Opening Statement by Revenue Chairman, Frank Daly to the Public Accounts Committee Hearing, 20 October, 2005.
1. I thank the Chairman and members of the committee for this opportunity to make an opening statement in relation to paragraphs 2.1 to 2.7 of the Comptroller and Auditor General’s Report.
2. Paragraph 2.1 shows net receipts at €35.775 billion. This represents an increase of €3.56 billion, or 11%, on the figure for 2003 and was €2.21 billion in excess of the budget target figure of €33.563 billion. This surplus over the target figure was mainly due to strong yields from capital gains tax, stamp duties and VAT and also to the success of Revenue’s "legacy" investigations.
3. Paragraph 2.2 deals with tax write-offs. The amount written off in the year was €172.5 million in comparison to €119.4m in 2003. The increase is mainly due to a review and write off of old insolvency debt on record. As I have said before to this committee, Revenue, like every other tax administration or business, inevitably experiences some bad debt. Our objective remains to minimise this in every way possible and we will only write it off when we are satisfied that it is genuinely uncollectible or uneconomic to pursue. Amounts written off should of course be viewed in the context of the amount collected. As a percentage of the total tax collected in 2004 the amount written off was about a third of one per cent of gross collection (including PRSI) of €48.7 billion.
It is also worth noting that excluding insolvency, the total tax written off for all other reasons in 2004 is €84m which is over €5m less than the corresponding figure for 2003. Almost 62% of the debt written off was over six years old and just about 8% was less than three years old.
4. Paragraph 2.3 deals with outstanding tax and shows the balance outstanding
at 31st March, 2005 as €1.217 billion. This is down €146m from
2003. This is the equivalent of 2.5% of Gross Tax Receipts for 2004, which
is a record low -; in fact it is among the lowest (if indeed it is
not the lowest) debt to collection ratio of any Tax and Customs Administration
worldwide. It clearly illustrates our continuing success in improving
payments compliance over the past number of years. Taxes outstanding have
now fallen every year from a high of €5.466 billion (62.5% of gross
receipts) in 1985. Just ten years ago outstanding taxes were €2.6
billion or 15% of gross receipts.
While I am very pleased with this progress I can assure the committee that we have no intention of resting on our laurels. Revenue has a new Statement of Strategy for the next three years in which we have set ourselves a target of eliminating debt over five years old by 2007 unless it is under active enforcement or Court proceedings. I should also assure the Committee of course that we will collect about 96% of the March 2005 debt figure through our further efforts.
5. Paragraph 2.4 reports on the Revenue Audit Programme. The audit programme
is an established and successful means of ensuring compliance with the
self-assessment system. The number of audits completed in 2004 is slightly
up on the 2003 count. However the yield was substantially up by almost
€120 million to €549.6m.
These traditional audit programmes Chairman, from which we continue to get very good results, are part of Revenue’s overall compliance activity. I would like to advise the Committee that, just as we have modernised our organisation to meet new challenges, so also are we modernising our whole approach to compliance. As we move on, our compliance interventions, whether they be audits or otherwise, are increasingly risk driven and based on extensive sectoral and taxpayer analysis. We are using computer technology to select cases based on risk profiling and during the audit process itself. Most importantly we are increasing the scale of real-time activity on the ground through visits to premises, surveillance, site visits and the like. All such interventions are driving our compliance agenda and as such we would propose to specifically recognise and reflect them in future performance reports from Revenue.
6. Paragraph 2.5 deals with prosecutions for serious tax evasion. The pay off for the intensive efforts invested in the past two years with the setting up of the dedicated Investigation and Prosecutions Division is bearing fruit with 7 convictions to date in 2005. In two cases custodial sentences were imposed and in two others the Judge made Community Service orders. We also take about 1000 Revenue prosecutions in the Customs and Excise area and for Returns Filing offences each year. Significantly as of today we have a further 78 serious tax evasion cases in the prosecution pipeline. I would hope this level of activity will go some way towards reassuring those who are sceptical about Revenue’s willingness to go down the prosecution route.
7. Paragraph 2.6 refers to the special investigations programme being undertaken by Revenue. I would like to update the Committee in relation to the ongoing Investigations.
The amount for the bogus non-resident account investigation now stands at €822 million (made up of €225 million in DIRT paid by financial institutions, €227 million under the voluntary disclosure scheme and €370 million paid in the investigations since then). This investigation is 98% complete.
The figure for the NIB-CMI investigation stands at €55.5 million. This investigation is 90% complete.
The Ansbacher investigation stands at €53 million -; progress on this investigation is painstaking but continues to yield results.
The follow-through from the Moriarty, Mahon and Flood tribunals is at €36.2 million. This investigation continues but is cognisant of the reality that the Tribunals are still active.
The Offshore Assets Investigation stands at €769.5 million. The
follow through phase of this investigation (identifying those who did
not voluntarily disclose) has started. We have obtained six High Court
orders against Financial Institutions and material is now flowing to Revenue
on foot of some of these orders. We expect to have sought orders against
all relevant institutions by year-end. All these orders will provide us
with further information into the identity of Irish residents holding
Committee members will recall that one of the starting points of this investigation related to offshore trusts held in Jersey. 254 persons came forward to make Voluntary Disclosures of such trusts when we started this investigation. We have now identified those who did not and they are being pursued as we speak.
And, lastly, but by no means least, the Insurance Products investigation stands at €372 million after the initial Voluntary Disclosure phase. We have now started the follow up phase with visits to Insurance Companies using the powers given to us in Finance Act, 2005 to access their records.
The running total as a result of these investigations stands at €2.1082 billion which is an increase of over €302.2 million since I last reported to the Committee on 21 July, 2005.
Although work on these Revenue special investigations is time consuming and complex, significant results are being achieved as the figures show.
8. Paragraph 2.7 deals with the Special Savings Incentive Account Scheme. Revenue are well advanced in the preparations for the maturity process of SSIA's. A comprehensive set of guidelines has issued to all financial Institutions setting out how the maturity process will be managed. These guidelines were compiled following extensive communications with the institutions. Revenue's approach is to ensure that, in conjunction with the financial institutions, that the maturity arrangements operate in a simple way that can be easily understood and followed by all account holders.
Thank you Chairman.