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COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 20 Feb 2014

Chapter 27 - Tax Audit Settlements

Ms Josephine Feehily(Chairman, Revenue Commissioners) called and examined.

Before we begin, I remind members and witnesses and those in the Public Gallery to turn off their mobile telephones and to keep them away from the microphones on the desk because they interfere with the sound quality of the transmission of the meeting.

I advise witnesses that they are protected by absolute privilege in respect of the evidence they are to give to this committee. If they are directed by the committee to cease giving evidence on a particular matter and they continue to do so, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against a Member of either House, a person outside the Houses, or an official by name or in such a way as to make him or her identifiable. I remind Members of the provision within Standing Order 163 that the committee shall also refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies.

I welcome Ms Josephine Feehily, chairman of the Office of the Revenue Commissioners, and invite her to introduce her colleagues.

Ms Josephine Feehily

I am accompanied by Mr. Michael Gladney, Collector General, Mr. Paddy O'Shaughnessy, principal officer, who liaises with the Comptroller and Auditor General and the Committee of Public Accounts, Mr. Declan Rigney, assistant secretary, planning division, and Mr. Terry Walsh, Department of Public Expenditure and Reform.

I invite the Comptroller and Auditor General to make the opening statement.

Mr. Seamus McCarthy

I thank the Chairman. As the Chairman has said, before the committee today are the 2012 accounts of the receipt of the State and the 2012 Appropriation Accounts for Vote 9 - Office of the Revenue Commissioners, as well as a number of chapters examining specific aspects of Revenue activity and performance. The account of the receipt of revenue of the State and the appropriation account both received clear audit certificates.

Chapter 23 reviews the key trends in the amounts collected over the period 2007 to 2012. Exchequer tax revenue increased in 2012 by around €2.4 billion, or 7%, to €36.5 billion. There was a significant shift between PRSI and income tax receipts in 2011 and 2012, following the introduction of the universal social charge.

Chapter 24 reviews Revenue’s debt collection function and the trends in the value, status and age of outstanding debt arising from assessed tax liabilities. The overall debt at the end of March each year from 2010 to 2013 remained stable at around €2 billion. Revenue has improved its debt management system through the introduction of an arrears case analysis tool, which now provides better information on the level and composition of debt. At the end of March 2013, more than 40% of the debt was regarded by Revenue as being currently non-collectible, mainly due to the debt being under appeal. Around a quarter of the debt was subject to enforcement action, and payment agreements were in place for a further 6%. The remaining 29% was deemed collectible, but was not subject to enforcement or collection efforts at the end of March 2013. For 2012, Revenue set itself a business target to reduce the level of collectible debt by 22%. We found that this was an overly ambitious target. The actual reduction achieved in 2012 was just 2%. The target set by Revenue for 2013 was a reduction of 4%.

Corporation tax losses are dealt with in Chapter 26 which outlines matters relating to trading losses used by companies to obtain relief from the payment of corporation tax on other profits. Prior to 2011, Revenue did not have a record of the trading losses accumulated by companies. Revenue amended the tax return form for 2011 to require companies to provide additional information on losses carried forward from earlier accounting periods. Arising from this change, Revenue now has better information to use in its tax forecasting work.

The total losses and allowances of around €205 billion available for offset in 2011 were highly concentrated in a small number of companies. Financial institutions participating in NAMA accounted for around a third of the total, or about €67 billion. There are restrictions on the rate at which these losses may be used to reduce future tax liabilities. Seven other companies in the financial and insurance sector accounted for a further €31 billion, or 15% of outstanding losses and allowances.

Revenue estimates that losses and allowances of around €23 billion were used in 2011 resulting in a reduction of around €2.8 billion in corporation tax receipts in that year. It has estimated that a further €183 billion of losses and capital allowances remained unused at the end of the year. The extent to which the amount carried forward will have an impact on future corporation tax receipts depends on the profits earned by the companies.

Chapter 25 outlines Revenue’s approach to monitoring and managing taxpayer compliance. Revenue undertakes a range of compliance interventions, including two tax audit programmes. Under its random audit programme, Revenue carries out around 400 audits of randomly selected individual taxpayers and business annually. The results of the audits for the years 2008 to 2011, almost all of which have been completed, show that, consistently, around one third of taxpayers under-declare their tax liability. The average yield for completed 2011 audits where the taxpayer was non-compliant was over €11,000 per case. The 2012 audits had not all been completed, so final outturn figures were not available for that year. The Revenue’s overall losses as a result of non-compliance by registered taxpayers are referred to as the audit gap. Revenue does not produce estimates of the gap.

We have pointed out in the past that the results of comprehensive random audits can be used to provide an estimate of the audit gap, by comparing the yield from the random audits with those taxpayers’ full assessed liabilities. The 2011 random audits suggest that registered taxpayers may have underpaid their liabilities by an estimated 3.1% in the reference year. It should be noted that this does not include any losses of revenue from activity by agents that are completely outside the tax system, operating in the black economy.

Revenue’s main compliance work is its programme of risk-based tax audit. The results of this programme indicate that Revenue’s detection work is generally well-targeted. In 2012, almost 70% of the risk-based audits resulted in identification of additional tax due – that is about double the non-compliance rate for the random sample. The average yield from risk-based audits was just under €60,000 per case. However, we noted that the number of risk-based audits fell by around 20% in 2012 compared with 2011, continuing a downward trend in the level of audit activity.

Chapter 27 notes that 20% of a sample of tax settlement cases reviewed by my office had been incorrectly classified as audits, and were in fact other non-audit interventions. As a result, it is likely that the reported total audit yield of €359 million in 2012 was significantly overstated. Revenue has pointed out that it began refining the classification of its compliance interventions during 2012.

Chapter 27 focuses on audit settlements reached by Revenue with taxpayers. The review examined in detail the process applied in reaching settlements in 45 audit cases closed by Revenue in 2012. The sample comprised the four cases with the highest settlements in the year, and 41 cases selected at random. As stated earlier, nine of the cases, including one of the largest cases, had been incorrectly recorded as audit interventions. The remaining 36 cases involved audits that resulted in a yield of €41.4 million.

For most of the cases reviewed, the examination found that Revenue had followed its published settlement procedures and that interest and penalties had been applied in accordance with legislation. However, there was insufficient evidence on file to indicate how the taxpayer’s liability had been calculated in 18% of the cases examined. Interest had been incorrectly applied or not applied at all in a small number of cases. In a third of the cases examined, the level of penalties imposed was lower than the files indicated they should have been. Analysis of all audit settlements reached in 2012 showed that interest and penalties were applied in just over half of the cases managed by the large cases division. In contrast, interest and penalties were charged on over three quarters of the settlement cases managed in the regions. The Accounting Officer stated that the nature of the taxpayers managed by the large cases division, mainly large corporates, means that the issues identified which gave rise to the settlement can often relate to technical adjustments which do not result in a penalty. The chapter recommended that Revenue should review the mechanisms it has in place to ensure that interest and penalties are quantified in accordance with legislation and with the code of practice for Revenue audit.

The highest audit settlement in 2012 was for €15 million. In that case, Revenue raised an assessment of tax due of €22 million but did not notify the taxpayer of interest due or possible penalties. As part of our examination, we calculated that interest of over €10 million had accrued at the time the assessment was raised. In addition, penalties could range from 15% to 100% of the tax liability. As a result, the taxpayer’s total liability in this case could have been in the range of €36 million to €54 million. Revenue could have added rigour and transparency to its approach to negotiating the settlement by making the taxpayer aware of the full potential liability and clearly documenting on file its assessment of the probable outcomes of litigation. Its records indicate that this approach was used in another large settlement case.

The chapter makes a number of other recommendations about the negotiation and settlement process. The Accounting Officer will be able to brief the committee about progress on the implementation of these recommendations.

I thank Mr. McCarthy. I ask Ms Feehily to make her opening statement.

Ms Josephine Feehily

Mindful of the two-minute limit, I will be brief.

The chapters under consideration are really about our core business of collection, debt management and audit and compliance. Chapter 23, which deals with tax collection, as the Comptroller and Auditor General pointed out, shows Exchequer revenue in 2012 at €36.5 billion. The figure for 2013 is €37.8 billion, some €6 billion higher than for 2010 which was the worst year in recent times.

In relation to debt management, as I have said before to the committee, the change in the amount of outstanding tax debt over time can give us some insights into the financial circumstances of taxpayers. The debt is expressed by Revenue as a performance measure by comparing it with the gross tax collected. As expected, the resulting ratio increased, from a low of 2% in 2007 to 4% in 2009. It was still at 4% in March 2013. However, I anticipate that it will show an improvement when we next measure the debt at the end of next month.

On the compliance side, as the Comptroller and Auditor General acknowledged, we have active risk-based programmes. I circulated in advance to committee members our headline results for 2013. On the subject of compliance, they may also be aware that we will shortly be rolling out a structured and focused local property tax compliance programme, but before we do, we are giving property owners a final chance to avoid interest and penalties. In that context, I have also furnished for the information of the committee some LPT statistics which have just been published to coincide with this campaign.

Let me add something that is not in the paper circulated. For the committee's information, in relation to losses, in his opening remarks the Comptroller and Auditor General referred to the fact that there were restrictions on the uses of losses, which, of course, was the correct position when the report was compiled, but that is no longer the case. Since the passage of the Finance (No. 2) Act 2013, that restriction has been removed. That is a new piece of information subsequent to the publication of the report.

May we publish Ms Feehily's statement?

Ms Josephine Feehily

Certainly.

I welcome Ms Feehily and everyone else present. I will start with the documents she provided for the committee on the property tax to obtain more details. What is the current rate of compliance?

Ms Josephine Feehily

The compliance rate in 2013 was 93%. We are still receiving returns in respect of 2014 at the rate of about 1,000 a day. Mind you, there was a big jump yesterday. In the first ten working days after Christmas, we were collecting about €1 million a day. We are now collecting about €600,000 or €700,000 a day from people who are making payments for this year. I guess what that tells us is that there is a clear desire to be compliant. We are delighted with this and the message we are trying to convey in that regard is that we are giving people an opportunity until the end of March to pay before we consider applying penalties or interest, but we do need those who want to pay - clearly, people are paying every day - to actually pay.

The last chance the 7% who are not compliant will have is to pay before the deadline of the end of March.

Ms Josephine Feehily

It is the last chance to pay LPT interest-free. It is the last chance to pay household charge arrears of €200 without further interest being added.

What is the household charge compliance rate?

Ms Josephine Feehily

There are a couple of things I need to say about it. The household charge had its own set of rules and matrix. I think we have seen the charge paid on about 1.2 million properties-----

The household charge.

Ms Josephine Feehily

-----whereas in the case of local property tax, the figure is 1.62 million properties. When we look at the two databases, we can see a gap of 460,000 properties. I need to enter a caveat. The two systems were so different that merging them was not easy. We have had to do a lot of work in the past six months to remove duplicates to try to make sure we are matching properly. For example, up to about three weeks ago, I would have said there were 40,000 or 50,000 properties that we had not matched. We have got that figure down to 17,000. However, we do not have confidence in the 460,000 number because the databases were so different, as was the approach taken. That is another message we need to get out. If there are people who have paid the household charge and if, when they look at their LPT records online - I have been getting questions about this - they see they are €200 in arrears, that means that for a variety of reasons that I can discuss with the Deputy we do not know they paid the household charge. Therefore, we do not have massive confidence in the figure of 460,000. The number is somewhere between 400,000 and 500,000 properties on which the household charge has not been paid.

Is it the case that the household charge has not been paid on 400,000 or 500,000 properties and Revenue is still not aware whether the property tax has been paid?

Ms Josephine Feehily

No; we know the property tax has been paid but that the household charge has not been paid. We know this when we match the databases. I am saying we do not have huge confidence in the perfection of the match; therefore, the figure of 460,000 could be slightly overstated. That is the only point I wanted to make.

Why does Revenue not have confidence in the figure? What was the previous system used?

Ms Josephine Feehily

It was not ours. It was designed differently by the Local Government Management Agency for a different purpose. There is one principal difference which I think explains most of it. Because it was principally an online facility, it was quite common for family members to pay the household charge for a parent. In that case, the system linked the property with the payer, not the owner, and that has left us with mismatches. That is why I am saying we do not have 100% confidence in the number, but we do know that there are several hundred thousand who have not paid. I am sure our matching is right in 80% or 90% of cases and we will be after those concerned. That is the message.

From the initial statistics, 190,000 reminder letters were issued. They are not getting to half of those concerned.

Ms Josephine Feehily

That was last year in the case of the LPT. The Local Government Management Agency had its own compliance programme, with which I am not familiar. We have not done any work on the household charge until now. This is new work for us. The reminder letters concerned the payment of local property tax in 2013. We wrote to people whom we felt should have engaged with us, particularly in the social protection category who were in receipt of social protection payments. We put a lot of work into making sure they knew they could avail of deferrals, exemptions and so on. Many of the reminder letters were in that category. We also wrote to people where we were about to make a mandatory deduction from their salary.

Has that happened yet?

Ms Josephine Feehily

In 29,000 cases we have initiated mandatory deduction action.

Has the money been taken at this stage?

Ms Josephine Feehily

Yes. About 8,000 or 9,000 suddenly contacted us, having been reminded for the third time; therefore, the actual number in this regime is now just over 20,000.

What do the Revenue Commissioners expect that rate will have to be at the end? Is that initial €29,000 the total figure that must be taken out or will there be more?

Ms Josephine Feehily

More of that will certainly happen in respect of household charges if people do not comply. We have a line of sight by matching those 460,000 cases with our tax databases. We can see that 240,000 of them are in PAYE employment. There is a cohort to whom we can apply that mandatory deduction straight away if they do not engage with us soon.

When does Revenue expect people to be fully compliant with local property tax, LPT, and the household charge?

Ms Josephine Feehily

Miracles take longer. In respect of taxes generally we get a blended rate of approximately 85% timely compliance, across all of the taxes, which is very good compared with international rates. Against that benchmark 93% for LPT is very good. If we can achieve 93% for LPT, household charge and LPT 2014 by the autumn, I will be very pleased. I am quite certain that some of the other 7% have no liability but they have not claimed the exemption. There is unsold housing stock for which the exemption has not been claimed. It will not be the same 93% each year. If we are in that space every year for the household charge we will be ahead of the compliance rates we achieve on some of the taxes, without engaging in the kind of activity the Comptroller and Auditor General spoke about, audits and so on. A voluntary compliance rate of 93% is very good.

On the valuation band changes, what was the relationship between what Revenue thought property would be valued at and the valuation people put down? There are some big discrepancies.

Ms Josephine Feehily

At the time we made it clear that we were not estimating a property but average values for property types in an area. We acknowledged straight out that at least half of those "must use" averages would not be right. That is what happens with averages.

I understand what Ms Feehily says, but if the valuation was out by two or three bands did that draw Revenue’s attention, or did Revenue take it as being the case?

Ms Josephine Feehily

Because of the compliance rate we have norms for areas, and the further somebody is out from the norms for the area, the more likely we are to begin with those. Taking a risk-based approach to compliance suggests that one starts with the bigger outliers. Our message to people in that position is that they can self-correct online now, without incurring any penalties, without interest, if they do it by the end of March.

When will Revenue begin that process of telling people it thinks they have undervalued property in an area?

Ms Josephine Feehily

We have already challenged a handful.

Ms Josephine Feehily

Fine. We got money. We will begin to challenge under all the headings we mentioned in our data, people who do not engage, people who have not paid the household charge and on valuation, beginning in April. Many will probably receive letters in the second half of April, depending on the response-----

Are those the people who Revenue believes may have undervalued their houses compared with the surrounding properties?

Ms Josephine Feehily

Yes.

Will Revenue go back to the 2% or 3% who it believes may have overvalued their properties to say they have given too much money?

Ms Josephine Feehily

No. It is a self-assessment tax. We do not do that with any tax. If people choose to self-assess too high and pay, the Minister for Finance would be very pleased.

On a more serious note, we have a refund programme in place because many people, particularly elderly people, took the Revenue estimate too much to heart. We will refund anybody in that position. We have already made several thousand refunds to those categories of people.

We have already collected approximately €3,000 for 2015. Most of those cases were people who were due a refund but who chose to leave it there for 2015.

They are well ahead of the curve. Is Revenue surprised that the bands it set out are roughly on target?

Ms Josephine Feehily

The cluster of the bottom four bands is consistent with data put in the public domain by the Thornhill report and other commentators, such as the Dublin Accommodation Finder Terminal, DAFT, and so on. There may be some nuancing within the bands. It is important to remember the valuation date was May 2013. We are very clear in the belief that recent colour supplements do not reflect the valuation that is relevant for property tax. If one views the bands as a cluster they are completely consistent with the other data that were published by the experts at the time. There might be nuances in between.

If someone believes he or she is not within the right band, can he or she change that within the next month?

Ms Josephine Feehily

There is no problem if the person does that online.

What is the total outstanding Revenue debt?

Ms Josephine Feehily

The debt is a moveable feast. It is continually being added to and worked down. We measure the debt on 31 March as at 31 December 2012. That is the debt figure the Comptroller and Auditor General audits. In between, the figures are so volatile that any other figure would be meaningless, for example, P35s are due in. Sometimes they have balances when they come in. If they have balances that means the debt goes up the next day. It is a very volatile process. The sensible thing is to measure it once a year, at a particular date, which shows a trend over time and is consistent. The debt measure we work to is 31 December 2012 measured on 31 March 2013. The debt at that stage was €2,006 million.

Deputy Kieran O'Donnell took the Chair.

I know from reading through the report if any of that is under appeal it is considered uncollectable. What is the process? If someone does not agree with Revenue’s assumption he or she can appeal it and Revenue cannot collect it. How long does that process take?

Ms Josephine Feehily

It is not an assumption. The person has to have submitted an appeal. We use an appeal stop. This is a legal position. The tax is not collectable because it is in dispute and we have no authority to collect it. It can take anything from months to years, very many years, in circumstances where, for example, the taxpayer avails of his or her rights to go from the Appeal Commissioners to the Circuit, High and Supreme Courts. We have noticed recently several judicial reviews interposed in that trajectory in high value cases, which lengthens the process.

Are there many over five years?

Ms Josephine Feehily

We have them over ten years, and probably over 15 years.

How much money is tied up?

Ms Josephine Feehily

The total amount is €826 million under appeal, relative to the €2 billion I mentioned. Of that €826 million, €61 million is appropriate to 2002; €54 million to 2003.

Are there legal costs involved in chasing the €61 million?

Ms Josephine Feehily

There will be if the person does not pay when the appeals are finally resolved. There is also a real risk that it will not be there. That is a matter of some concerns to us.

The Deputy might or might not be aware the Minister for Finance announced in his budget speech that there would be a consultation on the reform of the appeal system.

This consultation is under way. We made a submission, which we published, and drew attention to some of our concerns about the money. We suggested it might be time to consider whether we could collect some of the tax as the appeal goes on. The practice and legal position has been to wait until it is finally determined. There are a number of options one could examine, such as at the end of each stage the person pays or we repay depending on who wins. Alternatively with regard to VAT the trend in Europe is that it needs to be paid while the appeal is being handled.

Ms Feehily stated she would like to see a system where Revenue could collect some of the tax when a case is under appeal.

Ms Josephine Feehily

Yes.

How would this work? If it was under appeal why would any of it be paid out?

Ms Josephine Feehily

A system could be introduced whereby at the end of each appeal, because there are several, one party, which could be us if we lose, repays so the tax is resolved at each stage. A system could be introduced whereby we look for security in the appropriate cases if there were a risk of dissipation. We do not have the legal framework for this at present. There is a process and consultation under way where these can be discussed.

Is Ms Feehily concerned some people know they must pay but are legally drawing it out-----

Ms Josephine Feehily

Yes.

-----and it goes on for many years? Does Ms Feehily think much money is involved in this?

Ms Josephine Feehily

My instinct and experience, because I cannot provide figures here and now, suggest there is more of it now than there was. There is more tactical appealing than there was in the past. I want to be very clear it is very important for proper governance of the tax system that there is a good appeal system and that taxpayers can challenge. Some of the appeals are absolutely appropriate. They take a number of years as fine points of tax law and tax complexity are tested and resolved, sometimes in our favour and sometimes in favour of the taxpayer. At the end of the process we have the clarity we had been missing. It is very important work and it is important that it happens. It will take time. In some cases an appeal can end up in the European courts and one such case is in the report. A rigorous appeal system is important, but from Revenue's point of view it is our job to draw attention to our concerns.

The next point states approximately 29% of the outstanding debt of €580 million was deemed to be collectable, but at the end of March 2013 it was neither subject to payment agreement nor to any court proceedings. Why was this the case?

Ms Josephine Feehily

It is simply a question that we must get to it. The Collector General can provide more information on out debt management process if the Deputy wishes. We have debt management teams which work the debt on a tiered risk basis. In the report the Comptroller and Auditor General draws attention to our new arrears case analysis tool, ACAT, which analyses debt. It is a question of getting to it. It was not under activity when the table was drawn up.

On this point, I am sure the Minister for Finance would like to get his hands on this €580 million. Are the Revenue Commissioners understaffed? Why has it not been collected or sought?

Ms Josephine Feehily

If one were to take this particular piece of debt and track it through one would find 90% of it will have been collected. This is the point I wish to make. It gets collected. In a point-in-time snapshot there will always be debt under enforcement, under instalment and which we have not yet got to, but every day when the debt management teams come to work they get to a new tranche of cases which they examine and challenge and we collect a very large amount of it. It gets collected.

Does Ms Feehily consider the Revenue Commissioners to be understaffed? Could it be collected more efficiently and quickly with more people?

Ms Josephine Feehily

Yes, no question. If we had more people we could make more interventions. There is no point in saying any differently. We are subject to Government policy on public sector numbers like everybody else and within this policy my job is to optimise the value of the staff we have.

On a yearly basis over the past five years has it stayed approximately the same? Has there been a spike? Has it gone up and down?

Ms Josephine Feehily

I will ask Mr. Gladney to answer this.

Mr. Michael Gladney

Our debt has stabilised very well in recent years. Notwithstanding the resource issues Ms Feehily mentioned we have fine-tuned our debt collection systems to a point where the €580 million is picked up, starting at tier 1 and going to tier 5, almost within days of becoming due. Almost 700 people are involved in the debt process, including some in compliance who contact these taxpayers as the debt becomes due on a risk basis. They start with those most risky and work through them. In addition to human resources we have very good technology supporting the debt collection process. We are able to evaluate the risk, and slice, dice and cut it to ensure our interventions hit the higher risk cases much quicker than they did before. We are able to do this on an individual debt management unit basis. We segregate debt now, and technology allows us to do this. Every county or collection area has different types of taxpayers depending on the location. We are able to slice and dice the debt and ensure we put in place the appropriate mechanisms as we go along. As Ms Feehily stated the report is a snapshot in time and it was a significant amount, but the committee should be aware the debt is being collected and moved on month by month. New debt comes in and old debt-----

The figure never reaches zero.

Mr. Michael Gladney

No.

Debt is paid and more debt is added.

With regard to corporation tax losses, the report mentions a large proportion of the €205 billion losses in capital allowances in 2011 were offset. Will Ms Feehily explain how this system works? From where did this €205 billion come? I ask Ms Feehily to correct me if I am wrong, but I imagine it comes from the banking sector.

Ms Josephine Feehily

Yes.

Will Ms Feehily explain more about how this system works? Did it change in 2011 whereby companies no longer have to explain the losses incurred?

Ms Josephine Feehily

It is not that they have to explain; it is just we did not capture the full richness of the data so we were not able to provide the information to the Department of Finance for forecasting purposes. We captured limited data and when the Comptroller and Auditor General's report drew attention to this we committed to capturing the data the following year, which we did, so now we have the data and it is open. Trading losses are a feature of business life. Businesses have losses all of the time. The tax system recognises this for various taxes and it allows businesses to offset losses against subsequent profits in the same trade or business. It is standard. The recognition of losses in the tax system exists throughout the world. All this states is because of the huge changes in the economy in 2008 and 2009 significant losses got onto the balance sheets of big business, in particular financial institutions. These losses are available for offsetting against corporate tax whenever and if ever they return to profitability. Losses are not money we can collect. In financial terms, they are a deferred tax asset. It means when the company comes back into profitability and makes a profit it can offset its losses and pay no tax that year. It is all in the future with regard to financial institutions.

If they come back into profitability.

Ms Josephine Feehily

They must come into profitability to use up the losses. Its impact, and the reason the chapters for the past three or four reports have been concerned about it, is because it is material information to help understand how much tax the Government can expect to receive year on year. To the extent businesses come into profitability if they use up the losses they pay no corporate tax. It is useful information and that is all it is. It is perfectly legal.

Is the debt ever written off?

Ms Josephine Feehily

It is a loss on their balance sheets. It is not a debt. It is just a loss they have. They can offset it against profits. The committee might be interested to know in the context of our audit programmes we challenge large claims for losses all of the time.

In the past five years, for example, we have restricted losses and not always in the case of large businesses. This resulted in a figure of €500 million. We have not allowed businesses to claim losses because we deemed they were artificially generated. This also features in our work on avoidance. The creation of artificial losses to be offset against capital gains is a feature of avoidance schemes promoted by practitioners. The issue of losses is tricky and the sums concerned are valuable. In this context, the chapter is simply stating there is now information available to us on losses that have the potential to reduce the tax yield from the various sectors legally and properly in accordance with the current tax law.

What work is done with foreign corporations on the payment of corporation tax at the current rate? What is the role of the Revenue Commissioners in IDA Ireland bringing companies to Ireland?

Ms Josephine Feehily

Our role in relation to that promotion work of IDA Ireland is to give it technical advice and interpret the taxes Acts for it, just as we would give such advice to the Department of Finance, if it wanted us to do so. Our role is technical. Our corporation tax experts would, from time to time, provide technical insight and advice for IDA Ireland on the meanings of the various structures allowed in the taxes Acts.

It depends on the corporation coming in. Is every corporation treated differently?

Ms Josephine Feehily

No, every corporation is treated in accordance with the law, about which there is no question. It is just that IDA Ireland has its own tax experts who sometimes come to us to gain a technical understanding of what provisions mean.

Ms Feehily and her officials are very welcome and I thank them for attending.

At this meeting we always look at the negatives because that is what is reported. In my dealings I always point to the Revenue Commissioners as an example of how the public service can run well and efficiently. That said, having read through chapter 27, I believe it has fallen off the pedestal. I focused on chapter 27 on tax settlements for this meeting. I refer to circumstances in which the Revenue Commissioners write randomly to a business or taxpayer stating it or he or she is to be audited, or in which they target a certain sector of industry in which there may be a greater propensity for tax evasion or avoidance. The results of the audits were interesting. The Comptroller and Auditor General examined 45 cases out of over 9,000. Even in these randomly selected 45 cases, there are errors in classification and in how interest was applied, a lack of documentation in the files and no great evidence of how decisions were made. It is difficult to ascertain exactly how the process was engaged in.

Let me start with the easy point, namely, that 20% of the cases were misidentified. They are included as settlements, but they had nothing at all to do with audits; they were voluntary disclosures. How did this happen? How did 20% of the cases end up being misfiled or mislabelled?

Ms Josephine Feehily

I thank the Deputy for the compliment. Let me go back a little. We all found this chapter really interesting. Our approach to audit settlements and other interventions has been evolving. Every year we take another look to determine whether we can improve the recording and the way we do our work. Ten years ago circumstances were entirely different. We now have a code of practice that is published. It has changed several times in the timeframe. Our IT systems and staff have changed. We are in a position in which our approach to how we do our work is constantly being examined. We were already having conversations among ourselves about the classification issue when the Comptroller and Auditor General did this work. We had drafted some quality guidelines. More important, we had redesigned our case management system. That is reflected in this instance. The case management system now has a much richer, more granular classification. One should put oneself in the position of the auditor or the Revenue official whose job is to do compliance work on a risk basis and get into cases. We did not have a mechanism for having everything recorded or classified. Approximately ten years ago we were carrying out what we called 16,000 audits, approximately. We are now carrying out 9,000. That represents classification more than anything else. It is because we have provided for other types of intervention which we have codified and made available to our staff to capture and classify in their work.

The more important point – I acknowledge that the Deputy says this is the easy one – is that the money was collected. The Exchequer got the money.

That is why it is the easy one.

Ms Josephine Feehily

That fundamental piece runs right through all of them. In the data we circulated from our headline results, the Deputy will see that we now have four or five classifications. That money would probably be in a different box if dealt with now. It is not something about which we are happy, but it is a matter of classification. We are very satisfied that the money has to be brought to account somewhere. As an organisation, we did not have the granularity of tools available to our staff to classify the different ways. It is quite clear that the money did not come in on time; therefore, it had to come into compliance programme somewhere and it did. However, the Deputy is right about classification.

I accept that; it makes sense. Ms Feehily is saying there is now a different and more appropriate heading under which the moneys can be classified.

Ms Josephine Feehily

I am quite sure we are still getting some of them wrong. I can tell the Deputy that for certain. One of the quality assurance measures we have introduced - it took us a while to retool the IT system that came in with effect from last July - is that, on a random basis, 2% of all audit settlements, irrespective of who approves them, will come to one or other of the commissioners for a final sign-off. Principally, what we are looking at is quality and asking questions. I have disapproved of a couple on the grounds that they should not have been audits. They should have been something else and there was money collected. One is trying to change an organisation and people who recorded things in a certain way in the past. It is a matter of giving them tools, guidance and a framework. This is important, but it is equally important that the staff get out and undertake audits in order to provide assurance across the system that those who are non-compliant will be challenged.

I thank Ms Feehily.

I want to move on to the issue of interest. Figure 27.4 is very interesting. It gives a regional breakdown of where interest and penalties were applied in 2012. The Revenue Commissioners have a large cases division that deals with significant tax issues. It also has a regional issues division, with which we are familiar from our constituencies. I refer to the local tax office, for example. If there is a large case with a lot of money involved, the individual concerned is much less likely to be charged interest and penalties than a small person in the regions or an individual not involved with serious money. The figures are stark. We see that a figure of 55% in interest and penalties was applied to the large cases, compared to an average figure of 75% or 76% in smaller cases. We see that, as a total proportion of the revenue taken in, only 6% is from penalties in the large cases, whereas the figure is 20% to 25% in smaller cases. How can we justify this means of distinguishing between cases?

Ms Josephine Feehily

I referred to the audit code of practice. We have a published code of practice that sets out how an audit will be conducted and what the consequences will be.

It provides for a range of situations where there are no penalties, mitigated penalties and so on. An unprompted voluntary disclosure will never incur penalties. Technical adjustments do not incur penalties. It is a fact and there is no other way to explain this, but businesses that fall into the large cases division engage more in self-review because of their own governance rules and there are more voluntary disclosures in this sector. They are very big, which is reflected in the cash value. It is also a fact that they are the ones most likely to have the complex structures that cause valid technical adjustments. Between the two, one will find that the question of interest and penalties arises in a much lower number of cases. That is in accordance with the code of practice we have published. We apply the same measures to small businesses which are less likely to make voluntary disclosures and, in numerical terms, less likely to make early disclosures. Therefore, penalties and interest payments are more likely to arise. That is the way it is.

Ms Feehily said voluntary disclosure would never incur penalties. I see in appendix A to the chapter that unprompted disclosures should attract a 3% penalty.

Ms Josephine Feehily

I am sorry, Deputy; I should have said technical adjustments will never incur penalties. I was putting the two together.

There is also provision in the code of practice for innocent errors. There are all sorts of reasons penalties do not arise, but companies with self-review mechanisms are much quicker to make disclosures.

In paragraph 27.2(3) the Comptroller and Auditor General examines 24 cases in which interest was charged and has found that it was charged correctly in 21 cases. However, in three cases the interest amount charged by Revenue, on average, two thirds of the amount estimated to be charged by the examination team, and the undercharge in these cases was around €21,000. Will Ms Feehily, please, comment?

Ms Josephine Feehily

I can certainly comment on them. If the Deputy wishes to talk about the actual cases, my colleague, Mr. Rigney, has reviewed them and can deal with them in detail. Let me enter a caveat - we must be extremely mindful that we do not identify cases; therefore, between us, we need to be careful not to cross a line in order that we might be capable of identifying cases. The cases have been reviewed and I am very pleased that it was found that they were charged correctly in the vast majority of cases. One of the interesting things in this entire chapter is that in the vast majority of cases all of the things worked. We chose the right cases and penalties.

I acknowledge what Ms Feehily is saying and that the rate of compliance is high, yet in three of the 24 cases this was not so. It is greater than 10% of cases. If one were to extrapolate across 9,000 cases, there are potentially 900 cases. I know it is a high figure, but potentially there are a great many cases

Ms Josephine Feehily

I understand that, but I acknowledge the fact that in the vast majority of cases the figures were correct. As I said, Mr. Rigney will deal with individual cases, but the general position is that in the three cases interest arose at a later point. There are documentation issues and interest arose at collection stage. The other issue that can arise in these cases - it did arise in one of them - concerns a judgment mortgage which carries its own interest payment. I am not saying these cases were dealt with properly; the Comptroller and Auditor General is correct in identifying the three cases, but they were not entirely without exposure to interest at a later point in the process. They were not visible to us until I had them reviewed. There was an exposure to interest at a later point in the process. It was not done according to the book, but it was not the case that they was no interest. Should the Deputy wish, we can discuss them in more detail.

I want to continue to deal with the question of interest payments in regard to case study A.

May I interrupt while the officials are looking it up? The large cases division only accounted for 6% of overall interest payments. I am aware that the skill sets of staff in the large cases division have increased during the years. Are the skill sets of those dealing with larger companies different and distinct from the skill sets of those dealing with SMEs?

Ms Josephine Feehily

A number of years ago when I was on a panel, an American tax lawyer, who was speaking to tax administrators, said, "All you guys are out-lawyered and under-resourced."

Does Ms Feehily agree?

Ms Josephine Feehily

There is no question but that we are "out-lawyered". We have lost between 800 and 900 people through various departure mechanisms in the past few years and will be losing another couple of hundred this year. We have made it an absolute priority, to the extent that we obtain sanction to fill these posts, to target the gaps in skills. The Vice Chairman mentioned the large cases division, in particular; we specifically went to the market to recruit principal officers with detailed tax technical qualifications and placed them in the large cases division. They all came from the private sector. We also hired at assistant principal officer level for the large cases division. In the past few months we have hired staff at principal officer level to deal with complex corporate tax issues. We will never have enough staff, but to the extent that we have an opportunity to fill the gaps, we are focusing on skills to a very great extent and will continue to do so, wherever we can.

I wish to discuss further the issue of interest and case study B, in which Revenue identified an issue in regard to a capital gains tax provision and believed the tax method used was incorrect, that in this instance, if the correct method had been applied, it should have given rise to a taxable capital gain and an assessment of €22 million. The Comptroller and Auditor General stated in his introductory remarks that he believed Revenue could have added rigour and transparency to the issue. Was that case settled for €15 million? The initial assessment figure was €22 million. At the beginning, having looked at the case from first principles, Revenue decided €22 million was due.

Ms Josephine Feehily

Yes.

It settled the case for €15 million. The Comptroller and Auditor General believes that if proper penalties and interest had been applied, a figure in the range of €36 million to €54 million could have been due. Will Ms Feehily explain the reason Revenue settled the case for €15 million?

Ms Josephine Feehily

This is a case in which I need to be careful because in such cases those concerned can identify themselves. The Comptroller and Auditor General is correct that there is evidence of a lack of rigour and transparency in the way the case has been handled. Again, it has been reviewed and whereas considerable rigour was exercised by the auditor in question, it was not documented. The Comptroller and Auditor General acknowledges the considerable rigour in discussing the matter with the Revenue anti-avoidance network, but there is no evidence of the discussion having taken place. I have had somebody look at the case to ensure this discussion did take place.

I need to stand back from case studies A and B, which are the same in many respects. Round sum settlements were reached in cases that involved hugely complex issues; in one case everything was properly documented, whereas in the other it was not. In these cases we are trying to put ourselves back into the position of an auditor who takes advice and in the context of that advice, the probability of success in litigation has to be assessed. When one is dealing with complex issues, one never knows who will win. I discussed such an issue with Deputy Paul Connaughton and how many years it would take. We have an approval system in place and that settlement was approved. In reaching it, the auditor in the case also secured a commitment which restricted losses.

The impact of the loss restriction would have brought us back up to €22 million, if not more.

We have the legislation, we have the code of practice which is transparent and available for everybody to see, we have our quality guidelines and our approval processes. We have to trust our staff to use their judgment, to use those frameworks and to come to a settlement. That is what happened and is what auditors do.

I can accept that for a small case or even for a medium case. Where the initial assessment is €22 million owed and Revenue settled for €15 million - even though, by rights, €22 million plus interest and penalties should have brought the figure up to a minimum of €36 million and a maximum of €54 million - we are pushing the idea of trusting the auditor on the issue.

Ms Josephine Feehily

There was no consensus in Revenue as to the likelihood of success in litigation in that case. That is not, and it was not, documented. We have reviewed it and that is the view of the anti-avoidance network. There was no consensus that we would succeed if we went any further. It was very clear that in order to succeed and to begin to approach those figures we would have to go further. That is one of the biggest judgment points in very large cases because they are always complex. People may or may not be familiar with our anti-avoidance provision which took about 20 years to be tested all the way to the Supreme Court. In this particular case we did not have the confidence to insist, and that was a confidence based on consultation, which we acknowledge fully was not properly documented on the audit file. For that consultation to take place, there was not the confidence that we could actually collect the money. If the taxpayer was right it was zero and that is the problem we are faced with, and an auditor could be faced with. If the taxpayer is right and prevails, through the appeals system, it was zero.

If the taxpayer is right then the taxpayer is right and should not be paying anything.

Ms Josephine Feehily

Yes.

What Ms Feehily is saying is that Revenue did not have confidence that it could stand over the charge in the first place.

Ms Josephine Feehily

We did not have confidence that we would prevail if it went to litigation.

I know that I am expected to get this. Is Ms Feehily saying to me that Revenue was not sure that the money was owed in the first place?

Ms Josephine Feehily

We were saying that our view of the law - or we would never raise an assessment - was tax was due. If the Deputy looks at case A he will see how that played out; it was quite similar but better written up. We raise an assessment based on our view of the law. If it is a fine technical point that has not been tested before in the courts, we could be wrong. In technical appeals in recent years I think we are right considerably more often than we are wrong. In relation to appeal commissioner statistics that I have reviewed, we win about one third of the appeals. That is what one would expect.

Our officers would not be doing their job if they were not interpreting the law and saying "actually this is a valid interpretation" and sort of testing it. The taxpayers will say they do not agree with that - with their lawyers that I discussed with the Chairman - so we would never look for money that we do not believe is due under a valid interpretation of the law. Then one gets an interaction and the other side comes back and says "this is another way of looking at the section" and we say "maybe they are right". In many cases those things are dropped and they are settled.

Is it not fair to say that in both cases A and B penalties were not applied? Penalties trigger publication. Am I correct about that?

Ms Josephine Feehily

Yes. There has to be a penalty to trigger publication.

In both those cases there was no publication because penalties were not applied. Revenue produces an annual settlement list. Does that involve the amount that is assessed or is it the amount that they physically pay?

Ms Josephine Feehily

Is the Vice Chairman talking about the published defaulters list?

Ms Josephine Feehily

The published defaulters list is the amount of the yield from the intervention that is publishable in accordance-----

Is that the amount that they pay or is it the amount that they have been assessed to pay?

Ms Josephine Feehily

It is the amount that has been recorded as the settlement of the audit.

That does not mean that they have paid it.

Ms Josephine Feehily

In some cases they have not paid it because they cannot.

Why were penalties not imposed in cases A and B? Is it because suddenly one had the largest settlement in 2012?

Ms Josephine Feehily

It is because they met the criterion to qualify as technical adjustments in the code of practice so a penalty was not available to us in either case. That is very common in complex cases, as I discussed earlier with Deputy Connaughton. They were both penalty adjustments so there would have been no penalty available to us.

Do the Revenue Commissioners have a statutory footing on which to base these decisions on whether to pursue or not?

Ms Josephine Feehily

Yes.

How does it operate?

Ms Josephine Feehily

Every single year, when the Finance Acts are passed, the revenues of the State are placed in the care and management of the Revenue Commissioners. Care and management have never been judicially determined here but they have been judicially determined in the UK. What it means is that we have decisions to make which enable us to use the phrase "not to chase the last fourpence." We are entitled to use our judgment and expertise to decide which cases to settle, which cases not to settle and which cases to pursue. One cannot automate this kind of discussion. We could not function without that kind of power. Those are our care and management powers and they are repeated every single year by the Oireachtas.

Does the organisation flesh that out with its code of practice and procedures?

Ms Josephine Feehily

Yes.

I wish to refer to something that was written in the Comptroller and Auditor General's report. He said: "The Taxes Consolidation Act, 1997 provides for the application of interest for the late payment of tax and there is no provision for it to be mitigated even after qualifying disclosure." Does that legal provision contradict Revenue's operating procedures?

Ms Josephine Feehily

No. It is a parameter on our care and management powers. The Deputy will find that in the vast majority of our audit settlements there is an interest amount, provided the interest is applicable. In these three cases there was not.

Is interest not always applicable? Penalties are discretionary.

Ms Josephine Feehily

Yes.

Is interest not always applicable?

Ms Josephine Feehily

Interest is almost always applicable. It depends on how quickly an adjustment is made. If somebody comes in really quickly, in the context of a self-review, we might decide that interest was not to be charged. What happens in a negotiation around an audit is, quite often, a round sum amount is settled. That is part of the judgment that we have to allow our auditors to exercise. In round sum amounts, and again one of the cases here is like that, the auditor divides the amount into tax and interest. It is essential - and is part of our instructions to our auditors - that an interest amount must be secured and must be recorded. That is part of the work that we have to deal with following this chapter, is that it is not always recorded properly.

It was not done in case A, for instance.

Ms Josephine Feehily

It was not. They were round sum settlements. They were technical cases - both A and B. They were arrived at after intense negotiation and, in the case of A, after a lot of well documented internal consultation, including senior counsel advice. In case B, there was poorly documented consultation. That was a judgment call that was made, it was that was as much money as could be secured in those cases with no consensus that we could prevail in litigation.

I can only accept Ms Feehily's bona fides on that and I will. Is it not a contradiction, reaching an arbitrary settlement figure - deciding on that figure that "X" will be allocated interest and "X" will be the principal - with a statutory obligation to always charge interest and that there is not mitigation allowed by the legislation?

Ms Josephine Feehily

There is not an arbitrariness, I hope. I hope there is a fairness. In a strange way, one of the assuring things about Chapter 27 is that all of the weaknesses in our processes were in favour of the taxpayer. I know that might sound strange but it would be much worse if they were the other way. There is a fairness. When an auditor has the taxpayer or the taxpayer's agent in front of them we have to give them some room to reach a settlement that they think is reasonable. They have statements of affairs available to them so they know the circumstances and we have to give them. That is our view.

As long as we make that same facility available to everybody - we do that by way of the code of practice - then there is a fairness in it-----

I accept that.

Ms Josephine Feehily

-----rather than an arbitrariness-----

I accept that.

Ms Josephine Feehily

-----which might sound a bit-----

I understand. That leads on to my next question. Is that fairness, and coming to that decision fairly, and assigning a figure for interest, compatible with Revenue's obligation to always collect interest and for there being no statutory provision for it to be mitigated?

Ms Josephine Feehily

It is our interpretation of the way we manage, using our care and management powers, recognising the statutory provision is in place that we insist in our instructions to auditors that they must record an amount of interest, where they can.

That brings us nicely to case C, where there was a taxpayer inquiry audit. The Revenue found that the taxpayer owed €7.3 million in VAT, which was paid. About half of the payment was a year late while the remainder was between two and ten months late and, notwithstanding this, Revenue did not apply interest. The examination calculated that interest for late payments in this case was of the order of €570,000. The matter is of concern because, despite the requirement to do so, interest was not charged.

Ms Josephine Feehily

I shall ask Mr. Rigney to respond if the Deputy wants details on this particular case. My comments are recorded in the report. This was an unusual transaction. It involved a purchase which was under construction which had many stage payments and we accepted a view that the actual transaction was not complete and, therefore, the payment was not late. It was an unusual transaction in that regard. They had not received the goods until the very end and, therefore, we accepted that argument and they paid in full immediately. It was unusual; it was a most unusual case.

My understanding - I appreciate the clarification - was that the tax had become due in Revenue's view but that the contract had not concluded. That can happen. Tax can become liable before the conclusion of a transaction and that was the initial view of Revenue. Subsequently, it changed and accepted the taxpayer's point of view.

Ms Josephine Feehily

We accepted a proposition from the taxpayer to the effect that he or she had not received anything. It was not an organisation that was in the business of doing this every week. It was a most unusual case with a one-off transaction and a completely innocent error. An innocent error is something we also accept in our code of practice. Because it was such an unusual transaction for that person, it was not part of normal business. Innocent errors do happen; we recognise that in the code of practice and it is regularly a feature in our settlements. In the round, we accepted the proposition and we did not charge interest.

That brings me back again to what I have just read out from the Comptroller and Auditor General which is that there is no provision in statute for mitigating interest payments, so Revenue's code of practice is in breach of the legislation.

Ms Josephine Feehily

Our code of practice sets out how we interpret the legislation and how we will apply it in particular circumstances. Again, I have to say that in almost all cases we do apply interest and in almost all cases it is properly recorded. This particular one was unusual. We have to accept an argument back - a sterile argument about interest in a context of a case where there was a judgment point about when was the transaction properly taxable. Interest is not really the issue. The issue is getting the transaction properly accounted for and collecting the tax. If we were driven by interest as one our performance measures, it might not be the best kind of message to give to our officers. We need to be careful about driving too hard a notion that interest is an end in itself all of the time. We have to be prepared to listen to a submission, and we do, but we do not do it that often. This case was particularly unusual.

I accept that. I accept the premise and accept what Ms Feehily has said but we are talking about the Comptroller and Auditor General, whose job it is to see how cases are dealt with and he sees a statute in place that states that interest must be charged. That is it, there is no mitigating practice. It is black and white. When he sees that Revenue is not following that statute he does not have the discretion to look into Revenue policy or its code of practice and so on, he just has to follow the line and go all the way through. That is the law as it has been passed by the State. Whether what Ms Feehily is saying is the right thing to do, and probably she is right, but the truth is the law is different and what that tells me is that something needs to change. Either we need to get the Minister to change the law or we need to get Revenue's policy changed. We cannot have a position where the law provides for one thing and Revenue does another, especially when it is the Revenue Commissioners to whom people look and which is such an important body in the State.

Ms Josephine Feehily

To be clear, I have absolutely no issue with the description the Deputy has conveyed of the Comptroller and Auditor General's job. He drew attention to the statute and he is absolutely right. I am simply explaining that in our day-to-day job, from time to time, our officers make judgment calls and in the context of our overall care and management powers I am reasonably comfortable with that. I would not be comfortable if the numbers were reversed. I am comfortable that from time to time officers make judgment calls. We have a strong approval process in place that they must come through. They are not free to make it on their own. I will certainly note it and maybe draw the Department of Finance's attention to the Deputy's point about the Act.

That is what I was getting at. We should definitely have a follow-up on that; otherwise, we will be back next year with another audit case stating that the law is not being applied.

I want to conclude on case D. Actually, I will skip case D. On the Revenue audit files and the issue dealing with the compliance with procedures that were followed and so on, figure 27.6 shows the standards that were carried out, that a letter of notification to taxpayer was carried out in 89% of cases, a note of initial review was only carried out in 61% of cases, evidence to show all the key issues were carried out in 67% of cases, and adequate evidence of calculation at 86%, and written offers at 43%. What this shows is that from the limited number of cases that were extracted and reviewed, an awful lot of them had documentary failings.

Ms Josephine Feehily

The Deputy is absolutely right. I guess the good ones are the important ones. In 89% of cases there were letters of notification to the taxpayer and in 86% there was adequate evidence of the settlement. Those are important ones at the start and the end. As I said in my remarks, we had already come to the view that we had quality issues. We had already published internally draft audit quality guidelines in mid-2012. Those quality guidelines had been reinforced in 2013 by introducing stronger oversight with cases coming randomly to assistant secretaries and also to commissioners, including cases that might have been signed off at those levels. The machine will randomly send a number of them to somebody else for review. We have also connected the quality compliance standards with the performance management system for our staff. We have had two extensive discussions at MAC to reinforce the importance of quality and record keeping and evidence. There is no question but we take the evidence issue very seriously. On the positive side, the evidence in the report and from engagement with the cases ourselves is that the more complex cases are better documented. That is good. It is not all bad news but there is no doubt we have an issue and we are taking it very seriously.

I thank Ms Feehily.

I welcome Ms Feehily and her colleagues. There is just one topic I wish to touch on briefly arising from what the Vice Chairman said in respect of the defaulters' list that is published quarterly. Revenue calls it its list of publishable settlements. I understand there can be a company that pays a great deal of tax, VAT and so on but there might be an issue where not all the tax is paid, but it was a particular point. People must understand that is not necessarily all the tax a person was due to pay in respect of a particular issue. What will come as a surprise is that the public would have assumed, when they see a list of published settlements, that the amounts had been paid or were going to be paid.

The defaulter lists are published by the Revenue Commissioners and we see them in the newspaper every so often. What was the total value of the published settlements in 2012? How much of that money has been received and how much of it is still outstanding?

Ms Josephine Feehily

I will get the Deputy figures just now.

For even the previous year.

Ms Josephine Feehily

I have a couple of years here.

Ms Feehily can see what I am driving at.

Ms Josephine Feehily

I have a couple of years. I just want to make sure that I know what I am reading out.

It is the payment.

Ms Josephine Feehily

The Deputy is looking for how much we actually got.

And what it was paid in respect of.

Ms Josephine Feehily

Those are the figures.

Would Ms Feehily have that to hand?

Ms Josephine Feehily

Those are the figures that are published. While Mr. Rigney is checking I will explain something. We found ourselves in a funny situation a few years ago. Our position used to be that the figure that was published was what was collected - no question. Then after 2008, when businesses started failing, we found they could not pay us and so it became almost a haven from publication.

What does Ms Feehily mean by that?

Ms Josephine Feehily

The rule used to be that to settle an audit one had to pay in full, and that figure was published. That rule became a stick that was used to beat us because if a business could not pay in full we could not publish, and it was also avoiding the penalty, for want of a better word, of publication. The law was changed in 2009 or 2010 to make it so that we could publish even in situations in which the full amount was not collected. That is the legal background. That was the reason. Up until 2008 or 2009, the figures published were the figures, and then, after that, they were the audit yield but not necessarily the amount that was collected. I am pretty sure we have a figure somewhere but nobody seems to be able to find it for me.

Ms Feehily used the word "yield" there. "Yield" and "collected" are two different words, but the public would have thought they had the same meaning.

Ms Josephine Feehily

I am pretty sure I have a figure for that, but I cannot lay my hands on it.

I will give the officials a few moments and move on.

It probably would be useful, since the law changed in 2010 or 2011, if Ms Feehily sent us a summary of the published settlements or totals that appeared in the newspaper and the amount paid subsequently. More to the point, some of that will necessarily include phased payments or a schedule of payments. We accept and understand that. Given that the list of so-called defaulters has been published, along with the amounts, does Revenue have a mechanism to publish in due course what they paid?

Ms Josephine Feehily

No, not with that precision.

So a person-----

Ms Josephine Feehily

Sorry - just to amplify my answer, in quite a lot of the cases where they do not pay the amount is referred to the Collector General for enforcement and some will be collected subsequently through enforcement methods such as sheriff collection, attachment and so on. It would have to be a ways down the road before you would say they did not actually pay anything, but, no, we do not. We only have the opportunity. It is a very narrow window. We must publish within the quarter following the quarter in which the settlement is made and that is our only opportunity to publish at the level of the individual.

While I am on that topic, was there an issue with the Houses of the Oireachtas in this regard?

Ms Josephine Feehily

I cannot comment on any case, not even the Houses of the Oireachtas. Section 851A forbids me from talking about taxpayers of any kind-----

Including the-----

Ms Josephine Feehily

-----big or small-----

Including the national Parliament?

Ms Josephine Feehily

-----but the committee has its own mechanisms to find out.

I am sorry; I should have been aware of that. It merely came to mind because I read about these issues in the public arena, but I accept that Ms Feehily cannot comment on an individual case.

Ms Josephine Feehily

Sorry; I have found a note, but I am not sure it has the figures that Deputy Fleming wants.

I need to correct myself. Inability-to-pay amounts are not reported as part of the audit yield. They are recorded as nil-yielding audits. The inability-to-pay amount that we accept is not regarded as yield. We have not collected it at that point and an amount of it will be referred for subsequent collection. I will get that figure for Deputy Fleming. I do believe it is in here somewhere but nobody seems to be able to find it.

What Ms Feehily stated is slightly disturbing in its own right. Revenue can conduct an audit and come to the conclusion, for example, that a person owes €385,000, including interest and penalties, but the guy puts his hands up stating he has not got a bob, so Revenue publishes that as an audit with nil yield. Revenue might not have collected it but it had determined an amount that should be collectable. That would utterly skew every Revenue chart I have ever seen in all my years here. Ms Feehily gave us figures here for the percentage of audits with nil yield. I and everybody on this side of the table would have assumed that was where the taxpayer came out clean at the end of an audit. Ms Feehily is telling us a nil yield can include those who had a substantial liability for tax, interest and penalties but merely did not have the money, and they are written in as a nil yield.

Mr. McCarthy wants to contribute.

I heard what Ms Feehily said.

Ms Josephine Feehily

I think Mr. McCarthy would have a different view.

Mr. Seamus McCarthy

Some of that I will have to reflect on as well. We did try in the report. In Chapter 25, we give the number of cases that were published each year from 2008 to 2012, inclusive, and the total yield figure is given there as well. We specifically note that the yield amounts are based on settlements and do not represent amounts collected.

Would Mr. McCarthy repeat that?

Mr. Seamus McCarthy

The yield amounts are based on the settlements and do not represent amounts collected.

That is different from what Ms Feehily stated. Ms Feehily is saying a nil yield-----

Mr. Seamus McCarthy

In certain circumstances-----

-----is not included. There are two different definitions here now.

Mr. Seamus McCarthy

I also draw attention to Figure 27.5 in Chapter 27. We wanted to look at the specific point of how much, where a settlement had been agreed, of the amount of the settlement was collected and how much was still outstanding. We took samples of around 25 cases per year settled from 2007 to 2012, plus the ones that we had already looked at in more detail, and we looked at the total settlement amounts. One gets the amounts paid, the amounts written off and the amounts outstanding, and then there is a figure for cases in which the status on the Revenue records was not known. The Chairman of the Revenue Commissioners has provided an update on that, and there is movement between the not-known column and the paid column, so more of it has been paid since we completed the report. But there is still a figure there that is outstanding, which I suspect in the fullness of time may come up for consideration for being written off, so there is an element of moneys that are not and never will be collected.

That is merely the audit. I refer specifically to the published settlements. These are audits, some of which may not have required publication.

Mr. Seamus McCarthy

They may not have been published.

Yes. I refer only to the published settlements. Ms Feehily has not yet identified the figure, so she can send it on to us.

Ms Josephine Feehily

I will send Deputy Fleming the figure. I think that is the most sensible thing I can do.

With regard to the particular table that the Comptroller and Auditor General has drawn attention to, in reviewing the cases which at the time were not visible to the Comptroller and Auditor General's auditor, the not-known columns, we established that half of those cases were special investigation cases which had their own particular bank accounts and another quarter of them were restrictions of losses or restrictions of repayments, so they were collected in a different way. We have sent an update on the table, but if I were to wait another short while, I could send another update on that table which would show more of the 58 moving to the left and some of the 18. All of the 18 will have to move eventually-----

Ms Josephine Feehily

-----onto the left-hand side. That table has evolved already since the Comptroller and Auditor General's report and will evolve again as we work the cases. In a way, it is a good example of what happens with debt.

Cases get worked and they move to the left-hand from the right-hand column.

Revenue publishes companies' and individuals names on its defaulters list. If after a period of time some people have still not paid, could it publish a list of those names? I do not think there is as much shame in being on this list as there used to be. Is there a fear that people might laugh and say they were on the defaulters list but they never paid a bob? I am worried about the effect of this list when I hear that some of those people have not paid or might never pay. The public thought that was the last sanction Revenue had against people but it appears it is not enforceable in some cases.

Ms Josephine Feehily

There is a very rigorous process before we accept that people cannot pay, with statements of affairs and so on. Many of them are liquidation cases, where the business has gone. The judgment call we made was to seek the change in the law so that at least we could publish them once, because up to then we could not publish them at all. Maybe I will think more about the Deputy's idea to see if we can propose that.

It came as news to me that some of those on the defaulters' list were not going to pay.

I will move on to the local property tax. Ms Feehily said in the briefing notes she gave to us that €76 million was received in 2013 for 2014. Looking at those figures, I estimate that that probably equates to 250,000 properties, but Ms Feehily might give me a more exact figure. Arising out of what happened last November, has Ms Feehily made any changes for next November to prevent a situation in which hundreds of thousands of people pay their tax in advance? Now that everything has calmed down after that brouhaha, will it be repeated or have changes been made?

Ms Josephine Feehily

We have made no decisions in that regard. The commitment I made to the Joint Committee on Finance, Public Expenditure and Reform was that we would review it, but we will not do so until mid-year. If the Deputy looks at one of the pages we published, he will see there is a definite shift in the payment types chosen by people away from the-----

I will come to the payment types in a minute. I see that.

Ms Josephine Feehily

That is what it is about. The brouhaha to which the Deputy referred was about the payment types and not about anything else.

We will come to payment types in a minute.

Ms Josephine Feehily

Payment types were at the heart of the issue.

The answer is that we will wait and see.

Ms Josephine Feehily

What we will review is the payment types. The other dates are in the law.

I understand the date of 1 November is in the law.

Ms Josephine Feehily

The November and 1 January dates are in the law.

I understand that. I want to move on to the valuation bands Ms Feehily gave us. Some 86% of properties have been valued at under €250,000 - approximately 1.391 million. That is a very high proportion. Some people might be interested in the 0.2% of properties valued at more than €1 million. I estimate that that equates to approximately 3,240 properties. Is Ms Feehily able to tell us the largest payment received? I have no idea from whom that would have come.

Ms Josephine Feehily

The Collector General has just reminded me that the largest payments - we record the payments by person - are usually from multi-property owners, so if I gave the Deputy the largest single payment it would be the wrong answer. We do not have the figure for the largest payment for a single property with us.

Would Ms Feehily be able to get that without identifying anybody?

Ms Josephine Feehily

I imagine-----

Could she even give us the top ten payments? How many properties were valued at more than €10 million or over €5 million?

Ms Josephine Feehily

When we have time - I know that sounds awful - we have been doing some more work on the data and we publish better data. We had a set of data out in November. This is February and there is more granularity to which we could get, but we are doing other things, so it is a periodic publication of data. There is much richness in the data and we will publish more in the coming months, but we will see what we can do for the Deputy in the meantime which is safe from a confidentiality point of view.

Let us say there are properties valued at more than €5 million or €10 million. Revenue has this information in its files. Has it matched each of these to its large cases files?

Ms Josephine Feehily

The data are available to the large cases division auditors, particularly the high net worth individuals. The data are available to them.

Have they matched it?

Ms Josephine Feehily

They are matched to their tax records. There is no question about that, but I am not saying they are doing anything with them. The data are available to them and they are matched.

Did any properties come in about which the Revenue Commissioners did not know about the people concerned? If somebody came in with a property worth €5 million, Revenue should have known about him or her.

Ms Josephine Feehily

There might be an odd one.

Would Revenue have checked whether all of those people with single properties valued at more than €1 million were tax-resident in Ireland? How many of those 3,000 or so people are tax-resident in Ireland?

Ms Josephine Feehily

We have not done that kind of checking just yet. This is all very new for us.

Would you do it? Would it be a worthwhile exercise?

Ms Josephine Feehily

What we have done is that we have made the property tax data available to the people involved in compliance work in large cases and the high net worth individuals. They have access to the information in the context of reviews that they would do of high net worth individuals. For the moment, we have made the data available to our officers for compliance. Further compliance projects based on this data could be done, but that is down the road. For the moment, our priority has been to secure an amount of tax and to get people onto the register. We are now giving people an opportunity to self-correct. Using the data for other interventions is at the discretion of the auditors for the moment. There is no doubt there are the makings of compliance projects here, but I see that as down the road.

Ms Feehily mentioned that information is available to that section in the Revenue. How widely available are people's local property tax details among Revenue staff?

Ms Josephine Feehily

They are available to all our front-line staff in the same way as VAT information and PAYE information. We have an integrated taxation system and an integrated IT system and all of the links are built on the PPSN. They can see the full picture of a taxpayer.

Ms Feehily said people can self-correct, which is good. In the documentation she said Revenue had received new payment type instructions for 1.050 million properties for 2014, which was significant. Some 32% paid by debit card last year, which was payment on the date one registered. However, that dropped to 11%. Ms Feehily said that if people did not want to go down that route they should be encouraged down other routes. The direct debit, which is monthly or otherwise, has gone from 14% to 30% in 2014. Many people have moved from the debit card to the direct debt. Those opting for the single debit authority have gone from 21% to 30%. That will come in on 21 March. Can people change their payment type? If somebody who has opted for the single debit authority decides he or she would prefer to opt for a direct debit, can he or she change?

Ms Josephine Feehily

Yes.

Mr. Michael Gladney

Any time up to when we start to process the single debit authority, coming up to the week before 21 March.

People can change up to the middle of March.

Mr. Michael Gladney

It would be up to the five working days from 10 to 15 March.

People can change their payment type up to that time. Some people like to pay their tax when they can and some have opted for cash payments through approved service providers, namely, An Post, Omnivend and Payzone. Will An Post accept a cheque?

Ms Josephine Feehily

I have no idea. I think it does.

It is called a cash payment but I suspect it could-----

Ms Josephine Feehily

I do not know. Maybe that is a decision post offices make.

They accept cheques.

Ms Josephine Feehily

If they accept cheques, that is fine. We call it cash because it comes to us as a lump sum from the service provider. The manner in which it accepts payment is a matter for it.

Yes; therefore, once Revenue gets its money, it is satisfied. Service providers such as post offices allow people to make their payments for a fee of €1, while Omnivend charges 4% and Payzone 75 cent for the first €50, €1 for €100 and €2 for a single payment over €100. They each have different rates and people can choose which provider to use. Do they also have the option of paying weekly, monthly or in full?

Ms Josephine Feehily

Yes, they do.

By when must this year's liability be fully discharged?

Ms Josephine Feehily

The liable date for 2014 was 1 January, unless one had entered into an arrangement with the Revenue Commissioners. These arrangements include deduction at source and a single debit authority direct debit. That is the legal position.

Do they include the cash payments through the approved service providers?

Ms Josephine Feehily

We are happy to include them, provided we have evidence. However, if somebody has it in his or her head to pay in the post office next October, we do not know that. If somebody is paying weekly or monthly through a service provider, that is clear to us. Therefore, the people concerned are compliant.

Ms Feehily has just touched on the point to which I was coming. People can register to use the cash payment option. Therefore, those who have signed up to avail of the single debit authority option - a majority of 30% have chosen this option - could switch to the cash payment option by mid-March?

Ms Josephine Feehily

Yes, they could.

They could then make one full payment on 31 December 2014 and discharge their liability in full in the calendar year.

Ms Josephine Feehily

If they pay on 31 December 2014, they will have to pay interest.

Ms Josephine Feehily

Because they would be paying late.

Ms Feehily has said Revenue will accept the payment through the cash service providers.

Ms Josephine Feehily

I am sorry; I thought I had explained when I used the October example. We need to know how the payment will be made and customers need to have entered into an arrangement with us. We would not approve that kind of arrangement without the payment of interest. What the legislation provides for is that one pays on 1 January or else makes an arrangement with the Revenue Commissioners by that date. An arrangement includes all of the provisions listed. If the person in question has made no arrangement with us -----

I am talking about persons who went online and registered and chose the cash payment through a service provider option.

Ms Josephine Feehily

If they do not make the payment by 31 March or are not making it on an instalment basis by then, we will not regard them as compliant.

Do they know that? People would have thought they could pay €100 here, €50 there and €10 at another time. They would have believed that was the purpose in being able to pay at these cash points or filling stations.

Ms Josephine Feehily

I would be very happy if they were paying €100 here and €100 there. Where they pay nothing until 31 December, that is a concern because then they do not have an arrangement. They do not have the authority to take it on their own heads to decide to do this.

Paying through a service provider is listed as a payment type. However, Revenue has a qualification regarding interest on that payment type. Is there a qualification regarding the other payment types as to whether they will be accepted without interest?

Ms Josephine Feehily

The point I am making is that the law requires payment to be made on or before 1 January 2014, unless a person has an arrangement with us.

As we know, Revenue received €76 million on that basis up to 31 December 2013.

Ms Josephine Feehily

We received €1 million a day as soon as we returned to work. Clearly, many people wanted to pay on or around 1 January.

Therefore, Revenue would have received 25% of the moneys due on the due date.

Ms Josephine Feehily

We received a lot of money very near the due date. The service provider system is designed for people who want to pay on a phased basis and anybody who does not engage with us will be in our records as being in default. That is a fact. What we have announced in our compliance programme is that people who have not paid or entered into an arrangement with us to pay will be charged interest that will be backdated. Therefore, in the case of somebody who wants to pay in December, that payment will be liable to interest.

Would that case come up on radar?

Ms Josephine Feehily

That person will come up on radar as being non-compliant.

Does Revenue have guidelines on the cash service providers as to the flow of payments that is acceptable versus what will trigger an interest charge? I am asking because I am not aware there are such guidelines.

Ms Josephine Feehily

The Collector General will explain the guidelines.

Mr. Michael Gladney

All of our telephone agents will give advice and there are various warnings on our website in regard to payment. The use of service providers gives people the ability to pay on a phased basis over the year, if they want to do this. However, our systems run scans on all payment types on a monthly basis and if an individual shows up with a nil payment in month one or month two, he or she will be in our compliance programme and we will make contact with him or her to discuss the option he or she was trying to take or wanted.

Does Revenue have some information on this?

Mr. Michael Gladney

Yes, the information is available and all of our agents are completely tuned into it.

I know that when one speaks to them, they will say there are ten months left and that one need to pay a certain amount every week or month. However, are the guidelines published anywhere we can see them?

Mr. Michael Gladney

Yes, they are on our website.

Are the details of weekly payments, the interest payable and the need to pay on a regular basis on it?

Mr. Michael Gladney

Yes, all of the details are on the website.

That is an issue that was raised in regard to people who wanted to make staged payments. Is it a judgment call for Revenue as to whether it is happy with the rate of payment?

Mr. Michael Gladney

Yes, absolutely.

It is a care and management issue rather than a black and white issue.

Mr. Michael Gladney

The main point people need to understand is that we scan all of the payment types on a monthly basis and if individuals have selected the service provider system of payment option and payments are not coming through, we will contact them.

When will that system kick in?

Mr. Michael Gladney

It will be part of the compliance programme that will kick in on 1 April.

I will make a slight change of direction. I welcome Ms Feehily and her colleagues. The home renovation incentive scheme was announced in the most recent budget. What interest has been shown in this scheme since its launch last October and what does Revenue expect the scheme to cost up to the end of 2014?

Ms Josephine Feehily

My colleagues will try to find the figure which was set out in the budget arithmetic. We have no concrete line of sight in regard to the level of interest in the scheme, for example, in terms of claims under the scheme. The position is that we are building an IT system to manage the scheme, but it will not be available until April. Therefore, until the contractors begin to load claims onto the system, we will not have a numerical line of sight in regard to the interest shown in it. However, I can tell the Deputy that there has been huge interest among the trade and householders in learning about the scheme. We have already produced a booklet which we are circulating widely and which sets out how people can engage with the scheme before we set up the IT system in April.

Has the booklet been published?

Ms Josephine Feehily

Yes, it has. The Deputy can have the one I have and it is available in all Revenue offices. It provides advice for home owners on how they might engage with contractors between now and April. As the Deputy knows, this incentive is only available in cases in which householders use registered contractors who are tax compliant. The booklet shows what is required to be a tax compliant contractor and the evidence a householder can seek to ensure the contractor selected is tax compliant. After we get the IT system started, householders will be able to check this information on the computer.

Will householders require a C2 certificate from the contractor?

Ms Josephine Feehily

C2 certificates are no longer required following the introduction of the electronic relevant contracts tax system, eRCT. What householders will require is a printout from the eRCT system showing that we have given the contractor a tax rate of 0% or 20%. They will also require the contractor's VAT number and a tax clearance certificate of a recent date. Pictures of such documents are available for householders in the booklet which is being distributed through all Revenue offices, citizens' advice centres and so on.

Will people get the tax credit over 2014 and 2015 if they do the work?

Ms Josephine Feehily

The work is done in 2013-14 and the credit is given in 2015-16.

On the Deputy's question about interest, my colleagues ran four seminars at the Ideal Homes Exhibition within two days of the budget announcement and they were packed. All over the country local Revenue staff are attending such events and meeting groups of local business people. There is a huge interest in understanding the mechanics of the scheme and engaging with it. We are providing speakers and experts to attend meetings and talk to people. At that level, I can assure the Deputy that there is a lot of interest.

As I understand it, the builder will be required to submit data on time in order that the taxpayer can qualify for the rebate. What will happen if the builder does not do this?

Ms Josephine Feehily

We cannot give the credit.

Is there a legal onus being put on builders to compel them to do it? Let us say someone engages a builder, pays for the work to be done and is then chasing the builder to submit the documentation to the Revenue Commissioners. There may be a situation where tax clearance is current when the work is done. For how long must a tax clearance certificate be in place? Would three-month tax clearance certificates be a possibility?

Ms Josephine Feehily

I am not sure how we have defined "current" in the booklet, but certainly, on the relevant contracts tax certificate, we have defined "current" as meaning no more than 30 days before the work starts.

A tax clearance certificate could be current 30 days before the work starts but by the time it is completed, the builder may have no tax clearance certificate and may be reluctant to engage with the Revenue Commissioners for fear of drawing their attention. That leaves the poor punter who has paid out hard-earned money for renovation work high and dry. Where is the protection for the householder?

Ms Josephine Feehily

The protection does not lie in tax law. Protection for the householder in any relationship with a contractor lies in common law or consumer law.

I am talking about-----

Ms Josephine Feehily

What we have tried to do is to give advice. We have suggested there are things people need to check. We have even suggested they might want to consider keeping back some money. We are giving what could be called consumer advice in the booklet, but it is not something we can enforce.

I suggest the builder be required to provide details for Revenue before the work commences. There is a danger that if it is left until after the work is finished, some builders might be unwilling to engage with Revenue at that point. In these circumstances, the individual householder will not be able to claim the tax credit. In some cases, he or she may have only decided to get the work done on the basis of receiving the tax credit.

Ms Josephine Feehily

We can certainly look at that suggestion, but we are actually going one better. Once we have built the IT system, the householder will be able to look at a contractor's tax status in real time. There will be a look-in facility available once the system is up and running. We are very mindful of the consumer side and trying our best in that regard. The other piece of the jigsaw is the plan by the Department of the Environment, Community and Local Government to set up a register of contractors. I believe it was announced recently and we are certainly keeping in touch with that discussion. We would like to leverage other protections in the system and build them into the scheme. If there is a register that is approved in some way, we will be happy to add it as a condition.

Revenue is looking at everything going live from April. Is that correct?

Ms Josephine Feehily

Yes, in terms of the technology available and having an actual system in place, but in the meantime, if the work is done and people have the paper work, they can submit it. Work done since budget day is qualifying work; therefore, things do not have to stop. The other point to note from the media advertising is that many businesses are using this as an opportunity to encourage people to think about work they might undertake. A lot of thinking might be going on, with claims being made later. That is why we are anxious to have some information available.

On the local property tax, some people believe the valuation they submitted is not totally accurate. I have heard this from a number of elderly people, in particular. What options do such persons have at this time? Assuming that they have paid the property tax for the current year, can they change their valuation retrospectively?

Ms Josephine Feehily

Yes, upwards.

What about downwards?

Ms Josephine Feehily

They cannot self-correct downwards; they can only self-correct upwards. We have made it very clear publicly that we are aware that elderly people may have overvalued their properties, particularly if they followed Revenue's estimate too closely, which we fully appreciate is not always correct. Many thousands of such persons have been in touch with us. They are applying for refunds, sending us evidence and we are giving them refunds. In quite a few cases the refund was used as a down payment to meet the 2014 liability and, in some case, the 2015 liability.

The valuation stays, based on when the property was valued.

Ms Josephine Feehily

The valuation date remains 1 May 2013. It is not the same valuation as now, on which we are very clear.

They are required to pay the full amount in the year but can then apply for a rebate at the end of it, based on what they regard as the correct valuation. Is that correct?

Ms Josephine Feehily

Certainly, or if they came to us in the past few months saying they had paid too much last July and we have given them a refund, we will have adjusted downwards from that point. Once we make the refund for 2013, the expected figure for 2014 is automatically lowered.

They cannot self-adjust it.

Ms Josephine Feehily

They cannot self-adjust downwards; they can only self-correct upwards.

Would Ms Feehily advise them to go to their local tax office?

Ms Josephine Feehily

Yes, or write to the office in Ennis. That is probably the easiest thing for them to do. They can write to PO Box 1, Limerick.

Mr. Michael Gladney

PO Box 1, Limerick and it will reach our office in Ennis.

Everything can be routed through Limerick - that is good.

Let us say an elderly couple genuinely ticked the wrong box, overvalued their property and paid at that rate. They have since checked with their neighbours and realised they all submitted a lower valuation. They are then asked to have a valuation put on their property to provide proof that it has a lower value. Asking an auctioneer to value their property involves another cost that they simply cannot bear. In these circumstances, some of them throw their hands in the air and leave things as they are because they cannot do anything. Is there a way around this?

Mr. Michael Gladney

Yes, there is. An alternative to seeking a valuation is to provide evidence of sale prices for similar properties in the local catchment area. They need to give evidence of on what they are basing their revaluation.

Will Revenue accept evidence based on the valuations of six other houses in a rural location where there have been no sales for many years? If the only evidence is the lower valuations of six other nearby houses, would that be acceptable?

Mr. Michael Gladney

In normal circumstances, we would have to have some written evidence but not necessarily an official valuation. Normally our criteria are that they point to evidence that prices have planed at a certain level in a certain area or evidence of sale prices in the area. They are the criteria we use.

What if there is no evidence, bar the fact that the couple are elderly and have made a mistake?

Mr. Michael Gladney

In such circumstances, we would certainly look at the case.

I have met people, predominantly in rural areas where no sales have happened, who have made a genuine mistake but the evidence required to correct that mistake is too costly for them to acquire, namely, a valuation from an auctioneer. They have received letters from Revenue telling them to obtain a valuation. To whom should such persons write?

Mr. Michael Gladney

If there are specific cases which someone considers need to be reviewed for a particular reason, he or she should make contact with us. We need to base the evidence on something.

They do not have the money. The only evidence that they do is that the surrounding six properties in that rural pocket all have a lower valuation. These valuations have been accepted by Revenue. Why can it not check its records?

Ms Josephine Feehily

The dilemma for us is that this is a self-assessed tax. We have not necessarily accepted the other six valuations. I can think of situations which are perfectly straightforward and all six houses in question are the same. I can also think of situations where the six houses are not the same and one of them is a mansion. The fact that the owners of the other houses in question have chosen a lower valuation does not necessarily mean that they are right. In the scenario described by the Chairman, if all of the properties are the same, it would be useful evidence. The tax is based on self-assessment and people sign a declaration. The Comptroller and Auditor General would be very upset if we were to start to pay back money without evidence.

I understand Revenue’s dilemma, as well as that of the older persons mentioned. I will get them to write to Revenue about the matter.

Ms Josephine Feehily

Yes, they should write to us. A statement that the properties are all the same in that area would be helpful. We have a line of sight on the self-assessed values but not on properties just yet, but we will in due course. We would also be particularly careful with dealing with elderly people.

To come back to Deputy Kieran O’Donnell’s earlier question, the cost of the incentive is estimated at €62 million in 2015. As the credit is to be spread over two years, it will be double that amount. The tax cost will not arise until 2015 when the credit will be claimed. The work is done in 2014.

That will mean €124 million in total.

Ms Josephine Feehily

That is the budget figure. It is, however, difficult to estimate, as it depends on the level of activity involved.

Regarding Revenue investigations into small and medium-sized enterprises, SMEs, and larger corporations, the large cases make up 6% of the total yield from penalties and interest payments. In 2012 there were 127 investigations into large companies. How many ended up being published?

Ms Josephine Feehily

I would say probably one.

How many of the ones relating to SMEs would be published? Are there more working on these? How are the skills sets of those working on these cases spread around? How would these cases arise? Would they be the result of voluntary disclosures? I suspect most cases arise from risk-based analysis on the part of Revenue.

Ms Josephine Feehily

SMEs would not be correct in thinking they are more likely to be targeted. The large cases division has only about 800 cases. They have disproportionately more of our highly skilled personnel and at higher grades than our staff in the regions. We have skewed our resources heavily because we start from the premise of tax at risk. The large cases division is responsible for 80% of the tax collected, including PAYE, fiduciary and so on.

Is it 80% of the overall tax take?

Ms Josephine Feehily

I will confirm that figure. Much of the tax that comes in is from businesses that are managed and large cases. These are divided into business units by sector. Therefore, there would be a small number of cases with a team to look after them. We have a co-operative compliance regime in place which is international best practice in dealing with large businesses. Under this regime, we expect businesses to self-review. Often the engagement in the large cases division is with the chief financial officer to know if the company has carried out a self-review and ask if we can see the paperwork. A self-review is very common in large businesses for good governance reasons, not necessarily reasons to do with us. As a result, there is a much higher proportion of unprompted disclosures. The technical complexity adjustment argument is more likely to arise in large cases. They are much more likely to engage with Revenue every year.

Does Ms Feehily see any contradiction in the fact that the large cases account for 80% of the tax take but only 16% of penalties?

Ms Josephine Feehily

I can see the reasons that would be the case. Audits and intervention across the SME sector are considerably less frequent for an individual business than they would be for a large case. Therefore, SMEs would not be correct in thinking they are targeted more. The others receive a lot more care and attention. On the collection side, the Collector General has a team monitoring large cases. If the moneys are not in on the due date, there is a telephone call made straightaway. Our intervention is immediate.

On a more general point, the payments system has changed. Ms Feehily is on record as saying it impacted on revenue in January. What will it be like in February and the rest of 2014?

Ms Josephine Feehily

This concerns the changes to the single European payment area. It has had an impact for us on several levels, business and financial institutions. However, we were alert to it.

We would have alerted the Department of Finance to the fact that there was going to be an impact. In accordance with the SEPA rules, debits from bank accounts are not cleared for seven working days the first time and four working days every time after that. In January a significant amount of tax, €720 million, that under a previous system would have arrived in the Exchequer's account in January did not arrive until early February. We had predicted that the figure would be €750 million, so it was not too bad.

I am a worrier, so I am not sure what will happen in February. February is a short month. The working days fall funny. We are confident that the money due in January arrived in the first five or six days of February. As to whether we will have the same pattern from February into March, I would like to have the first quarter under our belt before I could say there is a pattern. I am also concerned that where new debits hit the system the seven-day rule will apply, for example when we come to October with the self-assessed taxpayers. Many SMEs pay their VAT and payroll taxes much less frequently, three monthly or quarterly, so we still have many cases for whom that seven-day delay has not happened. For all the big payers the seven-day delay is out of the way and the next debit delay will be four days.

If one follows it through, there will be an issue in December. The payment date for taxes in December is 23 December. Forget about seven working days, there are not even four proper banking working days on which we could rely, so we must examine that. It is cashflow, not cash missing, but year on year cashflow causes issues for the Exchequer in terms of Government accounts, etc.

In terms of the process in the SMEs or ordinary business people paying their taxes, if they go on the debit does it physically hit their accounts? Do they also have a seven or four day time lag?

Ms Josephine Feehily

We could change the filing date.

That is the question I am asking. Has Revenue examined that?

Ms Josephine Feehily

We have.

What is Revenue's broad view on it?

Ms Josephine Feehily

We could change the filing date by three or four days without impacting on cashflow for businesses, because the deduction is not made on the filing day.

They would have issues at their end in terms of debits coming in.

Ms Josephine Feehily

That is the problem. Many businesses were not ready for the impact on their cashflow or on their business model which relies very heavily on direct debits. There is a cooling-off period for direct debits built into SEPA that was not available to consumers in the past. We want to see a couple of months. At the end of quarter 1 we will have a better view of the impact on tax revenues. If we think it is sensible to make a proposal to the Department of Finance on the filing dates we will do so.

Is Revenue conscious of the fact that from a cashflow viewpoint many businesses are working off debits in terms of payments?

Ms Josephine Feehily

Yes.

The other issue coming up in business is that creeping into the cycle is the number of days' credit being taken by many companies, particularly the larger companies, with SMEs is increasing. A number of SMEs have told me that the days of credit they must give are increasing from 30 to 60 or 90 days. That is a major factor that must be borne in mind.

Ms Josephine Feehily

I regard it as work in progress for us, the Exchequer and business. Many lessons will be learned about the impact of this in the course of the first half of the year. After the first quarter we will certainly take stock.

I thank Ms Feehily and her colleagues for attending. I want briefly to touch on four areas. The first is to pick up where others have left off regarding LPT statistics. When Revenue took over this responsibility when this new tax was introduced, in terms of resources how did that impact on Revenue?

Ms Josephine Feehily

Badly.

Was Revenue given additional resources to manage this?

Ms Josephine Feehily

Yes, we were given a perfectly adequate budget; the issue was human resources. We were given an additional 100 staff. It has soaked up quite a bit more than that. I am not very surprised about that as 100 was always too few. However, we took it, and it has impacted on some of our other areas, not, hopefully, in a terminal way. I hope we will be able to rectify that in the course of the first half of this year. We had to accept an impact because it was such a major change for us and for property owners. The bigger problem for us is that we remain subject to the employment control framework, so while we were given an additional 100 staff, our headcount number overall had to decrease. It has been eaten up and in the course of this year we will be back where we started.

Is Revenue requesting additional staff?

Ms Josephine Feehily

I make these requests periodically in the context of business need. The most recent request we made was regarding the need to hire significantly skilled technical people to help us with the work on base erosion and profit shifting for the OECD. That was approved. Since the Government employment control framework structure began under the previous Government in 2010 we have received sanction to recruit 600 people. When we ask we get a hearing, some of the time.

Earlier Ms Feehily talked about the data available to her from the property tax returns and how she would like to do more work with it when she has time. Is she requesting staff to do that kind of work? Is that in the pipeline?

Ms Josephine Feehily

If we were seeking staff in the context of compliance work, and if we were doing it by return on investment, we would look at the other taxes long before we would look at the LPT. The property tax charge is small. What I meant in our earlier conversation about projects is that there is interesting intelligence that can be divined by analysing property tax information with tax returns made in the past to see if there is evidence of mismatches - lifestyle, bank accounts, cash - about which we could ask where the person may have got the funds for such property. The focus would be on the other taxes but the property tax data would help us.

Revenue would use that to feed into investigations in other areas.

Ms Josephine Feehily

I see that being useful for project work in the coming years. We are always seeking additional staff. I regularly write to the Department of Public Expenditure and Reform. When the Estimate is being set for our Vote for the year there is an engagement, perhaps not always in writing, where we set out our stall, there is a negotiation, we get what we get and we move on.

Revenue took over responsibility for the household charge that preceded the LPT. What is the compliance rate with that?

Ms Josephine Feehily

Responsibility was given to us last summer. We have not touched this tax until now in terms of meaningful compliance work. The Local Government Management Agency, LGMA, has a different way of measuring the compliance rate. Its report gives a compliance figure of 1.2 million properties. We have a compliance figure for LPT of 1.62 million.

Is Revenue's figure more accurate?

Ms Josephine Feehily

Our figure is bigger and in our terms it is more accurate because we are working from our register. However, the LGMA has different exemptions that we did not have. The unfinished estates regulations for those were considerably wider than for property tax. They are not quite matchable as a compliance rate. The unpaid household charge is now LPT so we will develop our own metrics around it. We have approximately 460,000 properties in our sights that have paid the LPT but do not appear to have paid the household charge.

How would that work? Would Revenue add an additional charge to their property tax?

Ms Josephine Feehily

The additional charge has already been added to their LPT account.

If people go online and look up their LPT accounts, they will see a figure of €200 for local property tax, but that is actually household charge. The legal position is that it is now LPT.

If they do not cover that €200 they will fall into non-compliance with their LPT.

Ms Josephine Feehily

We are advising them to cover that by the end of March or an interest charge will be added to it.

Do the figures in the document for compliance rates include people whose household charge was not paid initially but it was rolled into the LPT and has been paid?

Ms Josephine Feehily

Yes. There was a very interesting reaction to the household charge in some respects. This became our responsibility on 1 July. Before that, one could have paid €142. On 1 July, somebody walked into one of our offices to pay €200. This is the first time we have said we are now ready to do compliance work on the household charge, but without doing any work at all we have collected an amount of household charge. A total of €2.7 million has been lodged with us since 1 July in respect of 13,000 properties without us asking.

Are the people lodging that money in compliance with their first LPT payments?

Ms Josephine Feehily

That is a reasonable conclusion.

How does the witness interpret that?

Ms Josephine Feehily

The interpretation is that, having complied with their LPT obligations, they recognised that they could be found very easily when we started to do the household charge, so they decided to get it out of the way.

Perhaps they were waiting to see how things would develop. They might have been unsure whether this tax would stick or settle.

Ms Josephine Feehily

Perhaps they thought the household charge would not remain once the uncertainty arose about who would do it. I do not know, but I do not understand the psychology of the person who could have paid €142 in June but paid €200 in July. That is what happened, and there have been 13,200 more of them since then without us having to do anything.

That is very good. With regard to the document, it is great to note the compliance rates are so high. Also, the 76% in returns is excellent. The change we are seeing in the payment types and the methods is positive and will be of benefit to the Revenue Commissioners. As regards the legislation for LPT, the 2012 Act and the section 8 reinterpretation, when will we have identified everybody who bought in 2013 and will be exempt under section 8?

Ms Josephine Feehily

I hope we will have that job finished by April. We will then contact the people in question, ask them to make a declaration and we will give them a refund. As of yesterday, however, they can now self claim that exemption online. It only went live yesterday, so we have not had a chance to publicise it yet. There are also detailed frequently asked questions, FAQs, on the website since yesterday. That can now be self-claimed as an exemption online. If people have already complied for 2014 and self-claim, clearly they will be due a refund, and that will be automatically generated. If they have filled in a single debit authority, SDA, and they go online to claim this exemption, if they do it before 10 or 11 March, the date mentioned earlier, we will ensure that the SDA does not trigger so we will not touch their bank account. There is an opportunity for that group of people to self-claim but, in any event, we will write to them if they have not done so. We expect to be ready to do that work in April.

Are there any indicative figures available now for the potential loss of revenue to the State?

Ms Josephine Feehily

No, we are not putting a figure on it until we finish the work. There are conditions with it. It is not simply everybody who bought a property. We will put a figure on it in April when we have finished doing the work. That is the safest thing to do.

I will move briefly to another area, namely, the projected distribution of income earners. I have figures from 2012 and perhaps the witness could provide us with an update. The figures show that the number of people who are employed and earning an income, but who are exempt from paying income tax amounted to 37.7% in 2012, while those in employment, earning an income and paying tax at the standard rate amounted to 43.7% and those paying at the higher rate amounted to 18.6%. Does the witness have updated information for 2013?

Ms Josephine Feehily

I certainly have some figures on the proportion of people that are not paying tax. I might not have the distribution figure the Deputy seeks, but I can get it for him. My recollection is that the figure not paying now is approximately 40%. The figure for those paying no tax or USC is 24% and the figure for those who pay no income tax is 39%. These are 2013 figures. A total of 24% of all income earners pay no tax and no universal social charge and 39% pay no income tax. I have some headline figures on distribution. The top earning 1% of all cases account for 20% of the tax we collect and the top earning 10% of cases account for 59%. That is for income tax only. When one combines it with USC, the 20% becomes 19% and the 59% becomes 55%. Those are broad figures, but I do not have a granular distribution with me.

Is there a table showing the changes in those figures from 2008 to 2013?

Ms Josephine Feehily

Is the Deputy referring to the headline figures?

Ms Josephine Feehily

I do not think I have them here, but I can forward them to him. I only brought the figures for the current year with me.

Of course. It would be interesting to get the breakdown of, for example, the percentage of those earning over €100,000, how many that equates to, how much income they earn and how much income tax they pay as a result. I recall seeing figures previously which showed the top 5% earning 20% of income but paying 45% of the tax. It would be good to see how that pattern has been moving over the past number of years and what is projected.

Ms Josephine Feehily

Certainly. It would be better to provide it in written form, rather than read out figures.

That would be fine.

Send us a copy of it.

Ms Josephine Feehily

Yes. The changes are marginal. The most significant point is the interplay with the universal social charge, because that is a significant change if one goes back to 2008 when it was not in place. That is the reason we distinguish between income tax only and income tax with USC. The USC reaches down deeper into the income cohorts than income tax. If one was looking for a trend, the most significant trend would be the reaching down of the universal social charge. We will get a table, copy it and forward it to the committee. As the Deputy will see, there are many numbers in it.

The third area I wish to discuss is the relationship of the Revenue Commissioners with the Department of Finance. Does the witness advise the Department on policy matters?

Ms Josephine Feehily

Yes. We advise it in the sense that we give it our opinion. Sometimes we give it to the Department when it asks for it and sometimes even before it asks for it. Our advice would be more about the technical implementability of policy issues, rather than pure policy. However, we would be part of the discussion. For example, we are full members of the tax strategy group. We are part of the policy discussion.

Is there room to dissent from a decision that is made or in the course of a decision being put together?

Ms Josephine Feehily

Yes, absolutely.

Ms Josephine Feehily

It would probably depend on how deep the dissent was. If I thought something was really problematic, I might commit it to writing. However, our job is very clear. We have a really good relationship with the Department of Finance and it operates on a type of symbiotic basis, but at the end of the discussion we are clear about our roles - the Department makes the policy and it is our job to implement it. We might say, "We think that is a silly way to do it" or "That is an expensive way to do it", and we would make our arguments, but the policy decision is made by the Government and we implement it. We are very clear about that. There are opportunities to dissent, debate and suggest, but then there is a decision and we proceed with that.

However, the witness is not just advising on mechanics. Is she advising on actual policy? For example, let us say it is 2008 and the decision is to increase corporate gains tax and the yield that is given is an increased amount. Can the witness say, "Well, actually, that is not going to happen" or to say that it is not a sensible policy change?

Ms Josephine Feehily

Yes. If we believed that the arithmetic was not appropriate, we would give our view. If we believed there were risks attached to the policy, we would outline the risks. Much of this takes place in an engagement.

There are meetings; for example, I have already had a start-of-year meeting with the officials of the Department of Finance at which we outlined issues on our agendas for the year. Much of this work takes place at meetings at which we explain our view of the risks that need to be mitigated if a policy is pursued. They will accept some of our advice, not others. This is part of the normal cut and thrust. Most of the work takes place at official level and we are very clear that the policy dossier is theirs and that the policy decision is the Minister's and the Government's and that it is our job to implement the law.

Does Revenue interpret figures for the Department?

Ms Josephine Feehily

If we can help, we do. In terms of forecasting, we provide the Department with a lot of data; we tell it what we think the data are telling us and it makes its forecasts based on this. If we can help by giving our view of what the figures are saying about what is going on the economy, we do.

Income tax and PRSI account for 82% of all direct tax receipts, whereas in 2007 they accounted for 70%. In comparison with other jurisdictions, is that a high figure?

Ms Josephine Feehily

The most significant contributor to that increase is the universal social charge. There are solidarity levies such as those in place in many jurisdictions in times of difficulty. I will give an opinion off the top of my head, but the Deputy must not hold me to it. If he likes, I can write to him about it. I would have thought the figure might be slightly on the low side because indirect taxation accounts for a high proportion of our tax base. If our indirect taxation is higher than others, it follows that their direct taxation must be higher than ours. I think approximately 46% of our collective tax revenues, between excise and VAT, is on the indirect tax side and it was higher when the income tax figure was lower. I am pretty sure I am correct in saying that, if one includes such measures as universal charges which these figures do, we are probably still a bit behind the curve in other jurisdictions in terms of the proportion due to income tax., but I can get the data for the Deputy.

Was Ms Feehily surprised to see the increase in VAT revenue to 23%?

Ms Josephine Feehily

Not in the last half year because clearly there was increased economic activity behind it. As long as we are not too far out of line with the United Kingdom in frontier and cross-Border purchases, the higher rate is not as problematic as it might seem. Most EU jurisdictions, in search of money in the past five years, have increased their VAT rates and we are not far from the average. The highest rate allowed under EU rules is 25% and more and more countries have been moving into the high 20s, between 20% and 25%. The critical risk for us is linked with cross-Border shopping. Because of the sterling rate it has not presented a difficulty in the last couple of years. It did a few years ago when the United Kingdom reduced its VAT rate, which had an impact.

That is the most significant consideration.

Ms Josephine Feehily

As the United Kingdom then restored it, we are back where we started.

At the same time, capital gains tax, CGT, is increasing, but the yield from it is falling. Are we moving in the wrong direction in that regard?

Ms Josephine Feehily

I guess that it has more to do with the fact that people are not making gains on property and shares and in the markets. Those who deal in shares would have had high losses; for example, if they had shares in financial institutions, they would be offset against new, emerging gains. The fall in CGT receipts has more to do with the fact that there are not as many taxable gains. At the same time, the rate is higher and we need to watch it. Arbitrage between income tax and CGT is one of our risk areas. In some ways, the nearer it is to the income tax rate, the less arbitrage there is. In some respects, it works for us in managing the risk.

Might Revenue, off its own bat, go to the Department with proposals for changes to CGT based on the figures?

Ms Josephine Feehily

Every year we bring to the Department a list of changes we want to propose. Many of them are technical, but some of them have to do with mitigating risk. If we thought the tax rates were exposing us to a risk, we would come at them, but normally they are off our page and we do not take a view on them. We take it that it is for the Department to take a view on them, unless we considered they were exposing a risk we would have a difficulty in managing. We would tell the Department about the risk and give our view and it would then make the decision.

On Revenue's website the PAYE Anytime service includes a budget calculator, but I could not access it because I did not have an account set up. What does it do?

Mr. Declan Rigney

At the start of a year a person can input his or her salary on a weekly or annual basis and it will make an approximate calculation of take-home pay for the following year. It is a point-in-time application which we refresh at the start of each year.

Therefore, it calculates for an individual the amount of tax he or she will pay in the year in euro and cent.

Mr. Declan Rigney

Yes; it makes certain estimates of PRSI, etc. and the person's net take-home pay.

Has Revenue thought about adding to the calculator by giving it a tax transparency element, giving each person a breakdown of how taxes are spent in euro and cent per Department? I have been pushing for this for a while and it would be a very simple thing to do. I have it on my own website and I am not sure why Revenue does not give the information directly to people in a proactive way.

Ms Josephine Feehily

I have seen the Deputy's calculator and a similar one is provided on www.publicpolicy.ie, which is also very good.

Ms Josephine Feehily

This goes to the policy discussion we were having. Revenue takes the view that it has no role in deciding how the tax take is spent. Therefore for us, the tax collector, to tell taxpayers how their money will be spent is a tricky space for us because we have no control, nor should we, over how it is spent. We have not gone there, but we could, in the fullness of time, especially if there was an official one somewhere, provide a link and tell people there is information available on Government expenditure across sectors such as health and education. That is the kind of model the Deputy and publicpolicy.ie have used. That would be my preference because we have no role to play and it would be getting into the policy space, given that there is a Minister responsible for public expenditure. Not only is it not us, it is not even about our Minister. That would bring us into a place that I am not sure would be ours. As a public information piece, if there was an official calculator, the way to do it would be for us to tell people there was a link.

After people had calculated their taxes to be paid, they could take that figure, follow the link and the site could tell them how it would be spent.

Ms Josephine Feehily

Yes; there is a nice one in the United Kingdom that has a slider that allows a person to see how much more will go into the education sector, for example, if his or her income increases. There are various examples and we would be very happy, if there was one that had an official brand, to provide the link. That would probably be the right distribution of roles.

Deputy Eoghan Murphy could offer it on his website.

Yes, I could tweet it.

Ms Josephine Feehily

The Deputy should open a PAYE Anytime account.

I will not delay you, Ms Feehily, but could you provide the committee with a comprehensive note or briefing on cigarette smuggling and diesel laundering, dealing with what has happened over the last few years and the current position? We could discuss it with you on another day.

Ms Josephine Feehily

I would be happy to do that. We have a particularly interesting story to tell about diesel. For two years we have been pursuing a particular project-driven approach, using the law, licences, enforcement and supply chain analysis. For example, we have closed down approximately 120 retail outlets in the last two years. We are facing continual judicial review in this work. We are now involved in a joint procurement exercise with Her Majesty's Revenue and Customs to get a single marker for the island of Ireland. That would be hugely important. There is no point in changing the regime unless this happens. I can certainly give the committee a comprehensive report on the work we are doing working closely with the trade. The diesel story is an interesting one. I will do likewise with tobacco.

With regard to the policy role, which was mentioned by Deputy Eoghan Murphy, have the Secretaries General or Accounting Officers now been told that they can comment on policy? I read out a caution here every week - I can say it in my sleep by now - that the committee members should also refrain from inquiring into the merits of a policy-----

Ms Josephine Feehily

No, I have not been told-----

It is a new departure. There is a change in the law now and you can give your opinion on policy.

Ms Josephine Feehily

I certainly have not been so advised-----

We might check that. It would be great to get some insight from you.

Ms Josephine Feehily

It is floated around in the political reform box of the public sector reform agenda. I have heard it suggested-----

Mr. Watt wrote to us about it.

Ms Josephine Feehily

-----but I will wait until somebody tells me it is more than suggested.

The other query is about the property tax. When a person ticks the box for the valuation of their property, he or she is genuine about the valuation. However, consider how the market is going now. What happens if that person sells the home to move on and gets a sudden windfall because of house prices going back up?

Ms Josephine Feehily

Good luck to them. The valuation date is 1 May 2013.

The Revenue Commissioners will not chase them.

Ms Josephine Feehily

It is not even that we will not, but that there is no issue for them. The valuation date of 2013 holds until November 2016, which is the next valuation date provided for by law. It is a three year valuation date and it holds. In a rising market that is good news, and good luck to them.

I have a question for the Comptroller and Auditor General regarding audit standards, which also relates to the point Deputy Eoghan Murphy was making. If, for example, somebody wished to look at an audit standard and that audit standard was to demand how Departments spend their money or how a rate was struck in local government, is that something that is part and parcel of an audit and is it applied to local government, in particular, or the HSE and its branches around the country, whereby they should or can explain in real terms where the money was spent and what value they got for it? That is not part of an audit now.

Mr. Seamus McCarthy

It struck me when Deputy Eoghan Murphy was asking his question that it is really a whole-of-government performance measure. It might be something that would be worth discussing with the Secretary General of the Department of Public Expenditure and Reform or the Secretary General of the Department of Finance. Certainly we have seen these things being published, but it raises accounting issues. One must take account of the fact that there is debt as well, which is used to fund expenditure. What way does one factor that into the presentation of the information? Certainly it is something that potentially gives meaning to citizens and taxpayers as to how their money is used. Had I more resources, I might attempt something like that in the interests of informing the public or, indeed, just establishing that it can be done in a meaningful way.

Perhaps you should apply. This lady seems to have a good success rate with the numbers.

Ms Josephine Feehily

Percentage-wise, he has done just as well.

I have a question for Ms Feehily about an old case. I will not mention the name as I know you cannot comment on individual cases, but this one is well known. It was discussed in two committees of the Oireachtas and it was agreed that the person concerned should get a particular amount of money, approximately €600,000. I raised this with you previously. He only got €300,000. The Office of the Ombudsman was involved as well. That person later had issues with how it emerged that he only got €300,000. What course should that person take now in terms of trying to appeal it? A number of years have gone by and it has been before the Committee of Public Accounts and before the committee on finance twice. It is back on the agenda now. There is an issue about how the Revenue Commissioners describe the payment and how he describes it. There is an issue with how the Ombudsman said it was an agreement but the taxpayer says there was no agreement. There is still €300,000 outstanding. Is there somebody in the Revenue Commissioners to whom he can make an appeal, or do you consider this matter to have been dealt with? It is before the Oireachtas committees again.

Ms Josephine Feehily

I cannot comment on the case. I certainly cannot comment here.

Is there a process or a way he can pursue it?

Ms Josephine Feehily

It is unique, so if I were to comment on a process, it would be commenting on the case. The normal engagement process for taxpayers who feel aggrieved comprises three different routes, or they can use all three. We have an internal review system. We call it "internal review" but in the case of the people doing the review the taxpayer can choose between an internal individual and an external individual. They can appeal to the Appeal Commissioners if it is a tax matter, or they can go to the Ombudsman. A large number of cases go to the Ombudsman every year and they are resolved - or not, as the case may be - through that process. Almost always, however, they are resolved.

There is a process in place for the generality of cases. However, if I talk about a process for a case that is unique, I will be commenting on the case, and I am not in a position to do that.

Generally, however, cases can go to an appeals section within the Revenue Commissioners.

Ms Josephine Feehily

If people have a complaint, as opposed to a technical tax appeal, we have a complaints process whereby they can seek to have the handling of their case reviewed. It goes to internal people who have never touched the case previously. It is all set out in a process. One complains locally first, it is escalated and then one has a choice-----

Is there a time restriction?

Ms Josephine Feehily

There is, but I cannot remember what it is right now.

I will not go into that. The fact that the case was heard before Oireachtas committees and has been sent to the Minister for Finance and so forth is a matter for the individual to set out, perhaps, and go with it to the appeals section within the Revenue Commissioners.

Ms Josephine Feehily

I will say no more about the case.

Mr. Walsh, do you provide a report on today's proceedings to Mr. Watt? How does it work? Do you go back and give a verbal report?

Mr. Terry Walsh

Normally, we go back and make a verbal report on anything we thought was relevant to us.

Or relevant to the members.

Mr. Terry Walsh

In particular, it would be if some specific question had been asked that we should go back and check.

It is something to which I will refer again. I am mentioning it to you today, although I realise it is your first day with the committee. Where issues are raised by members, they should be fed back into your Department.

There should be some report as to what concerned members sent back to that Department. This would mean when the Secretary General appears before us, we can refer to the issues. It is just a matter of closing off the circle of information.

We have heard from the Comptroller and Auditor General and Ms Josephine Feehily that there is an interest in the Department of Public Expenditure and Reform exploring the idea of a tax transparency calculator. If the Secretary General could look at that, it would be helpful in advance of the next budget.

Mr. Terry Walsh

We can check it with our central section. There are many areas which prefer statistics.

All the information is there. It is just a question of making it meaningful in tabular form or graphs for individuals accessing it.

Mr. Terry Walsh

I will bring it up with those involved.

I thank the witnesses for attending today's meeting.

I propose the committee disposes of Vote 9 and chapters 23 to 27, inclusive. Is that agreed? Agreed.

The witnesses withdrew.
The committee adjourned at 1.30 p.m. until 10 a.m. on Thursday, 27 February 2014.
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