Press Conference Revenue Commissioners Annual Report 2008
Introductory Comments by Josephine Feehily, Chairman
Welcome and introductions
This is Revenue's 86th Annual Report. Last year, in what was a significant move for us, we dropped the paper printing of our report and produced it in a disc format. This year we've moved further again, dispensing with the discs and publishing exclusively on our website. I confess I’m very pleased about the obvious environmental benefit to this form of report production.
This Report is the first time we've reported progress on our Statement of Strategy 2008 – 2010 which sets out four main goals covering compliance; service; our contribution to economic and social development and organisational factors and issues.
The Report sets out our progress in these areas and in its design and layout makes a very clear and visible link between our Statement of Strategy - what we say we are going to do - and what we actually achieve.
The Economic Backdrop
2008 saw a remarkable change in the Irish economy, a change that had a dramatic effect on the yield from taxes and duties. After a decade of unprecedented growth, during which the gross yield from taxes and duties almost trebled, the Irish economy experienced a sharp contraction. This domestic contraction was exacerbated during 2008 by the exceptionally unfavourable global economic conditions and by extreme instability in the financial markets.
Receipts and Collection
The combined effect of these factors on tax and duty receipts was substantial. Gross receipts in 2008 fell by 9.2% compared to 2007 and net receipts fell by 13.5%. While shortfalls occurred in all taxheads, the asset related taxes were hardest hit, with receipts from both Capital Gains Tax and Stamp Duty down by half.
Last year net receipts amounted to €41.1 billion, down €6.43 against the corresponding figure for 2007 and €8 billion below the Budget estimate and the influence of the economic environment was evident daily to Revenue staff in their interaction with taxpayers and their agents. However, 92% of the largest cases paid their taxes in the month they were due, and 97% paid in due month plus one. This is a very good result.
Debt available for collection in 2008 was €1,233m, up from €895m in 2007. Debt available for collection as a percentage of total gross receipts was 2.1%, up from 1.4% in 2007 – still one of the lowest ratios worldwide.
I take the opportunity this morning to repeat a message to taxpayers who have trouble meeting their tax obligations, particularly where they have liquidity problems, "Please come and talk to us. We have no interest in making a difficult situation worse for a viable business. I can assure you that you will find us very willing to engage".
However, it's important to stress that we will make the inevitable decisions in situations where there is no realistic engagement with us. This is essential – for the Exchequer, because we must be fair to those who do pay and because we can't allow a situation where a business can get a competitive advantage by not paying taxes.
Compliance
Our Compliance Programmes are increasingly designed around REAP – our risk analysis system. During 2008, auditors completed 13,414 audits with an overall yield of nearly €570 million. The numbers of audits and the yield reflects a reduction in the number of special investigation cases.
Over 345,000 assurance checks were carried out in 2008, and brought in €63 million.
Special Investigations
What we term the 'legacy investigations' are now close to conclusion, in terms of tax yield at least. Some may well continue on for a number of years before finalisation because of court cases and indeed we have one or two new ones. In recent times the total yield from these investigations topped €2.5 billion.
Last year we introduced new reporting requirements for deposits in banks and building societies. To coincide with these, we announced a voluntary disclosure initiative focused on large undeclared funds in bank accounts. By the 15 January deadline we had received 1,232 disclosures with a total payment of €73.8m to date.
At the beginning of this year we had a Stamp Duty Incentive designed to encourage old deeds to be presented for stamping before we introduce electronic stamping. The incentive waived penalties on instruments presented within 56 days of the passing of the Finance Number 2 Act so the closing date was 17 February. The yield from this incentive is over €50 million in respect of some 3311 instruments. This is made up of about €40million Stamp Duty and €10 million interest.
Reporting arrangements for third parties - accountants, tax practitioners, solicitors, financial institutions - regarding settlements made by Irish residents involving non-resident trustees were also introduced recently. To coincide with this, we announced an investigation into undeclared tax liabilities in respect of settlements made on trusts or other structures, with a voluntary disclosure date of 1 September 2009.
This pattern of tighter focused investigations, often inspired by information gleaned in earlier investigations, and underpinned by third party information, is likely to recur. Thanks to international cooperation and increasing widespread abhorrence for tax evasion the world is becoming a smaller and more difficult place for tax evaders. This is very much to be welcomed.
International Developments
Revenue contributes at many levels internationally. We have 50 Double Taxation Treaties, double the number we had in 1995, with several more in the pipeline. These treaties are very important for Irish business and Revenue is conscious of its responsibility to support Ireland’s competitiveness in any way we can.
We are also involved in negotiations for Tax Information Exchange Agreements. An Agreement with the Isle of Man came into force in 2008. Agreements with Jersey and Guernsey were signed in the last month and are expected to come into force in January next. At the same time, the Government of the Cayman Islands included Ireland in legislation which will enable them to provide us with information without a TIEA. These were very significant developments.
Prosecutions
In 2008, Revenue obtained 20 Court convictions for serious tax and duty evasion, making it our most successful year ever. 15 cases of those related to serious tax evasion - a 50% increase on the previous year. In one case, a three-year custodial sentence, suspended to 6 months imprisonment, was imposed. This is the seventh prison term imposed by the Courts for serious tax offences since 2000. An eighth prison term was imposed in early 2009.
Protecting Society
Revenue, in association with the other Joint Task Force partners, plays a key role in seeking to prevent the smuggling of drugs into the State. Some of the more significant successes in drug interdiction during 2008 were as a result of this interagency co-operation.
In November, Customs Officers, working alongside colleagues from the Naval Service and the Garda Síochána, were involved in operation Sea Bight, which resulted in one of the largest cocaine seizure in the history of the State. The drugs seized had an estimated street value of €105 million.
Other large seizures during 2008 included two consignments of cannabis, valued at €18 million, in Rosslare; 10 Kgs of heroin valued at €2 million in Meath; and two large hauls of drug money, totalling over €1 million.
International cooperation is vital in protecting our frontiers and keeping our citizens safe from the threat of illegal drugs. In 2008, we assigned Revenue officials as Liaison Officers to the Maritime Analysis and Operations Centre for Narcotics and to Europol.
Smuggled cigarettes and tobacco present a serious threat to the Exchequer and, where they are counterfeit, a particular risk to health. The volume and value of seizures during 2008 increased dramatically over the previous year through a combination of intelligence, profiling and scanning. There were 14 significant seizures in maritime freight amounting to 90 million cigarettes, of which 57 million were counterfeit. Four large seizures, totalling over 52 million cigarettes, were made in Dublin Port. We also carried out a targeted programme on distribution outlets resulting in 128 seizures, totalling over 6.3 million cigarettes.
Services for Customers
In difficult economic times, it is even more important that we provide first-class service to our customers. This service is increasingly being delivered electronically and received considerable public recognition this year. In 2008, our PAYE service was awarded a Public Service Excellence Award and an Innovating Government Award in recognition of the improvements to the delivery of PAYE services over the last ten years. The Revenue Online Service (ROS) scooped an Inspired IT Award for innovative use of IT in Government.
By the end of 2008, 14% of PAYE customers had registered for PAYE anytime, our online service for PAYE customers. An improved version to make it even easier to transact business will go live in the next couple of months. On the tax returns side, the number of returns filed electronically increased by 9% overall on 2007 levels, with Corporation Tax returns up by 23%. Payment transactions increased by 16%. This is very encouraging in advance of mandatory e-filing which came in for Large Businesses and Government Departments on 1 January last.
Conclusion
In launching a report which notes the twentieth anniversary of the establishment of the Taxes Administration Liaison Committee (TALC) it is fitting that I place on record the Board’s appreciation of the work of the tax and customs practitioners and other professionals with whom we have an excellent working relationship, even if we don’t always see eye to eye.
2008 was a year of great challenge for Ireland and indeed for Revenue. Despite the downturn in the economy our volumes of business increased under many headings. We were called upon to respond to many business challenges, including those presented by two Budgets and Finance Acts. We are currently preparing for our third Finance Bill in a little over twelve months and putting systems in place to implement the Supplementary Budget changes. It is a matter of great pride to me and to my fellow Commissioners that the organisation met those challenges so successfully. I take this opportunity to record my thanks, and those of the Board, to our Revenue colleagues whose hard work and dedication has been central to all we have achieved.
Looking to the immediate future, the implementation of the tax reform agenda already outlined by the Minister for Finance and likely reforms arising from the forthcoming report of the Commission on Taxation will challenge us.
It is also clear, in the context of Government policy on public expenditure that we must reduce our operating costs while still delivering key business programmes. Revenue, in partnership with staff and Unions, has been developing and modernising itself. We have invested sensibly in technology and in skills. We believe that these, with the support of our staff, have equipped Revenue to carry on being a high performing organisation and to deliver on our Mission of Service to the Community.