefs or exemptions, other than for small gifts, are claimed by a beneficiary of a gift or inheritance.
Revenue recently achieved the ISO 27001 information standard for information security management, providing further reassurance to customers who interact electronically with us. This standard is independently audited and sets requirements in all aspects of security and data handling. Only 30 companies in Ireland have achieved this standard.
An external independent audit of data protection in Revenue was undertaken by the Office of the Data Protection Commissioner during 2009. In the final Report, which was was published on the Revenue website, the Data Protection Commissioner stated that the Report reflects favourably on the approach to data protection in the Office of the Revenue Commissioners.
Revenue achieved a fully integrated tax assessing and collection process during 2009 when the Corporation Tax Assessing System was incorporated into our Integrated Taxation System. Revenue staff now have all Corporation Tax assessing and collection data available within a single system, facilitating faster responses.
During 2010 we will introduce a modern, simpler business model for Capital Acquisitions Tax in conjunction with the Probate Office. A re-engineered Vehicle Registration Tax system will also be introduced.
Our programme of making automatic tax refunds wherever possible continued. We issued over 56,000 automatic refunds to the value of €9.6 million in respect of the costs of prescription drugs. Over 1,500 automatic refunds amounting to almost €760,000 were issued in respect of tuition fees paid for approved third level college courses. In addition, the granting of automatic age credits is now in place. The number of deposit accounts exempt from DIRT at the end of 2009 stood at 73,738, up from 68,855 in the previous year. Over 2,500 information posters highlighting exemption from DIRT for over 65s were displayed in Banks, Post Offices, Citizens Information offices and Revenue offices around the country.
Listening to our customers
Between December 2008 and February 2009, Revenue conducted a postal survey of about two thousand small and medium-sized enterprises. The purpose of the survey was to gather hard data from customers in relation to three areas: usage of and satisfaction with Revenue customer service; the factors that influence compliance; and difficulties encountered paying taxes in the previous 12 months. Among the key results of the survey was that 87% of respondents were either very satisfied or satisfied with our customer service. In addition, 22% of respondents indicated that they had encountered difficulties paying tax on time and/or in full in the 12 months prior to the survey. The results of the survey, together with our analysis of what they mean, were published on the Revenue website.
In response to concerns from business and tax practitioners we reviewed our process for handling repayments of Corporation Tax (CT) and Income Tax (IT). There were immediate improvements in response times, showing that the percentage of repayments approved and issued within five days increased from 48% to 63% for CT, and from 80% to 89% for IT. The benefits of the review will be fully realised in 2010.
Contributing to Economic and Social Development
Revenue has a pivotal role to play in contributing to Ireland's economic and social development, particularly in helping to create an environment that promotes economic growth, facilitates trade, encourages investment and improves competitiveness.
At home, Revenue provided advice and support to the Department of Finance on a broad range of measures contained in the Finance Acts. The successful introduction of the income levy was a particular challenge and we also successfully introduced the Air Travel Tax which yielded €84.4 million in its first year. The Research and Development regime was improved and new Guidelines issued. The first phase in the preparation of a new, consolidated VAT Act was also completed. Draft legislation was published on the Revenue website in October 2009 to initiate a consultation process with the legal profession, accountancy bodies and tax practitioners. Work also progressed on the preparation of a consolidated Customs Bill, with a view to enactment in 2010.
We contributed staff resources and research expertise to the work of the Commission on Taxation, and we assisted in the implementation of the Nursing Homes Support Scheme and the age related credit for private health insurance.
In 2008, a trade facilitation programme known as the Authorised Economic Operator (AEO) Programme was introduced to protect the international supply chain from terrorist exploitation. It works by granting recognition to reliable operators and encouraging best practice at all levels in the international supply chain. By the end of 2009, 35 AEO certificates had been issued to Irish traders, up from 14 in 2008.
Revenue contributes at many levels internationally. We are represented at EU, OECD, WCO and UN forums and make a considerable contribution to policy development and implementation.
By the end of 2009, Ireland had signed comprehensive double taxation agreements with 56 countries, of which 48 are in effect. During the year, new treaties with Chile and Vietnam, came into effect and treaties, with the Former Yugoslav Republic of Macedonia and Malta have effect from January 2010. Seven treaties were concluded and signed during 2009. and it is expected that seven further treaties including a treaty with Hong Kong will be signed during 2010. 13 Tax Information Exchange Agreements (TIEAs) were negotiated and signed and four further TIEAs were advanced.[Strategy 3.2, Output 3]
On the international front, Revenue continues to play an active role in the work of the World Customs Organisation (WCO). In June 2009, Ireland completed a successful two-year term as Head of the Europe Region and as Vice-Chair of the WCO.
Developing our People and our Organisation
A highly skilled and motivated workforce is critical to the achievement of Revenue's goals. Over 500 of our colleagues left Revenue in 2009 between the Incentivised Scheme of Early Retirement, the Incentivised Career Break Scheme and normal course retirements. This presented us with particular challenges, given the moratorium on recruitment.
Our response has been to manage the situation through internal redeployment and by examining our business processes to identify efficiencies, while maintaining a clear focus on our core business. Significant efficiencies have been delivered through modernisation, restructuring and use of electronic systems and technology.
We have reviewed our training programmes and tailored them to ensure that they are focused on our current business needs, taking account of the changed economic environment. In January 2010, 99 Revenue students graduated from the University of Limerick; 23 with a BA (Hons.) in Applied Taxation and a further 76 with a Diploma in Applied Taxation.
In February and March 2009, staff from a number of offices in Monaghan and Louth relocated to the M: TEK II Building in Monaghan.
In April, the new Revenue office for staff of the Collector General's Division in Newcastle West, Co. Limerick was officially opened. The Collector General's office is now the largest decentralised office in the State. Also in April, a second new Revenue office was officially opened at Geata na Cathrach, Fairgreen, Galway. The new building provides modern and efficient facilities for staff and deals with all aspects of Revenue business - tax, customs and excise - for employees, self employed and corporate customers based in Galway City and County and in County Roscommon.
We are actively engaged in the Transforming Government agenda, and contributing to shared services by providing printing and mailing services to other Government organisations and by hosting IT systems in our data centre.
Revenue's overall priority in 2010 and beyond is to protect the tax base. We will do this by continuing to make it as easy as we can for businesses and taxpayers to comply; giving otherwise viable businesses a fair hearing if they get into temporary difficulties, and finally, ensuring a level playing field for those who do comply by taking resolute action against those who don't.
As at the end of the first quarter of 2010, tax and duty receipts remain weak, down by €1.27 billion on the same period last year. Latest figures show that debt available for collection is just over 33% higher. While it is still too soon to judge the prospects for 2010 as a whole, initial indications are that it will be another very challenging year.
Towards the end of 2009, the Minister for Finance sanctioned the filling of up to 200 posts in Revenue by a combination of redeployment, internal appointment and recruitment. All three elements are now underway and Revenue is recruitiing directly at Principal and Assistant Principal level for the first time. This is a very important development as we work to enhance our skill base.
We say a public thank you to everyone working in Revenue for their hard work and commitment in 2009. With their help and support we will successfully meet the challenges ahead.