Press Conference Revenue Commissioners Annual Report 2016

Introductory Comments by Commissioner Niall Cody, Chairman

On behalf of the Board, I am pleased to present Revenue’s Annual Report for 2016. This is Revenue’s 94th Annual Report. Results for 2016 reflect solid progress on each of our strategic objectives; making it easier and less costly to voluntarily comply, and identifying and confronting non-compliance.

This morning, I will give you an overview of our 2016 results, and talk about some of our plans for 2017.

Tax Returns & Collection

Revenue collected €47.95 billion for the Exchequer in 2016. This was an increase of 4.7% on 2015 and the sixth annual increase in a row. It was also the highest Exchequer receipts figure in the history of the State[1] . Significant year-on-year increases were recorded in each of the main taxes. Taxes on income were up 4.5%, VAT up 4.2% and Corporation Tax up 7%. Along with today’s Annual Report, we are publishing a Revenue research paper on pdfCorporation Tax (PDF, 535KB) which provides insights into the significant increase in Corporation Tax receipts in 2015, and presents an initial analysis of the trends we observe in 2016 receipts.

A key measure of Revenue’s performance is the rate of timely compliance. Our 2016 results show that, across all taxes, the overwhelming majority of taxpayers want to do the right thing and be tax compliant. This is demonstrated by the very high timely return filing and payment rates in the 90%+ range. We acknowledge and value the important role of compliant taxpayers and businesses, and the contribution of tax and customs practitioners to the achievement of these results.

Another key indicator of Revenue’s performance is the level of debt. In 2016, we introduced a new data analytics application to facilitate earlier Revenue intervention where tax payment and returns filing obligations are not being met. By the end of 2016, we had reduced the debt available for collection to €755 million, down 8% on 2015. Our debt collection activity is fair and even-handed. When a viable business that is experiencing temporary cash flow problems engages and cooperates with us, we work very effectively with them to deal with these problems, as is shown by 10,886 traders in instalment arrangements worth €103 million. For the small minority who either refuse to engage, or refuse to pay their tax, they are met with determined collection and enforcement action, and the additional cost of that action. We collected €210.3 million through enforcement action in 2016.

2016 Exchequer receipts were almost 1% higher than 2007, when €47.5 billion was collected.

Helping Taxpayers to Meet their Tax Obligations

Almost every adult citizen interacts with Revenue and, as I said earlier, the vast majority of taxpayers are compliant. We want to make it easy for customers to ‘get it right first time’, pay the tax and duty they owe, and claim their correct entitlements. Helping and supporting taxpayers to get things right from the start remains a core priority for us.

During 2016, we expanded our offering of secure and user-friendly ways of interacting with us. Revenue customers can now register their first job, new job or private pension online, using the new "Jobs and Pensions" service, and can make secure online payments using “RevPay”. There are now over 1.4 million registered users of our PAYE Anytime service, which is accessible through myAccount on any smart device.

In 2016, we handled more than 2 million telephone calls, up 22% from 2015. Despite this significant increase in call volumes, call waiting times for our customers have been reduced from over 5 minutes in 2014 to less than 1 minute in 2016.

This Report sets out some of the significant service enhancements we implemented during 2016, and the positive effects these changes are having on the quality of our service to taxpayers.

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Confronting Non-Compliance

In tandem with improving service, and as a further support for compliant taxpayers, we remain sharply focussed on tackling non-compliance. This focus applies across a very broad spectrum, from failure to make a tax return, to outright tax fraud. We carry out a range of compliance interventions across the full spectrum of our taxpayer population.

The type of intervention we undertake, and the consequences for the non-compliant taxpayer, are proportionate and responsive to taxpayer behaviour. Whether it’s a simple phone contact, a visit to the taxpayer’s premises, an audit, or a criminal prosecution, matching the response to the taxpayer’s behaviour is key.

Increasingly, we segment taxpayers and sectors by reference to behaviour and risk. This way, we can target our scarce resources and maximise the effectiveness of our interventions. Today, we publish our research paper on pdf"Applying Behavioural Science in Tax Administration" (PDF, 869KB). This sets out a series of trials we undertook to better understand and influence taxpayer behaviour. The paper also shows how we have put our findings to use in reducing the compliance burden for taxpayers and Revenue.

The overall yield from Revenue audit and compliance interventions in 2016 was €555.6 million. We continued our national programme in the construction sector, conducted a significant number of interventions in sectors where cash transactions are the norm, and prioritised our interventions on certain professions. In 2016, the yield from such sectoral interventions was €210 million, as set out in Table 19 of our Annual Report.

During 2016, we published details of 341 taxpayers in the quarterly List of Tax Defaulters. Cases of serious tax and duty evasion are referred for criminal prosecution and 2016 saw criminal convictions in 18 such cases. At the end of 2016, a further 30 such cases were before the Courts, and 108 cases were under Revenue investigation with a view to criminal prosecution.

Fiscal Fraud, Tobacco Smuggling & Drugs

Revenue tackles fuel fraud, the smuggling and sale of illicit tobacco products, and drug smuggling. These criminal activities and tax frauds pose serious threats to the Exchequer, to communities, to public health and to the environment. We work in close co-operation with other tax and law enforcement agencies, both in Ireland and abroad, and with the relevant international organisations to combat these threats.

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Fuel Fraud

Our effectiveness in responding to fraud and criminality in the fuel sector has been strengthened by the comprehensive and co-ordinated set of measures we have implemented over recent years. These included the introduction of a new fuel marker, in April 2015, in a joint initiative with Her Majesty’s Revenue and Customs (HMRC). We take robust and sustained action against those involved in fuel fraud at all stages, whether laundering marked fuel, supplying and selling the laundered product, or using it illegally in road vehicles. In January 2016, Revenue conducted a National Random Sampling programme which found no evidence of the new fuel marker in any of the samples tested. During 2016, just one mobile laundry was detected; local councils report that sludge dumping is very significantly reduced and the volume of road diesel released for consumption continues to grow strongly. We are encouraged by the Revenue research paper published today entitled pdf"The Oil Market in Ireland" (PDF, 488KB), which provides evidence that our overall strategy and actions to address the illegal trade in oils is working and continuing to yield benefits to the Exchequer and to compliant businesses. We are alert to the challenges posed by existing and new fuel frauds, and we will continue to meet those challenges head on.

Tobacco Smuggling

Tobacco smuggling and associated illegal activity pose significant threats to the Exchequer and to compliant businesses. Revenue targets all elements of the supply chain and, in 2016 we seized over 44.6 million cigarettes and 1,527 kilos of tobacco, with a combined value of €24.24 million.

Today we publish the results of the pdf2016 IPSOS MRBI survey (PDF, 206KB), conducted for the National Office of Tobacco Control and Revenue, which reports a 10% illegal cigarette market, down from 12% in 2015. The downward trend is encouraging, but we are not complacent. Patterns of smuggling activity change continuously as smugglers adapt their methods and look for new ways to avoid detection. Tackling the illegal tobacco trade will continue to be a high priority for Revenue.

Drug Smuggling

In 2016, Revenue seized 1,678 kilos of illegal drugs with an estimated value of €30.49 million. We continue to work closely with An Garda Síochána, the Naval Service and international agencies to intercept and prevent drug trafficking.

Tax Avoidance

Tax yield, and the perceived fairness of the tax system, are threatened by tax avoidance schemes and unintended use of legislation. Revenue challenges such schemes and, in particular, tax avoidance that may be undertaken by High Wealth Individuals. During 2016, Revenue settled 40 tax avoidance cases, yielding €10 million in tax, interest and penalties, and preventing more significant losses to the Exchequer. At the end of 2016, there were 836 such cases ongoing; we are persistent and determined in challenging these tax avoidance schemes.

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Tax Evasion using Offshore Structures & Accounts

Over a number of years, Revenue has been proactive in tackling the use of offshore accounts to evade tax. To date, we have collected €2.8 billion from over 35,000 such cases and, during 2016, our investigations in this area yielded €7.7 million. The release of the Panama Papers in 2016 showed that offshore tax evasion remains a global problem. In response, governments and tax authorities worldwide are engaging in closer co-operation and increased automatic information sharing. As a result, tax administrations have greater visibility of the offshore assets and income of their residents.

A significant change was introduced in the Finance Act in December 2016, the effect of which is to remove the facility to make a Qualifying Disclosure to Revenue in respect of tax defaults involving offshore income or assets. This means that anyone who does not come forward before the deadline will face penalties of up to 100% of the evaded tax, publication in the List of Tax Defaulters, and potentially, criminal prosecution before the Courts.

International Taxation

We are committed to playing our part internationally. This Report sets out Revenue’s ongoing extensive involvement and engagement internationally, as we contribute to, and influence, tax transparency and the exchange of information between tax administrations.

Last August, the EU Commission announced its decision in its State aid investigation into the tax treatment of certain Irish branches of Apple companies. As you know, the Irish Government has appealed the EU Commission decision to the General Court of the EU. The matter is still the subject of open legal proceedings and I won’t make any further comment today. However, as I stated when the EU Commission announced its decision, under Irish law, the profits of non-resident companies that are not generated by their Irish branches cannot be charged to Irish tax.

Following the Apple case, we undertook to publish a breakdown of Opinions issued. We do this in Table 15 in our Annual Report. We also reduced the term of an Opinion to 5 years, and are currently in the process of reviewing Opinions issued before 2012. Companies relying on such Opinions have until 30 June this year to apply for a renewal or extension of the Opinion.

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People & Capability

Our staff are central in, and critical to, Revenue’s effectiveness. The considerable loss of experience due to retirement continued in 2016, and we estimate that more than 1,700 staff will retire in the next five years. We recognise the need to build capability and innovate, and we will continue to recruit and to invest in training and in technology.

In 2016, we recruited more than 500 staff from open and interdepartmental competitions. We invest in our people and support our staff at all levels in their pursuit of relevant professional and academic qualifications.

Looking Ahead

Our Statement of Strategy 2017-2019 sets out our high level objectives over the coming years. Performance in our core role, the collection of the tax and duties payable to the Exchequer in a fair and efficient manner, remains a primary focus. We are resolute in our commitment to service, compliance and continuous improvement to increase the efficiency of tax administration.

We continue to improve the way we interact with taxpayers. Our objective is to make taxes and duties easy to pay and hard to avoid or evade. In the coming months, we will launch a new website to support compliant taxpayers by making it easier to find key information, and by making that information easier to understand. Our focus in the year ahead is on developing our data analytics capability and refining our risk-targeted response to non-compliance.

Revenue’s culture of collaboration and performance is evidenced in the work underway on PAYE Modernisation - a move to real time reporting of PAYE. This will improve the accuracy, ease of understanding and transparency of the PAYE system for all stakeholders.

As the UK prepares to leave the EU, Revenue’s priority is to protect the Exchequer and support trade through this transition. We are working closely with the Interdepartmental Group on Brexit issues. We will continue to work closely with the Department of Finance and the Government, to achieve the best outcomes for Ireland.

We publish this Report just ahead of the deadline for disclosure of undeclared offshore income or assets. Customers should be aware that we now get more information, and more detailed information, on offshore accounts and assets held by Irish residents; any person or business affected is strongly advised to avail of this last opportunity to contact us and make a full disclosure, before we contact them. Given that the deadline falls on the Sunday of a Bank Holiday weekend, the deadline is being extended to Thursday, 4 May at 17:30.

There are challenges ahead and we are confident that Revenue is ready to respond effectively to them. As I said earlier, our success in serving the community by administering taxes and duties fairly and efficiently is significantly reliant on the professionalism and expertise of our staff. On behalf of the Board, I wish to thank our management team and all our staff for their dedicated hard work and commitment, and their contribution to Revenue’s success in achieving our objectives.

27 April 2017

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