Opening Statement by Revenue Chairman Josephine Feehily to the Public Accounts Committee, 19th February 2009

Thank you Chairman and members of the Committee for this opportunity to make a short opening statement in relation to Paragraphs 3.1 to 3.7 of the Comptroller and Auditor General's Report for 2007 External link.

Paragraph 3.1 shows net receipts for 2007 at €47.334 billion. While this represents an increase of almost €2 billion on 2006 figure, it was over €1.8 billion below the Exchequer target figure for the year. With the exception of Income Tax there was a shortfall in all the major taxes, but in view of subsequent events, it can be seen as a comparatively successful year in terms of tax collection. The single biggest contribution to the shortfall was in Stamp Duty receipts, due to the slowdown in the property market.

Paragraph 3.2 and 3.3 deal with write off of taxes and analysis of major write off cases. The amount written off in 2007 was about €118 million, which was slightly down on the previous year. Revenue like every other tax administration or business inevitably experiences some bad debts. Our objective is to minimise these in every way possible and we will only write tax 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 of tax collected. As a percentage of the gross tax (including PRSI) collected in 2007 the amount written off was less than one fifth of one percent, and was the lowest ratio of write off in the last seven years. I should mention that tax is written off for administrative purposes only – in order to prevent uncollectible tax from clogging up the system and distracting our focus from collectible tax. With the exception of examinerships, if information comes to light that the status of a taxpayer who has had tax written off has changed we can reinstate the write off and pursue the unpaid tax in the normal way.

Paragraph 3.4 deals with outstanding tax and shows the balance outstanding at 31st March 2008 at €1.286 billion or 1.9% of gross collection. While this is marginally up from 2007, when it was at a historic low of 1.8%, it clearly illustrates our continuing success in improving payments compliance in recent years. Just 10 years ago outstanding debt stood at 7.4% and it was as high as 62% in the 1980’s.

The remaining Paragraphs today are mainly concerned with managing compliance and Revenue audits. Revenue’s approach to managing compliance is multi-faceted, involving:

  • getting returns and payments in on time, an area where we have made very good progress
  • the Revenue Audit Programme which is an established and successful means of ensuring compliance with the self-assessment system. The yield from the 14,308 audits completed in 2007 was €688 million.  
  • A much larger programme of Assurance checks giving us coverage and presence across the tax base – in 2007 over 237,000 assurance checks were carried out yielding some €46 million. 
  • A further €30 million approx. of tax arrears was also collected by Revenue auditors in the course of audits, bringing the total recovered under all the interventions  to over €763m.
  • Details of 555 cases settled in 2007 were published under the provisions of Section 1086 of the Taxes Consolidation Act 1997. The total amount of tax, interest and penalties in published cases was €144 million.
  • Increasingly our compliance programmes are focussed on a sectoral approach and so, for example a large amount of our audit activity was focussed on the construction sector which yielded €130 million.  A further €15.5 million of arrears and €22 million in assurance checks was collected from this sector, and we had projects in many other sectors.
  • As part of the sectoral approach, the largest cases representing the greatest tax risk to the exchequer are managed in a Large Cases Division
  • In accordance with our risk-based approach cases are selected for intervention based on the presence of various risk indicators and other information available with the aid of our computerised risk analysis system REAP. The use of REAP is also helping to change the way that Revenue looks at its compliance programmes, and we are planning to publish a new Compliance Strategy later this year which will reflect the impact of REAP and the changed economic environment.

Finally Chairman you asked that I make a few specific comments in relation to the Internal Audit function in Revenue. Revenue has had a full internal audit function in place for over 20 years. The Internal Audit Branch remit extends over all areas of Revenue and it has unrestrained access to all systems, records, reports, and personnel. It operates in accordance with the 'Internal Audit Standards' published by the Department of Finance. The head of Internal Audit reports to the Revenue Board and has direct access to me as Accounting Officer. We also have an Internal Audit Committee in place since 1999. The Committee comprises five members, four of whom are external to Revenue, including its Chairperson and Vice-Chairperson. The purpose of the Committee is to oversee the Internal Audit function and to advise the Board on the operation and development of that function. Its terms of reference are set out in a Charter agreed between the Board and the Committee. The Committee also meets with our external auditor, the C&AG, annually.

In the two year period 2007/2008, a total of 26 audits were completed comprising a mixture of original audits and follow-up audits. All original audits are followed up in order to ensure that any recommendations arising from the findings of an audit are implemented by management to the satisfaction of the Internal Audit Branch, the Internal Audit Committee and the Board.

Some examples of the audits carried out in the period mentioned are:

  • the management and control of capital assets,
  • the write off of uncollectible taxes, which they do every year
  • computer badge security,
  •  the control of non-EU imports by customs,
  • the integrity of the Tax Register with regard to the systems and procedures in place for the registration, cancellation and amendment of taxpayer data.

Copies of all reports are sent to the Office of the Comptroller and Auditor General for its information. 

Thank you Chairman


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