Press Conference Revenue Commissioners Annual Report 2010
Introductory Comments by Commissioner Josephine Feehily, Chairman
Welcome and Introductions
This is Revenue's 88th Annual Report covering the year 2010. Our main results for the year 2010 have been distributed to you. I won't go through them in detail but I would like to give you an overview of some key areas addressed by Revenue in 2010 and outline some priorities for this year. In a nutshell, all things considered, 2010 wasn’t a bad year for Revenue.
The Economic Environment and Tax Collection
Following two years during which the Irish economy contracted sharply, the indications at the end of 2010 were that the contraction, though ongoing, was moderating. The scale of the retrenchment in fiscal terms, however, has been enormous. The good news was that net tax and duty receipts for 2010, at €31.9 billion, were 2.25% ahead of Budget target, supported in the main by stronger than expected Corporation Tax results. The bad news for the country is that these were levels of receipts last seen in 2003.
Total outstanding tax debt actually fell by 1.6% to €2.08 billion but still remains high and the debt available for collection fell by almost 3.8% to €1.39 billion.
Challenges for Business
The rate of timely compliance is an important performance indicator for Revenue – that is to say the percentage of businesses that send in their tax returns, VAT returns, PAYE, PRSI, etc. on time or nearly on time. I am very pleased to report that in 2010 93% of the largest cases filed on time and 97% filed by the due month plus one. For medium size cases the figures were 86% and 94% with the smaller cases somewhat behind at 81% by due month plus one. This is a significant achievement given the extremely difficult environment for many businesses and individuals, and maintaining this level of compliance is a task that requires sensitivity and sound judgement on our behalf.
I have said many times that we want to help viable businesses and taxpayers who want to pay their taxes but can't in the short term. We can, and do, put alternative payment arrangements in place to help such customers through difficult periods. As of end March over 15,000 cases covering debts of about €160 million are being supported by instalment arrangements or other specific arrangements designed to deal with particular challenges of the current environment.
This support will continue. But businesses and individuals must engage with us at the earliest possible opportunity and this engagement must be realistic. Revenue is not a lender of last resort and we have a duty to ensure that all our customers operate on a level playing field and all tax due is paid.
Ensuring Everyone Complies
Non-compliance is an ever-present challenge for Revenue administrations, but in periods of recession this challenge grows, so we have to be active and we have to make our presence felt. Last year our auditors carried out 11,008 audits resulting in a yield of €434.7 million. A total of 454,796 assurance checks, a less intrusive form of intervention, produced a yield of €58 million.
Included in these audit and compliance programmes, are the results of very specific focus on “cash” businesses. These businesses can exist right across the economy wherever there is an opportunity to under-report turnover or profit. For example:
- Construction: 2,226 audits yielded €61.2m.
- Motor Trade: 235 audits yielded €10.4m
- Hospitality - Pubs, Entertainment Venues, Nightclubs: 295 audits yielded €7.2m
- Professionals – Doctors, Dentists, Vets, Solicitors: 328 audits yielded €9.4m
- Restaurants and Fast Food: 248 audits yielded €10.6m
We work very closely with the Department of Social Protection and NERA in our shadow economy work, and last year Joint Investigation Units made nearly 5,800 checks, visits or inspections.
Cash Economy Priorities 2011
In the course of our work on cash businesses we uncovered instances of tax fraud by using electronic sales suppression devices known as zappers. We have been able to respond very quickly by outlawing them in the Finance Act 2011 and we will be engaging with the suppliers of cash registers and EPOS systems to ensure that they comply. Working with colleagues in the UK and Canada, we have learned a lot about this type of software and we will be putting it to good use in 2011 in sectors such as hospitality and retail. Projects are already underway across the country in these sectors; in sectors involving professional cash businesses; in the “employee” area in co-operation with the Department of Social Protection; and so on.
The biggest risk in the so-called shadow economy is suppression of sales and under- declaration of income and profits, and I want to take this opportunity today to say something about this :
- First of all, it is tax evasion and its wrong,
- Secondly, its unfair on those who pay,
- Thirdly, it affects everybody in the community by depriving the Exchequer of funds that are so badly needed to fund the public services on which we all depend.
Unlike the big problems of the country, everyone can do something about tax evasion, for example:
- Don't ask a tradesperson to give you a "cash" price, and put her in an awkward position,
- Don't pay your service professional in cash if he asks, and make sure you get a receipt, ideally one that shows the VAT you have paid.
Can I remind you that tax evasion includes evading tobacco tax? Last year Revenue seized 178 million cigarettes, and so far this year we have seized another 36.6 million, including 5 million on Monday last. As well as evading tax if you buy contraband cigarettes, you run an extra risk to your health because they are most likely counterfeit.
Focus on Risk
We use all the information sources available to us to help identify and target the riskiest cases of non-compliance across all sections of the economy. Our Risk Analysis system (REAP) has multiple data sources including information from deposit accounts, credit union accounts and Suspicious Transaction Reports. In 2010 we added Taxi Regulator data, Private Residential Tenancies Board data and data relating to the second home tax. Data, and the analysis of data is a key part of our strategy. We have enhanced our e-audit capability and all auditors are now equipped with software and training to enable them to do an e-audit on a business’s transactions and records.
We also got powers which give us access to details of eligible bank assets from the National Assets Management Agency, and so far we have received information relating to 108 NAMA cases.
On the subject of Banks, our Financial Services Banking unit monitors and responds to tax issues arising from the banking crisis. Last year, that unit’s compliance programme targeted risks including claims for loss relief, bad debts, VAT and employer taxes liabilities. The audit yield figure in 2010 from this sector was €12 million and the impact of restricted losses amounted to €108 million. Additionally, the High Wealth Individuals Unit initiated enquiries into approximately 300 directors and executive level employees in the six main financial institutions. Enquiries have been closed in about 280 of these cases and to date, €1.3 million has been collected.
And our offshore project hasn't gone away. During 2010 we collected nearly €8 million from our offshore assets project, and the total to date now stands at €963 million. Last year, we collected €19 million from our work on Trusts and Offshore structures – total to date €38 million. Working through information going back 10 years received under Court Orders in relation to transfers from Irish clearing Banks to and from 5 foreign jurisdictions including Liechtenstein and Switzerland, we have identified 3,600 cases who have had dealings with those jurisdictions. We have more checking to do before we can say whether those dealings cause us concern or not.
Our base of Double Tax Treaties and Information Exchange Agreements has grown significantly. To give you a practical example of their value, can I tell you that during 2010, we made a request for information from a Treaty partner which provided us with details of accounts held in a bank in Switzerland by people with Irish addresses. While some had already made a disclosure to Revenue under the 2004 voluntary disclosure scheme, a small number of individuals have been identified with questions to answer. This investigation is in its early stages and has yielded €2 million to date.
Aggressive tax avoidance is just as big a risk to the Exchequer as tax evasion and we were very active during 2010 preparing for the introduction of a mandatory disclosure regime which compels promoters of tax avoidance schemes to tell us about them. The first disclosures were due last Friday (15 April) and I can tell you that we have already received 5 disclosures and we expect some more.
Modernisation and Simplification
To ensure that we continue to provide a reliable, top class service and deliver more with even less, we are committed to continually reviewing and refining our business programmes to optimise performance and effectiveness.
In recent years, this has resulted in us embarking on a programme of what could be called redesigning and re-engineering our products. This has involved designing new workflows and processes, modernising the IT and also modernising the legislation which supports these processes
2010 started with the introduction of e-stamping which had been revamped. Later last year we modernised and simplified the operation of Capital Acquisitions Tax (CAT) resulting in reduced compliance costs.
The administration of Vehicle Registration Tax was also significantly overhauled in 2010. Since 1 September, the National Car Testing Service (NCTS) operates a range of vehicle registration functions on our behalf. This means that registration of used imported vehicles now takes place in 24 NCTS Centres around the country and has allowed us to redeploy staff to core Revenue duties including tax compliance work.
A complete review of the design of Relevant Contracts Tax (RCT) also took place in 2010. Changes were recommended to enhance its effectiveness, reduce opportunities for fraud and help decrease the administrative burden for businesses and Revenue. We plan to see these changes implemented towards the end of 2011.
This type of constant re-engineering of our assessment and collection processes has allowed us to minimise the impact of staff losses and budget reductions. Over the past 3 years our annual running costs have come down by nearly €95 million. In 2008, our Administrative Budget was €487.6m and this year it will be just under €393m. This means that this year it is costing nearly 20% less that it did 3 years ago to run Revenue.
Looking forward
Looking to this year and beyond, there is no doubt that we, as an organisation, face significant challenges. We will continue to work smarter by refining our systems, processes and information sources to ensure that we can keep the high compliance rates, address the risk of growth in the shadow economy and in smuggling, successfully implement major tax changes, and continue to provide the high standard of service our customers expect. We have a strong, and I believe well-deserved record of innovation, change and delivery thanks to the commitment and hard work of dedicated officials, whom we recognise and thank today. I'll leave you with two pieces of information of which I am very proud and which are tributes to those officials:
- In a survey conducted among PAYE taxpayers in 2010, 91% were satisfied or very satisfied with the service they received from Revenue.
- A report produced by PWC/World Bank recently found that Ireland is still the easiest place in the European Union to pay business taxes.
20 April 2011