Press Conference Revenue Commissioners Annual Report 2011
Introductory Comments by Commissioner Josephine Feehily, Chairman
Welcome and Introductions to Commissioners Irwin and Cody
This is Revenue's 89th Annual Report covering the year 2011. It is the first time we’ve reported progress on our Statement of Strategy 2011 – 2014 which set outs our four main strategies and three enablers for that period.
Our main results for the year 2011 have been distributed to you. I won’t list them in detail however I would like to give you a flavour of the results across our main business areas last year and draw your attention to some particular trends and developments.
Overall I would say last year was a year of really solid performance in challenging circumstances. We can report positive results in virtually all our business areas, good productivity, and some very interesting and innovative projects as well.
Tax Returns and Tax Collection
While overall tax and duty receipts were €831 million below the Budget target, net tax and duty receipts in 2011 increased by 7.3% to €34.2 billion, reversing three years of falling returns to the Exchequer.
Perhaps more significantly from Revenue’s point of view, is the fact that the level of outstanding tax debt stabilised in 2011 and is now beginning to decrease. The overall debt reduced from €2.08 billion in 2010 to €1.99 billion in 2011. The debt available for collection also fell by almost 5.2% to €1.32 billion in 2011. This is an extremely important performance indicator for us in Revenue and to achieve it, we increased the staff resources deployed on debt collection and recovery by 11.5% in 2011. This combined with our strategy of balancing enforcement with limited debt rescheduling for viable businesses and the initiation of our enforcement powers when necessary has facilitated these results, and we intend to improve on this figure during 2012.
Many of you will be familiar with our offer of help and support for viable businesses and taxpayers who want to pay their taxes but can’t in the short term. As an indication of our commitment to this regard, approximately 16,000 cases have an agreed phased payment plan in place with us covering €113 million in tax debt. This represents an increase of 8% on the number of arrangements (10% decrease in the amount of debt) in place at the end of 2010 and more than 50% increase on the number at the end of 2007.
Supporting Compliance with Good Service
We have worked hard to make our electronic services attractive and easy to use – this has reaped dividends in terms of increased volumes of usage. In 2011, a total of 642,808 customers had registered for our online PAYE anytime service, an increase of 27% on 2010. A total of 378,757 transactions were processed by the service during the year, transactions that previously would have been processed manually. ROS continued to show strong year-on-year growth with payment transactions increasing by nearly 36% while the value of those payments increased by 16% to €32.1 billion. During 2011 we also initiated phase three of mandatory electronic filing which extended mandatory efiling to an additional 200,000 entities. Phase four of this process will apply to all VAT registered cases from 1 June this year.
Our reducing staff numbers has meant that we have had to make choices about where to deploy our staff. While we have maintained a high level of service delivery in most key service areas, in some areas we did not achieve the standards we have set for ourselves. For example on our PAYE 1890 phone service our answering standard slipped from 92% but we still managed to answer 85% of calls within 5 minutes.
On the other hand, our response times improved in processing Tax Clearance applications and Repayment Claims – getting money which they are owed into people’s pockets more quickly.
Ensuring Everyone Complies
A very important positive result for us is that the rate of timely filing of tax returns for both large and medium cases increased in 2011 despite the challenging business environment with 95% of the largest cases filing on time and 98% filing by due month plus one. For medium cases the figures were 87% and 95%, with all other cases remaining unchanged at 72% and 81%.
We are determined to maintain high levels of compliance despite challenging circumstances both for our customers and for Revenue. Our approach of providing a good service to support voluntary compliance, while vigorously pursuing those who do not comply still works. Last year we increased the level of our audit and assurance activity by almost 20% with the resulting yield increasing by nearly €30m.
We carried out 11,000 audits and 546,000 assurance checks which between them yielded more than €520 million. Significantly, the average audit yield increased.
Included in these numbers are the results of a particular focus on shadow economy activity in certain sectors:
- Construction: 1,833 audits yielding €58.8m
- Bars and restaurants: 613 audits yielding €16.9m
- Legal activities: 142 audits yielding €4.6m
- Landlords/rental properties: 908 audits yielding €35.1m
- Professionals (accountants, doctors, dentists): 350 audits yielding €8.9m.
Cash businesses in those sectors are still at the top of our list for 2012, and we’ll also be paying close attention to:
- Couriers
- Security sector
- Nursing homes
- Solid Fuel Merchants.
Our Joint Investigation Units, who work closely with the Department of Social Protection and NERA, made nearly 9,000 checks, visits or inspections. An important result of this work was the registration of 2,274 new businesses or taxpayers. The significance of this figure is that once an individual is registered in our system, we can put measures in place to ensure they are fulfilling their tax obligations.
We also carried out what we call streetscape operations where Revenue officers visit every business on a particular street/area//town. 255 of these were conducted in 2011 during which over 6,000 businesses were visited and assurance checks carried out. These checks have a combined customer service and compliance purpose but, as was the case with our JIU work, employees being paid off the books were detected in several hundred cases. As a result, the Minister for Finance agreed to include in Finance Act 2012 a new fixed penalty of €4,000 for failure by employers to register for PAYE or failure to keep an up-to-date register of employees.
Fiscal Fraud
For us in Revenue, shadow economy activity also includes evading excise of duty on diesel. In 2011, we completely revised our strategy in relation to how we confront the risks in this sector. We tightened the regulations for licensed mineral oil traders to strengthen the control and supervision of the supply and distribution of diesel and we followed up by vigorous enforcement action against unlicensed outlets and those in breach of the licensing conditions, resulting in the closure of 32 filling stations between July and December. A further 11 stations were closed to date this year.
At the same time we seized over one million litres of mineral oil and detected nine oil laundries. Already this year we have seized over 270,000 litres of mineral oil and detected three oil laundries including one mobile laundry. We had 226 successful summary prosecutions last year, and the DPP has to date directed trial on indictment in 9 serious criminal cases.
Our results in 2011 in detecting oil laundries were 125% better than in 2010 but we know we have more to do in relation to diesel fraud. We are working with the legitimate traders and later this year we will introduce tighter regulations to improve controls at several points in the supply chain. When businesses evade excise duty on oil, they are also likely to be evading other taxes. For this reason we are devoting 10% of our compliance effort to the oils sector generally in 2012.
But motorists can help too I would like to remind them of the risks to their vehicles from laundered fuel. They should also be aware that it robs millions of euro of much needed funds from the State, hurts legitimate trade and is bringing criminality into our communities.
Tobacco smuggling is another big risk area for us where we have good results to report. There were 10,581 seizures in ports, airports, inland and in the postal system amounting to 109 million cigarettes. This represents a potential loss to the Exchequer of €46 million. To date this year 2,545 seizures were made including the largest seizure in Europe to date this year of 38m cigarettes in Dublin Port. We also seized drugs with a street value of over €24 million.
Prosecutions
We had an active and successful prosecution programme last year with over 1,000 convictions for not filing income tax returns; over 860 successful cases relating to VAT or PAYE returns and 500 summary criminal convictions across a range of headings and we secured 30 convictions for serious tax (16) and duty evasion (14) last year – up from 13 in 2010.
Between summary and criminal cases, 55 custodial sentences were imposed last year of which 21 were not suspended. Already this year a further 15 custodial sentences have been imposed and 10 of those went to jail.
Anti-Avoidance and Offshore Assets
Work against tax avoidance is just as important as our work against evasion and last year was a particularly interesting year under this heading for a number of reasons. We carried out enquiries in relation to
- Financial transactions that give rise to a potential loss of Capital Gains Tax of approximately €110 million,
- 11 other financial transactions using a different scheme that give rise to potential tax loss of Capital Gains Tax of approximately €13 million,
- A series of transactions involving the extraction of funds from a company using discretionary trusts that give rise to potential loss of income tax of €2.4 million.
As a consequence of enquiries into these potential tax avoidance transactions, legislation has been introduced to counteract these schemes and 23 Notices of Opinion under our general anti-avoidance legislation were issued in 2011. We also had the first Supreme Court test of this legislation, and Revenue’s position was upheld in an extremely complex case.
Last year we introduced a regime to make it mandatory for promoters of tax avoidance schemes to disclose the schemes to Revenue. We have had 7 disclosures to date, one of which includes a client list of 54 names relating to a loss relief scheme. We are examining these disclosures closely.
Offshore evasion is never off our agenda and during 2011 our yield from special investigations was nearly €19 million, over half of which was from our offshore assets project. The cumulative total from this project currently stands at €976.5 million.
PAYE Risk
In 2011 we collected just under €8.5 billion in PAYE. As for all our taxes the majority of claims for reliefs and credits are in order but 2011 saw a number of important innovations in relation to risk in the PAYE sector. We developed our risk analysis tool (REAP) to risk assess PAYE taxpayers. During 2011, more than 55,000 PAYE cases were screened for intervention and Tax Credits were reduced or disallowed in more than 24,000 cases with a resultant yield of nearly €15 million.
One of our most significant innovations last year was a Real Time Risk framework for PAYE which went live in July 2011 and by the end of December about 3,200 transactions were successfully stopped resulting in savings of approximately €1m. By now, that figure has increased to €1.8m and 5,200 transactions. This project, which uses advanced analytics to devise risk rules, puts us at the leading edge of managing risk, ahead of most other tax administrations in the world and we are extending the project this year to include VAT repayment claims.
Looking Forward
We face into 2012 determined to maintain and if possible improve compliance levels.
This is our top priority for the foreseeable future and we are confident that it is achievable. That said, the challenges are considerable. It will be difficult to restore organisational capability and capacity in the short term. All of our business areas, from collection, to managing shadow economy activity, to implementing legislative change, will remain under pressure - but as always we continue to innovate and refine our procedures and processes to improve efficiency and effectiveness. We want the community, the Government and all our stakeholders to have the highest possible level of trust and confidence in the integrity, quality and efficiency of our operations and in our contribution to economic and social development.
This year is likely to be just as challenging as last year, but I want to conclude by paying tribute to the staff of Revenue without whose hard work and support I would have little to report today, and who I am confident will continue to serve the community with dedication and distinction.
26 April 2012