Introductory Comments by Mr. Frank Daly, Chairman 09 June 2005

Introduction

Ladies and Gentlemen I would like to welcome you here for the publication of our Annual Report for 2004 which I have presented to the Minister for Finance. Before we begin I would like to introduce my two colleagues on the Revenue Board - Commissioner Josephine Feehily and Commissioner Michael O'Grady. This is Revenue's 82nd Annual Report.

Format

We have followed the approach adopted in recent years in which we design our Annual Report to report closely on progress in implementing our Strategy Statement.

This year we are providing the second report on our Strategy Statement 2003-2005 which highlights three main Goals each of which, in turn, has three or four numbered strategies associated with it. Our Annual Report reflects this format and you will see that the three Goals and their associated strategies represent the heart of the document. Once again, our Report highlights not just successes in meeting targets but also records areas where performance needs improvement.

I would now like to make a few comments on the substance of the Report itself and bring you up to date with developments in some areas which may be of particular interest to you. Afterwards, we will be happy to take any questions which you may wish to raise.

Review (Pages 6-7)

Investigations

Once again this year the investigations into a legacy of tax evasion in a number of areas have been highly successful. In 2004 these investigations yielded a total of €697 million of which €585 million came from offshore-related investigations. (The total yield to 31 May this year from all these Legacy Investigations now stands at €1.68 billion.) For an organisation like ours the commitment of time and resources to these investigations is considerable. However, as I have said before, the benefit for Revenue, for the exchequer and, indeed, for the whole country is considerable.

When we began our investigation into bogus non-resident accounts many people obviously believed that if they kept their heads down, we would lack the will, the information or the resources to pursue them. Only 3,750 came forward during the voluntary phase: we subsequently pursued and identified a further 8,500.

When we began our investigation into offshore accounts in 2004, 15,000 came forward in the voluntary phase. The message has hit home that Revenue will pursue those who do not come forward and these people - those who decided to ignore the warnings - will unfortunately count the cost. We are currently in the follow-up phase of the offshore investigation. We have recently secured a High Court Order against a financial institution (one order was obtained last year) and are seeking others all of which will give us the information which we will use to follow up on those who did not come to us.

Our most recent investigation, into those who put undeclared amounts into life assurance products has seen some 10,000 people come forward in the voluntary phase. I will say something about this investigation later.

I have said before that these campaigns, the publicity that goes with them and the demonstrated determination of Revenue not to ignore evasion by any sector, have proved to be key drivers in a growing public intolerance of tax evasion, and an increasing public awareness of the obligations of tax compliance. This shift in attitude is the real bonus from the Legacy Investigations.

General Progress

2004 was also marked by significant progress in a number of areas:

Exceptionally strong tax collection performance. Net receipts came in at nearly €35.8 billion. We also collected €6.9 billion on behalf of other agencies
Revenue audits yielded nearly €550million
We again reduced our debt - arrears as a proportion of gross collection is now at a record low of 2.5%
On the Customs front we seized drugs with an estimated street value of over €12 million. We seized almost 61 million cigarettes and there were also four detections of oil-laundering plants.
While only one conviction for serious tax evasion was obtained in 2004, by the end of the year there were seven cases in the court process, directions had been issued by the DPP in a further six cases and the DPP was considering another seven cases.
Revenue published the names of 884 tax defaulters in connection with audit settlements amounting to €143.79 million
Take up of our Revenue On-Line service (ROS) increased substantially. Over half of income tax self-assessment returns are now made via our electronic service, ROS
We have consolidated the new organisational structure which has lead to greater flexibility within the organisation and the development of new approaches to how we do our business

Three important landmarks, which indicate the wide scope of our work, are also celebrated in this year's annual report:

The establishment of a unique partnership with the University of Limerick which sees the accreditation of our internal technical training programme
The commissioning of our new Customs cutter RCC Suirbhéir, which has strengthened our capacity to protect the State against drug trafficking and smuggling by sea
Our contribution to the very successful Irish presidency of the European Union

The main features of the year are set out at pages 6 and 7 of the Report. Let me take you briefly through some of these and update you on some topical matters as we go.

Receipts (Pages 10 - 20)

Tax and duty receipts again reached record levels.

Gross receipts were over €48.5 billion, over €4.7 billion ahead of 2003. Net tax and duty receipts reached almost €35.8 billion, some €3.5 billion ahead of the previous year and €2.2 billion above the Budget estimate, while €6.9 billion was collected on behalf of other agencies, mostly in PRSI.

The scale of our tax collection operation might again be best illustrated by highlighting a couple of figures for you. The daily payments to the Collector General's Office during 2004 averaged €159.2 million while the largest amount lodged on a single day was €1.3 billion.

Debt Management (Pages 19-20)

We continue to effectively tackle outstanding debt. Revenue debt decreased by €146 million or 11% over the year. This figure is now at 2.5% as a percentage of gross collection - down from 3.1% in the previous year. This is a new record low and is also very low by international standards.

Taxpayer returns and payment compliance increased in 2004, largely due to a continued focus on maintaining the timeliness of payments.

The write off of uncollectible debt increased to €173 million in 2004 from €119 million in 2003. This was primarily due to a review of old insolvency debt on records for all years prior to 2004.

Prosecution (Pages 24-27)

We have a clear policy of prosecuting cases of serious tax and duty offences. By the end of 2004 there were seven cases in the court process for serious tax evasion. There was one conviction in 2004 for serious tax evasion. A further six cases were awaiting the issue of summonses and the DPP was considering another seven cases.

While these figures are low (as we point out in the Report) the reality is that tax prosecutions for serious evasion are long drawn out and are fought every step of the way. 2004 was a year then in which a lot of work was done which cannot be measured by simple figures about convictions, and we point to the fact that a further 44 cases were under investigation at year end - by far the highest figure to date.

The work is paying off and the number of cases which are likely to go to Court this year will be by far the highest number ever.

For example already in 2005 there have been four further convictions for serious tax offences
a further 6 cases are in the Courts
the DPP has given instructions to prosecute in a further 4 and is considering a further 14
and yet another 48 are under investigation by our Investigation and Prosecution Division.

Getting back to 2004:

We referred 538 summary cases to the Revenue Solicitor or State Solicitors for prosecution.
There were 592 convictions for failure to file tax returns.
There were 180 convictions for unlicensed trading, 149 convictions for marked mineral oil offences, 59 convictions for smuggling and nine convictions for Vehicle Registration Tax offences.

While these results are encouraging, we recognise that prosecution is an area where there is a public expectation that we will do more - the public can be assured that we intend to deliver on that expectation.

Special Investigations (Pages 21-23)

Revenue is currently involved in a series of special investigations with which most of you will be familiar.

Bogus Non Resident Accounts (Page 22)

In January 2004 the final 28,000 general enquiry letters issued to Bogus Non Resident Account holders who had not come forward under the voluntary disclosure phase.. The yield for 2004 from the BNR investigation was €87.2 million, bringing the total yield at the end of 2004 for the BNR project to €787.2 million. More than 90% of cases had been finalised by year's end. To bring you up to date (to 31 May 2005) the total yield is now €808 million with over 95% of cases now finalised.

Clerical Medical Insurance/National Irish Bank (Page 23)

We are investigating 452 cases here. By the end of 2004 we had concluded our investigations on 412 cases. Of these, 296 were settled with payment of €48.7 million in tax, interest and penalties. 116 were finalised with no extra liability arising. The remaining 40 cases are the subject of ongoing investigation, in respect of which €4.78 million has been paid on account. Three cases were prosecuted, with fines being imposed in two of them and a suspended prison sentence imposed in the third. One further case is currently under investigation with a view to prosecution.

To bring you up to date (to 31 May, 2005) the total yield is now €54.1 million with 415 cases finalised and 50 remaining under investigation.

Ansbacher (Page 22)

We have enquired into 289 cases and we have concluded settlements with 108 with total payments amounting to €45.4 million to date. In the course of this investigation it has been necessary to make six applicationsto the High Court for orders requiring the production of books, records and other documents by financial institutions and other third parties. Some 200,000 documents have been received under the terms of these High Court orders.

This investigation continues, the up to date position (as at 31 May) is that we have finalised 123 cases with total payments now standing at €47.80 million.

Offshore Assets Investigation (page 21)

In 2003 we undertook investigations into a Jersey-based subsidiary of an Irish financial institution and later that year we investigated an Isle of Man-based subsidiary of another Irish financial institution. Following these investigations and after a series of meetings I held with the Chief Executives of the ten major Irish financial institutions with offshore branches or subsidiaries, we announced an investigation into holders of offshore accounts who had not declared these funds. Account holders were given a deadline of 29 March 2004 to indicate whether they had a disclosure to make and were given a further deadline of 28 May 2004 to forward payments and submissions. In response to requests from tax practitioners, accountants and other interested parties we agreed to extend the deadline to Thursday 10th June.

During 2004 €585.4 million was collected as a result of this Revenue initiative.

Those individuals who failed to avail of the voluntary disclosure scheme are now the focus of our attention and as already mentioned we are using the High Court orders route to obtain the necessary information from Financial Institutions.

I can also confirm that those individuals who did not make a voluntary disclosure of their Jersey-based trusts have already been identified. All of these are currently being investigated - some with a view to prosecution.

Undeclared funds in Life Assurance Products (Page 23)

As you are aware the investigation into undeclared funds held in life assurance products was announced earlier this year. By the deadline for indications of voluntary disclosure on 23 May approximately 10,000 people had come forward. The second deadline, the date by which computations and payments have to be submitted is 22 July. (If I may presume to pre-empt a question that I'm sure you're about to ask!) it will be some time after that date before we will be in a position to quantify the amounts involved.

It should also be clear that people who invested legitimate funds in these legitimate products have nothing worry about. As we are at pains to explain, on every opportunity presented to us, our investigation is focused on tax evaders who invested undeclared funds in these products. As in all of our investigations, the decent, honest taxpayers who did not engage in tax evasion have absolutely nothing to fear.

Pursuing Legacy Investigations

I know there have been some commentators who do not fully support Revenue's determination to pursue these legacy cases - arguing that this was all in the past and that we should leave it there; arguing that it was unfair and inequitable to pursue people now for old debts and liabilities.

As far as Revenue is concerned however there could never be the option of walking away from this systemic and widespread evasion - and as for those who advance arguments about unfairness and inequity, I have to remind them of the inequity and unfairness that was visited for many years on those who struggled every week to pay their taxes; the inequity and unfairness to those who struggled to keep businesses going in the face of unfair competition subsidised by tax evasion; the inequity and unfairness to those who may have been deprived of better services because tax revenues were not what they ought to have been during those years.

As I have said before, nobody hopes more than me that this latest legacy investigation will prove to be our last one of major significance. Our track record over the past number of years makes it clear however, that for Revenue the idea of walking away is not - and cannot be - an option.

Moving on from the special investigations:

Collection Enforcement (Page 19-20)

Despite very active collection compliance work and improving due date payment figures we still have to resort to the more robust forms of collection enforcement in difficult cases.

In 2004:

Enforcement procedures through solicitor, sheriff and attachment yielded more than €200 million from more than 46,000 cases.
Bankruptcy proceedings were initiated against one individual.
The High Court was petitioned by Revenue on 31 occasions to appoint liquidators to wind up companies.
In addition 38 'phoenix' companies either ceased trading or liquidated voluntarily. During 2004 Revenue examined some 1,057 companies for 'phoenix' operations or abuse of limited liability.

Audit Activity (Page 31)

16,321 audits were carried out yielding €549.64 million, a substantial increase of over €120 million on 2003.
In 56 of these cases the liability exceeded €1 million.
In the course of the audit programme 73 cases were identified for possible investigation with a view to prosecution. This is more than twice as many as were identified in the previous year (32).

Customs and Excise (Pages 25 - 28)

This was another successful year in the battle against illegal drugs and other contraband.

Drugs with an estimated street value of over €12 million were seized while €370,000 of suspected drug related cash was detained.
We seized almost 61 million cigarettes and 2,454 kg of tobacco
There were also four detections of oil-laundering plants and 14 retail outlets were detected selling laundered oil

Customer Service (Pages 37-41 )

In April 2004 we published our Customer Service Charter which updated and replaced the Charter of Rights that had been in place since 1989. The new charter, which reflects the mutual expectations of Revenue and its customers, was a response to the Customer Service Charter initiative for all Government Departments and Offices launched by the Taoiseach in December 2002.

We continue to evaluate our performance against challenging customer service standards and there are times and specific areas where we fall short of the standards we set for ourselves. This is particularly true of our PAYE area where a combination of business growth and the annual peak period of demand at the beginning of the year have presented us with major challenges. To indicate the level of demands imposed on us it is worth noting that our LoCall PAYE phone service handled some 1.7 million calls in 2004. Table 5 indeed of the Annual Report will give you a good picture of the increased levels of business we experienced across almost all areas in 2004.

To address this high demand for service we have introduced some new initiatives in recent times including self-service options for taxpayers to contact us via text, touch-tone phone or via the web. Later this year we will rollout the biggest redesign of our PAYE computer system in forty years. This will provide a wide range of internet-based facilities for employees. Our aim is to provide PAYE taxpayers with the benefits of the on-line facilities which have proved enormously popular to the business users of our on-line service, ROS.

Conclusion

Revenue's work is vital to the running of this country and the well being of its citizens. We collect the money that funds 94% of Government expenditure, we contribute to keeping society protected from drugs and we do our bit to help business and economic development.

If there is one overriding objective for us, it is to foster voluntary compliance with tax and customs obligations.

This objective is central to everything we do. Our approach is very clear. We aim to make voluntary compliance the easy and attractive option and to make sure that non-compliance doesn't pay.

We must demonstrate good faith to those who have consistently paid their fair share of taxes and duties by vigorously pursuing those who have failed to do so. Making good on that commitment has meant investing energy and effort in addressing legacy issues - in looking back.

At the same time we have remained firmly focussed on the future. We have learned many lessons from the past. We have re-shaped and modernised Revenue. We have integrated our business systems and we continue to re-think, re-design and re-develop our business processes and invest in leading edge technology solutions. We are progressively improving how we serve our compliant customers and every day we are sharpening our ability to detect and deal with the minority who do not comply.

Looking to the future we will always face new challenges - new lessons to be learned. For the Tax and Customs Administration in Ireland's modern dynamic economy, standing still will never be an option. However we will face the challenges of the future with confidence in the skills, the commitment and the adaptability of the people who make up the Revenue organisation.

We would now be happy to take any questions you might have.

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