2016 and 2017 Revenue Accounts

Mr. Niall Cody (Chairman, Office of the Revenue Commissioners) called and examined.

We are dealing with the 2016 annual report of the Comptroller and Auditor General, chapter 21, tax debt and write-outs, and chapter 22 which is entitled, Allocation of Encashment and Film Withholding Taxes. I hope some of the experts present will explain what it means in simple English. We will also be dealing with the 2016 Appropriation Accounts, Vote 9, Office of the Revenue Commissioners, and the Revenue accounts for 2016 and 2017.

From the Office of the Revenue Commissioners we are joined by Mr. Niall Cody, chairman; Mr. Joe Howley, assistant secretary, Office of the Collector General; Ms Clare Omelia, principal officer and liaison with the Office of the Comptroller and Auditor General, and Mr. Tom Dowling, assistant principal, corporate services division. From the Department of Finance we are joined by Ms Anna Donegan. They are all most welcome.

I remind members, witnesses and those in the Visitors Gallery to switch off all mobile phones, which means switching them to airplane mode. Merely leaving them in silent mode means that they will still interfere with the recording system.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to 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 asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an entity, by name or in such a way as to make him, her or it identifiable.

Members are reminded of the provisions within Standing Order 186 that the committee shall 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 policy or policies.

While we expect witnesses to answer questions put by the committee clearly and with candour, they can and should expect to be treated fairly and with respect and consideration at all times, in accordance with the witness protocol.

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

Mr. Seamus McCarthy

The account of the receipt of revenue of the State collected by the Revenue Commissioners comprehends receipts of taxes and duties remitted by Revenue to the Exchequer and receipts collected by Revenue on behalf of others. The 2017 account shows that net receipts of taxes and duties amounted to a total of €50.8 billion, an increase of €2.8 billion, or 5.8%, by comparison with the figure for 2016. Receipts related to VAT, income tax and corporation tax together accounted for over 80% of net tax receipts.

Receipts collected by Revenue and remitted directly to non-Exchequer agencies and funds also increased substantially. Net receipts totalled €10.8 billion in 2016, increasing to €12.2 billion in 2017, an increase of around 13.5%. Pay related social insurance, PRSI, contributions account for the majority of this category of receipts. A significant part of the increase in that category of receipts in 2017 was in respect of the VAT mini one-stop-shop, MOSS, scheme, which implements place of supply based VAT rules for businesses engaged in electronic supply of services cross-border. Transfers to other EU member states increased from just under €400 million in 2016 to almost €1.2 billion in 2017.

Revenue's administration and operational expenses are charged to Vote 9, Revenue Commissioners, rather than the Revenue account. The 2016 appropriation accounts show that the total spent by Revenue in the year was €397 million. Taking account of appropriations-in-aid of €75 million, net expenditure under the Vote amounted to €322 million. The surrender for the year was €8.8 million.

There were three chapters in last year's report on the accounts of the public services dealing with Revenue-related issues. The committee has already examined and reported on the chapter dealing with corporation tax.

Revenue is obliged under legislation to collect tax in a timely and efficient way, including the pursuit of any tax debt outstanding. As at 31 March 2017, the total value of gross tax debt outstanding was just under €2.3 billion. The value of outstanding debt has increased since 2015, reversing the downward trend of the previous five years. Revenue has attributed the increase in recent years to an increase in the value of tax debt outstanding under appeal and, therefore, not currently available for collection. Tax debt under appeal in March 2017 accounted for 48% of the total. Our analysis also found that €661 million or 29% of the total tax debt was classified as collectable, but it was not subject to either payment agreements or enforcement proceedings. About one third was recently identified as debt. Much of the remainder was at various stages of investigation or review but some debt was not under investigation.

Revenue wrote out a total of €211 million of debt in 2016 and active pursuit of that payment ceased. It included €1.6 million in around 512,000 cases where small balances, an average of just over €3 per case, were written out automatically. The remainder was higher value debt which was written out on a case by case basis, with more senior authorisation for higher debts written out. The most frequent reasons for such debt write-outs are liquidations and businesses ceasing to trade.

Chapter 22 deals with delays in transferring certain tax receipts to the Exchequer, which resulted in the accumulation of deposits in a Revenue holding account at the Central Bank at year end. The problem arose because the receipts for the two tax heads had not been matched with the appropriate taxpayer records in a timely way. Encashment tax is a standard rate income tax deduction made by banks and stock broking firms when they make or receive certain payments. Encashment tax receipts of just under €31 million which had accumulated in the period 2012 to 2016 remained unallocated to taxpayer records at the end of 2016.

Since the start of 2015, companies which qualify for a film tax credit are required to apply film withholding tax when they make certain payments to non-resident artists from outside the European Union and remit the amounts collected to Revenue. Accumulated film withholding tax receipts of €1 million remained unallocated to taxpayer records at the end of 2016. Revenue subsequently developed systems to ensure more timely allocation of such receipts to taxpayer records. The accumulated receipts of both taxes were allocated to customers records during 2017.

I call on Mr. Cody to make his opening statement.

Mr. Niall Cody

I thank the Chairman for giving me this opportunity to make a short opening statement. The focus of the meeting is on chapters 21 and 22 of the 2016 report of the Comptroller and Auditor General, entitled Tax Debt and Write Outs and Allocation of Encashment and Film Withholding Taxes, respectively. The meeting is also to consider the 2016 appropriation accounts, as well as the Revenue accounts for 2016 and 2017.

I will first address the findings of the Comptroller and Auditor General in the two chapters of his 2016 report, setting out some of the background for context, as well as providing an update on progress in implementing the recommendations made.

Revenue plays a vital role in the economy by collecting taxes and duties due to the State. In 2017 we collected a net €50.76 billion in taxes and duties. This is the seventh consecutive annual increase and was €2.8 billion more than in 2016. Provisional net tax collection to 31 May 2018 was €20.48 billion, which was €1.2 billion ahead of the figure for the same period last year. Revenue's core strategy is to maintain and improve timely voluntary compliance, tackle non-compliance and prevent the occurrence of tax debt. The maintenance of high rates of timely compliance, categorised by case size, in other words, by the amount of tax at risk in the event of late or non-payment, is a key measure of our performance and closely monitored. Table 1, attached to my opening statement, sets out the rates of timely compliance each year in the period from 2013 to date.

It is clear the overwhelming majority of taxpayers want to be and are voluntarily compliant. We acknowledge and value the important role of compliant taxpayers, businesses and their agents. One of our core targets in the next three years is to reduce debt levels by increasing the rate of timely compliance for all other cases from 89% to the mid-90s range. The Comptroller and Auditor General's 2016 report explains that tax debt falls into two main categories, namely, debt that is available to collect and debt that is not available to collect. The latter mianly comprises debt that is the subject of appeal to the Tax Appeals Commission and insolvency related debt.

The Comptroller and Auditor General's report reflects €2.29 billion in total tax debt outstanding as at 31 March 2017. Of this, €1.19 billion was not available for collection, while €1.1 billion was available for collection, equating to 1.68% of gross collection. By comparison, at the end of March 2018, total tax debt was down 4% to €2.2 billion. This includes €1.24 billion not available for collection and €958 million available for collection, representing 1.35% of gross collection. The committee will be interested to hear that the amount available for collection in 31 May 2018 was down to €845 million.

To safeguard tax receipts due to the Exchequer and in support of the compliant majority, Revenue intervenes early when tax payments and filing obligations are not met. Recognising that the more entrenched the debt becomes, the more difficult it is to resolve, our approach offers businesses and taxpayers an opportunity to deal with tax payment problems before they become unmanageable through early engagement. When viable businesses or taxpayers with temporary payment problems engage with us honestly, we work with them to reach an agreed solution. On 31 March 2017 there were 12,437 such businesses and taxpayers in phased payment arrangements in respect of €116 million in tax debt. At the end of March 2018, there were 10,833 phased payment arrangements in place, covering €99 million in tax debt.

The small minority of taxpayers who either refuse to engage with us or refuse to pay their tax are met with enforcement action. On 31 March 2017, €328 million of debt available for collection was subject to enforcement proceedings. During 2017 we referred more than 40,000 warrants to the sheriffs, while over 3,700 cases were referred for court recovery action, yielding a combined €181 million in debt collected.

In order to secure a tax debt, Revenue may place a notice of attachment on a third party. Attachment is an escalated option and normally used only where sheriff or solicitor enforcement has failed to secure payment of a debt or it is likely to be the only effective collection option. In 2017 we issued 6,440 notices of attachment, yielding €32 million for the Exchequer. During 2017 we successfully petitioned the courts to liquidate 34 defaulting companies, while 22 individuals were adjudicated bankrupt by the courts on foot of a Revenue petition and 273 personal insolvency arrangements were agreed .

The Comptroller and Auditor General reported that, at the end of March 2017, €661 million in debt available for collection was not the subject of either a payment agreement or enforcement action. While €390 million of this was more recent debt, €271 million was more than one year old, had no payment agreement in place and no enforcement action initiated. The Comptroller and Auditor General recommends that Revenue conducts an annual review of such debt.

I assure the committee that entrenched debt is always the subject of regular close oversight and, as at 31 May 2018, the recovery process has been finalised in respect of €148 million, or 55%, of that older debt. Of the remaining €123 million, 93.5%, or €115 million, is under active collection involving direct engagement between Revenue and the taxpayer, while the balance of €8 million is likely to conclude in write-off as uncollectible debt due to the circumstances of the taxpayers involved. As at 31 March 2018, the comparable figures to the €661 million and the €271 million are €569 million, down 14% and €221 million, down 18%.

Turning to debt write-out, it is inevitable that business failure or individual circumstances will sometimes make collection impossible. In such circumstances, Revenue may write out the debt and suspend all collection activity. Most debt write-out is on a case-by-case basis. Debt may be the subject of partial write out, where the taxpayer is able to make some payments towards the tax due but unable to pay the debt in full. Our write-out procedures and controls facilitate closer focus by Revenue on the debt with a reasonable prospect of collection. During 2017, Revenue wrote out €147 million in tax debt. This related mainly to insolvencies and ceased trades, and represented a reduction of 30% on the write out figure of €211 million in 2016.

The report of the Comptroller and Auditor General refers to receipts of almost €31 million in encashment tax in the period 2012 to 2016 and €1 million in film withholding tax in the period 2015 to 2016 that remained unallocated to taxpayer records at the end of 2016. Unallocated receipts are transferred daily to the Exchequer. The only exception to this occurs in December each year when the transfer is suspended to facilitate the end of year balancing of the Revenue account by its accountant general. Unallocated receipts are reported in the annual revenue account on the balance sheet as an asset and under the corresponding liability.

In June 2016, Revenue introduced RevPay, an online payment facility for all major tax liabilities, including encashment tax and film withholding tax. RevPay facilitates online payment by debit or credit card, or by using a single debit authority, and the taxpayer record is updated when the payment is made. This new facility reduces reliance on electronic funds transfer, EFT, as a payment method and over time will help to reduce the level of unallocated tax balances for all taxes. In 2017, Revenue completed a project which updated the customer record for all payments of encashment tax and film withholding tax, and there are currently no unallocated receipts of encashment tax or film withholding tax.

The report of the Comptroller and Auditor General recommends that systems should be quickly updated when new taxes are introduced, and this is in keeping with the objectives of Revenue. However, the prioritisation of IT development resources requires proportionate allocation. For example, PAYE modernisation and the introduction of real time PAYE reporting on 1 January 2019 is a priority project for Revenue this year. As such, smaller developments may not always be completed as quickly as would otherwise be the case. However, like film withholding tax and encashment tax, all required changes will be assessed and prioritised in the IT development schedule and integrated with other taxes at the earliest opportunity.

In keeping with the responsibility Revenue has to protect Exchequer funds, our resources are allocated based on risk. Our debt management framework prioritises early intervention and action to drive positive taxpayer behaviour. This gives the taxpaying public confidence that the system is fair, which, in turn, drives the very high rates of voluntary compliance. In 2017, Revenue introduced a new case segmentation and compliance tracking system, providing greater oversight, enhanced whole case management and flexibility in matching debt management resources to business needs. The new system is being implemented on a phased basis and all key elements are planned to be operational in early 2019. The system has contributed to strong compliance outcomes and will also provide enhanced online customer services, thereby supporting positive compliance behaviour.

I will be happy to answer any questions raised by the committee. In that context, I draw attention to my obligation to uphold taxpayer confidentiality, as provided for in section 851(a) of the Taxes Consolidation Act 1997 and which prevents me from commenting on the tax affairs of any individual or entity.

I thank Mr. Cody and his team for the presentation and for being here today. This morning, the Tax Appeals Commission, TAC, appeared before us, and to say that we were shocked by some of the things it said to us is putting it mildly. It said there is no external phone system, that nobody can ring out or ring in, and that the computers of directors have blown up. It reminded me of Manuel from "Fawlty Towers". However, as the Chairman pointed out this morning, this is serious business, not just for those who are collecting tax but for the wider public and society. Every time the witness appears before us, I state that we rely on tax revenue when we debate issues in both Houses every week, such as schools, hospitals and roads. The witness knows this better than anyone; it is reflected in his remarks.

This morning, Mr. O'Mahony from the TAC said that he felt he was being stymied. He also repeated the words of another person when he said that the TAC was being used as a back office by the Revenue. Is that a fair comment? Is there any truth to it? Is it fair to say that the TAC did not create the backlog but rather inherited it from the Revenue?

Mr. Niall Cody

I have spoken about the TAC and the issue relating to appeals at this committee previously. We have also appeared before the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach, to discuss the same issue. It is useful to put the issue into context. The TAC inherited a tax appeals system that was not fit for purpose. From 2009 or 2010, my predecessor made it one of her lifetime ambitions, as chairman of the Revenue Commissioners, to reform the tax appeal system. The previous Minister for Finance launched a consultation on tax appeals in, I believe, 2013. It was one of the few times that Revenue, as an office, actually made a submission to the Department of Finance. The TAC is independent of Revenue. The office which preceded it was also independent. We do not control the tax appeal system and we did not control it before the TAC was established. The legislation to deal with tax appeals was very limited before the Finance (Tax Appeals) Act 2015 was commenced. The TAC was then set up in 2016, and has been a major reform of the tax administration system. The TAC did not create the problem because there was a legacy system which did not have the proper system around it to provide for the listing of cases.

I pay great attention to proceedings of the Committee on Public Accounts, particularly when tax is being discussed. I watched the discussion this morning with the TAC. Some of the statements made, which Mr. O'Mahony did not make but which he reported, are based on a submission that was made to a recent consultation provided for by the TAC. I would be very wary of relying on submissions being made by what I see as vested interests. The legal framework for how the appeals system works is set out in legislation. We raise an assessment, or make a determination, or disallow a repayment. Those are formal processes that are then, by law, subject to appeal to the TAC. It is not a back office for the Revenue nor could it be.

In certain cases, there are issues around whether there are grounds for appeal. Sometimes, people make appeals without having the grounds to do so, and the TAC must rule on that matter as well. I do not in any way agree that we use the TAC as a back office. However, there are a number of issues with the process, and I am willing to set out for the committee the detail around the transition to the TAC. If the committee wants us to write-----

Mr. O'Mahony referred to the transfer as well. I cannot remember what phrase he used, but he mentioned that the transfer posed challenges. What kind of review took place before the transfer from Revenue to the TAC?

Mr. Niall Cody

The Finance (Tax Appeals) Act provided for a process, which we had to engage with, in respect of each taxpayer for whom an appeal was open. We had to write to each taxpayer and ask him or her a series of questions. Some appeals were in a legacy position and the taxpayers did not realise that they were still open. They had to fill out a questionnaire, the first question on which was whether the appeal was still in existence.

The legislation also provided for an opportunity for agreement between Revenue and the taxpayer about the issue. Subsequently, some practitioners said that they had believed they were going to get an opportunity to reach settlements, but I imagine what they thought was that, if the liability was X amount, we would settle for half of it. We cannot do that, however. We are obliged to interpret and apply the law. What the legislation provided was an opportunity for engagement to see whether there could be agreement around the interpretation of the law or the quantum of the liability. A good number of cases settled at that stage and did not proceed. However, the taxpayer might have replied that he or she was interested in the appeal continuing.

The cases were transferred in three tranches, with the details set out, a spreadsheet all the cases and the notes on each. In the period between the first and final tranches, there was a Supreme Court judgment on a case, which led to the settlement of approximately 100 follower cases. It was a tax planning case that we lost. Those cases had gone over in the first tranche, but they were then withdrawn because the assessments fell.

A process would have been followed at the end of November or December. I have many details on when the cases went over. The final set would have been transferred over and summarised in a final file transfer of all legacy cases-----

How many were transferred ultimately?

Mr. Niall Cody

Approximately 2,500 cases, involving 1,100 taxpayers. The difference between the two numbers is because, if there is an assessment of two years, for example, that is counted as two appeals even though there is only one taxpayer.

Regarding the commentary, and as if the legacy issues were not clear to everyone, the finance committee undertook pre-legislative scrutiny of the legislation before it was enacted. The Chairman mentioned a few points he recalled from that process. All of these figures were on the agenda. One of the reasons the Minister authorised up to five temporary appeal commissioners was the significant legacy issues. One temporary commissioner was appointed to join the two permanent commissioners. If the committee would find it useful, I can set all this out in detail. We cannot have an assessment that is then subject to appeal without us putting on an appeal stop to stop the collection. While the appeal is waiting to be heard, the money is not due. This morning, it was asked whether that interfered with someone's tax clearance certificate. If an assessment is under appeal, the person is entitled to a tax clearance certificate. The tax is not due. That is just a bit of information.

I wish to ask about something that the Chairman touched on this morning. What quantum of money is under appeal and what is the backlog? The head of the Irish Tax Institute said that it could take ten years for the backlog to be cleared. Should more be done at the Revenue stage to reach settlements before they go to appeal, given the ever-growing size of the logjam and the quantum of money involved?

Mr. Niall Cody

While a case is subject to appeal and before an appeal hearing is held, we are always open to engagement with the taxpayer. We do not stop the engagement process just because there is an appeal. The issue is that we have raised an assessment. If that is as a result of an intervention by us, for example, an audit, we will have engaged with the taxpayer and his or her agent and set out our reasons for believing there is a liability. Most of our audit settlements are reached without the raising of an assessment and the issuing of an appeal. If there is an additional liability, it is settled by agreement and, hopefully, paid. Where there is a disagreement at the end of an intervention, most appeal cases relate to an interpretation of the law whereas others relate to the quantum of the liability. For example, the best records not necessarily being kept was mentioned this morning. In such an instance, we would have assessed the liability and raised an assessment, which would then have been appealed. Those cases are less precise because, if there are not proper records, we make assumptions. However, we must have grounds to make an assessment. Before we do, there will be an engagement with the taxpayer. Assessments do not get entered lightly. Following the appeal, we are open to dealing with reasonable grounds for settling the case.

Mr. Cody has addressed a matter raised in the Comptroller and Auditor General's remarks, namely, managing debt, the amount of that debt, what is not collectable because of appeals and what is collectable. The Comptroller and Auditor General has pointed to a reversal in the trend and an increase in gross debt, more than a quarter of which is classified as collectable but has been subject to neither pay agreements nor enforcement proceedings. He also stated that €271 million, or 41% of the debt, was over one year old. Given the Comptroller and Auditor General's conclusions on the lack of payment agreements and enforcement proceedings on this collectable debt, why were they not in place in the first instance? Mr. Cody has addressed the question of the subsequent process.

Mr. Niall Cody

In any process, we work on the highest amounts of debt and engage with taxpayers. As to the figures set out by the Comptroller and Auditor General - I have since supplied the updated figure - approximately one third of the debt at any time is less than two months old and is in the process. Before we refer debt to enforcement, we go through a process. We do not refer cases to the sheriff as the first action. We engage with the taxpayer and try to arrive at a debt agreement.

Of the €271 million that was not subject to an enforcement and in respect of which there was no phased agreement, 55% has been recovered in the intervening year. The equivalent figure in March 2018 was €221 million, which is €50 million less than it was at the equivalent time in 2017. Obviously, €221 million is not the same. There is always a cycle of debt. There is a table that sets out some figures. We were looking at percentages. In 2010 the debt available for collection was just under €2.5 million and in 2015 and 2016 we were back at that level. However, as a percentage of total tax it is a significant reduction. In 2010 we collected €30 billion. In 2018 we are collecting €50 billion, so it is a much smaller proportion.

Mr. Cody mentioned 2010. Since then nearly €1.8 billion in tax has been written off, which averages out to €250 million a year. In any man's language, or in layman's language, that is a significant amount of money, notwithstanding the increases in tax revenue in the eight year period. In terms of getting that average down and reducing the proportion of tax collectable that is written off, does Mr. Cody have any assessment on whether that level of write-off is acceptable as a percentage of tax collected?

Mr. Niall Cody

The majority of debt is written off as a result of companies liquidating and businesses ceasing to trade.

That was understandable in the early part of this decade but, as things have gone on, has the average remained close to €250 million?

Mr. Niall Cody

No. There was a higher figure than normal up to March 2017. I was looking at it and the biggest proportion of it related to liquidations of companies in the property development and construction area arising from the collapse of the building industry. Sometimes these liquidations take that length of time. Some of them were unfortunately cases that had gone through a whole legal process of appeal, in which Revenue won at every level of appeal. When these cases were settled the companies went into liquidation, leaving substantial debts. That is one of the reasons we would be very keen to make the appeals process much speedier. Some cases enter the appeals process partly as a strategy to ensure that those involved do not end up paying the money at all. In the last figures the amount written off had decreased to €147 million. That reflects the recovering economy, but even in a recovering economy businesses will run into difficulty through no fault of the business itself. Business failure is not all down to people engaging in sharp practice. It is an inevitable part of the business cycle. As I mentioned in my opening remarks, we are really keen to improve the timeliness of compliance in order to prevent moneys owed becoming debt. On that increase in timeliness, our large cases have a 90% compliance rate in the month following the date of payment. Compliance in medium-sized cases, which is to say cases involving a tax liability of €200,000 to €500,000, is now up to 98%. Compliance in cases involving total liabilities of less than €200,000 has increased from 81% in 2009 to 89%. I would be really interested in having a target to improve that to approximately 95% over the next three years. The Collector General will not like me giving that figure.

Looking at that timeliness of compliance and at Revenue's audit teams and tackling non-compliance, which is something we have also touched on here before, I think of every ordinary person who looks at the defaulter list when it gets published in the newspapers. People sneak a look to see whether their neighbours are on it. The 2017 annual report shows that the yields from audits and interventions came to €500 million. Some €196 million of that came from audit and €295 million from intervention. I know the witnesses have done so before, but will they speak on the cost to Revenue of the audit process in comparison with the yields or the amounts brought in? Will they comment on the types of business audit teams would focus on? Does Revenue look at small operations at grassroots level with regard to back street operations or is the focus on larger operations?

Mr. Niall Cody

The Deputy is right. We have discussed our compliance programmes here a good few times. Over recent years we have probably become more sophisticated in that we now do fewer audits and more targeted risk-based interventions. We obviously retain the right and need to do a significant number of audits but we are increasingly targeting single issues where there are risk indicators based on third party information. I believe 2014 was the first year in which there was a comprehensive review of expenditure. We made a submission to the Minister for Public Expenditure and Reform around that comprehensive review of expenditure. In that submission we said that the return on investment from a fully-trained Revenue auditor is in the region of 10:1. In the last number of budgets and Estimates processes, the Minister has supported that case. While Deputy Michael Noonan was Minister he supported the case to Deputy Paschal Donohoe, who was Minister for Public Expenditure and Reform. The Minister is now supporting that case to himself. In the last four budgets we have been allocated additional resources but we have been given back a compliance dividend in the budget arithmetic. That is the process. We have our risk intelligence systems and carry out targeted risk-based audits. We have discussed the return on targeted risk-based audits as opposed to the random audit programme here. Approximately 70% of risk-based audits produce a yield compared to less than 30% of random audits. In random audits the average yield is much lower than in targeted audits.

What do yields of 30% and 70% mean?

Mr. Niall Cody

In 30% of random audits we carried out there was an additional yield.

That yield could have been big or small, could it?

Mr. Niall Cody

It could have been big or small but the vast majority were under €3,000.

There was a yield in 70% of the targeted audits.

Mr. Niall Cody

In the targeted audits there was a yield in 70% of cases. The average yield is something like €35,000 in our targeted audit programme.

Before I finish, chapter 22 refers to the film withholding tax. Will Mr. Cody explain this for people viewing? It is very interesting. It has been in legislation since 2015. I am interested because the Comptroller and Auditor General had issues with the delay in bringing film withholding tax receipts to account. Will Mr. Cody also speak to the actual issue itself? I am interested because it points to the strength of the film industry. Will Mr. Cody outline how the tax operations work out when Tom Cruise or someone else makes a film here?

Mr. Niall Cody

The film tax support system was substantially reformed in 2015. Section 481 of the Taxes Consolidation Act 1997 moved to a credit-based system for supporting the film industry as opposed to what was there before. The total amount claimable in tax credits for films under section 481 last year was in the region of €100 million. It is by far the biggest support to the film industry, much higher than the amount given in direct grant aid.

How does it work out in practical terms? If a foreign actor is-----

Mr. Niall Cody

Section 481 provides funding for the film production company. In conjunction with the reform of section 481, a process was brought which includes a film withholding tax on income paid to foreign artists involved in the film.

The film production company has to withhold an element of the fee paid to cover tax liabilities of the actor. That is the film withholding tax process here.

Is it 20%?

Mr. Niall Cody

I will give the rate before we are finished but it is not massive.

That is fine.

I have a quick question. On the €250 million in write-offs as a percentage of the total take, how do we compare internationally and with other European countries? I am following on from Deputy Cassells' questions.

Mr. Niall Cody

I was looking at comparisons around the tax collection and debt management system and I have spoken here before about the tax administration series, which is a process where the Organisation for Economic Co-operation and Development, OECD, collates information on tax administrations across 48 countries. I think it is that number at this stage. When the Comptroller and Auditor General looks at what we do, he also looks at the OECD. It is interesting. I was looking at the debt management process before I came here-----

Whether that is interesting or not is probably an opinion, I imagine. It is a heavy read.

Mr. Niall Cody

It is a fascinating read and it is available on the OECD website. It is very interesting. I have read it and I was looking at tables for collectable debt as a percentage for all the countries and the latest figure is for 2015. I hate to say this, but the lowest percentage of debt available for collection in all of the countries reported was Ireland.

Why does Mr. Cody hate to say it?

Mr. Niall Cody

I hate to say because next year it might not be. We are way below. In the context of the OECD, we are helping lead a project on debt management because of the processes we have. The figure for us is 1.5%. We are not the lowest when it comes to gross debt available for collection but we are very close to it. This also goes into the issues of write-off and the various powers that administrations have. Only I would say this, but it is very interesting reading for-----

For an accountant.

Mr. Niall Cody

For any member of the Committee of Public Accounts, I presume.

I will bring a copy home with me tonight.

I will get it for Christmas. I thank Mr. Cody.

I have a couple of questions on one or two points from Mr. Cody's opening statement. There were 40,000 warrants sent to the sheriff and 3,000 cases were referred to court for recovery action. Will Mr. Cody explain who goes where? Who goes to the sheriff and who goes to court warrant? Will he talk me through the two processes? How does the sheriff send a letter or land at somebody's door? What happens before that happens?

Mr. Niall Cody

Our debt management teams will look at cases and debt and at records about the business that we have in our systems. After a number of warnings and demands for payment, we then have to see what is the appropriate escalation. It will sometimes depend on the nature of the business, information the Office of the Collector General has, third-party information we have, and information from the local-----

Will Mr. Cody explain third-party information? Does that mean information is being gathered about every company from everyone else?

Mr. Niall Cody

We gather a lot of information and we get details from financial institutions. Issues such as short-term accommodation platforms and rental income have recently been in the public domain and we also get details of Government payments and suspicious transactions reports. There were 24,000 such reports from financial institutions on something they were unsure about, such as an unusual lodgement. We have a whole bank of information in our systems and we have it linked in and matched to the individual taxpayer. That will inform our debt management team of what might be the appropriate recommendation. We will then refer a debt to the sheriff.

As a result of the sheriff engaging with the taxpayer and where there are no assets or there is no engagement, some of the cases that have gone to the sheriff may be returned because there is not an appropriate method for the sheriff to follow up. That case could then go to one of the solicitors perhaps for a judgment mortgage on a property. Cases will be escalated to the appropriate intervention and then reviewed. In some of the figures not subject to any payment arrangement or enforcement action, it can be seen that they have gone back from enforcement action because nothing can be done. We then have to think about the necessary next step and sometimes that will be moving on to write-off.

Does attachment come into it then?

Mr. Niall Cody

Attachment comes in-----

How many attachments were there?

Mr. Niall Cody

About 6,000-----

I have a pertinent question for Mr. Cody.

Mr. Niall Cody

There were 6,440 attachments.

There were more of them than there were court recoveries. There were 3,700 of those.

Are we only talking about bodies corporates, companies-----

Mr. Niall Cody


Is it individuals as well?

Mr. Niall Cody

I am referring to sole traders. It is business taxpayers.

It is not PAYE people.

No, of course not.

Mr. Niall Cody

Very rarely would PAYE people have an outstanding debt like that. There is a facility to attach wages in rare circumstances.

I thank the witness.

That is fine. Following on from this morning's conversation with the Tax Appeals Commission, will Mr. Cody update us on that and the figure that the Office of the Comptroller and Auditor General gave us? I understand the gross amount in dispute to be at €1.8 billion now, and there is also the net amount. Will Mr. Cody give us the figures?

Mr. Niall Cody

The gross amount is about €1.8 billion and the amount that is stopped, that is not collected, is about €1.2 billion.

Mr. Niall Cody

One of things mentioned that is a bit confusing is that the Tax Appeals Commission witnesses referred to €1.6 billion being in dispute. Another €200 million, however, is in dispute at levels above the Tax Appeals Commission-----

Meaning that it has gone to the courts?

Mr. Niall Cody

It has gone to the higher courts.

It is in the courts. That €1.6 billion is in the Tax Appeals Commission. What is the net amount involved?

Mr. Niall Cody

It would probably be around €1 billion because it is €1.2 billion of the €1.8 billion.

It is €1.1 billion or so. Does that figure come from people who have paid some tax? Will Mr. Cody explain why that is? I imagine everyone had assumed up to now that €1.6 billion of tax was locked into the Tax Appeals Commission, but it is essentially only €1 billion plus. It is still a massive amount of money, but will Mr. Cody explain why there is the difference between the gross and net figures?

Mr. Niall Cody

There are several reasons. Some of the tax in dispute is a claim to a repayment. The taxpayer has made a claim to a repayment and we do not think a repayment is due. If he or she is successful, however, we will owe him or her money.

At what interest rate?

Mr. Niall Cody

It is-----

This morning we saw that it was 10% for the interest.

Mr. Niall Cody

No, the interest rate is less than 10%. I think it is about-----

Is it 8%?

Mr. Niall Cody

No, it is less than that.

What would the taxpayer have to pay?

Mr. Niall Cody

The current rates of interest are 8% and 10%. The 10% is on VAT and PAYE liabilities on behalf of their employees and 8% on income tax.

Or corporation tax. They are high enough rates at the moment. I refer to 10%.

Mr. Niall Cody

Leaving aside tax under appeal, the issue around the interest rate is late payment. The interest rate has to be more than an authorised overdraft rate, otherwise-----

It will be cheaper.

Mr. Niall Cody

-----we would become the bank of first resort.

I understand that.

Mr. Niall Cody

The rate of interest on credit cards is much higher.

Yes. It is 20% or something like that, I think.

Mr. Niall Cody

To respond to the question about the rate of interest, it was reduced in 2009 to the 8% and 10% rates.

I ask Mr. Cody to explain the difference between the net and the gross.

Mr. Niall Cody

Sometimes it could be a repayment that we say is not due. The second thing that can happen is that the taxpayer may pay the tax in dispute to stop the interest clock running. That is one element of it. If the taxpayer is then successful, he or she will be refunded the amount.

The interest.

Mr. Niall Cody

The final bit is-----

Is that interest subject to tax?

Mr. Niall Cody

That interest is not subject to tax.

It is a good return on one's money, then: owe Revenue money and one gets it back tax-free.

Mr. Niall Cody

It is one of the reasons why the rate of interest we pay is less than-----

I understand that.

Mr. Niall Cody

There was a time-----

Mr. Niall Cody

-----when there used to be interest repayable on preliminary tax and people used to lodge money with us and get a higher rate. That was all done away with.

Obviously, the Tax Appeals Commission has no information on this, but we are asking Revenue, if it does not have information on, for example, the 5,000 cases in there, to see whether it can work on them. That is all I can say at this stage. Revenue has an idea of the amount of tax that was due, as far as it was concerned, and that arrived in the appeals office. Is that right? Then, when the cases come back out, Revenue must know because the cases will come in and out. Revenue either pays or collects the tax. Mr. Cody is the person in receipt of the information. The Tax Appeals Commission has no knowledge of this. It does not handle the tax, as in what goes in and what percentage comes back out. In other words, if 700 cases were decided last year, as the Tax Appeals Commission said, Revenue knows about the 700 and knows what it was hoping to get from those 700 when they went in. How much did Revenue actually get out of those 700? We just want to see this. It is a mechanism of knowing how this operation is working. If everything that went in came back out as it was, what is the point? If there is a change, it tells us something has happened but no one seems to have any information on this. It is akin to the Social Welfare Appeals Office. In social welfare, if somebody disputes his or her allowance or an entitlement to something and goes to the appeals office, the appeals office is there to adjudicate on A and B and reject C and D and it sends the case to the Department of Employment Affairs and Social Protection to go back and work out the figure. The Social Welfare Appeals Office does not do the calculation. It sounds as if the Tax Appeals Commission is akin to that. It is up to Revenue to work out the figure, so Revenue has the information. Has Revenue done any exercise yet on what comes in and out of the appeals office?

Mr. Niall Cody

There are a couple of the things that were discussed today. The Tax Appeals Commission has issued 74 determinations. Of the 74 determinations, Revenue was successful in 58, the taxpayer was successful in 11, and the balance was split between-----

A bit of both.

Mr. Niall Cody

-----a bit of both. They are the only determinations that have issued. What happens with the other process is that within the period between the assessment and the listing of the appeal, it may be settled. Each of those cases will then be settled by agreement and the amounts will be reduced to reflect that, so in every case that is the subject of an appeal, when a decision is made, the assessment is either confirmed and released for collection-----

Or amended.

Mr. Niall Cody

-----or amended. Therefore, on a taxpayer record basis, the information would be there. To pull it together in a statistical report would be more complicated but we can certainly look at how a case can be tracked. However, all the records have to be amended, so the Tax Appeals Commission, TAC, would not be aware of what is paid or not because when it is determining a case, what it is determining is the actual total assessment amount. It would not know whether it had been paid or unpaid-----

I understand.

Mr. Niall Cody

-----but we would.

In other words, somebody has come up with the €1.6 billion figure, so Revenue has come up with the 5,000 cases adding up to €1.6 billion. The Tax Appeals Commission cannot come-----

Mr. Niall Cody

Yes, absolutely.

Revenue has the figure of what went in and knows the cases that came back out. I accept cases will be withdrawn and perhaps Revenue can have a line in its figures detailing cases withdrawn-----

Mr. Niall Cody

Absolutely. The Comptroller and Auditor General shows in that appeals stop figure that that tax adjusts every week, every day. We report on it on 31 March every year, but every year new cases come on and off. Absolutely, we can look at that.

There is movement in and out, but I ask Mr. Cody at least to look into the cases that were completed in the year in order that at least somebody has an idea of what happened. We have no idea what happens, really, when a case goes to the Tax Appeals Commission and Mr. Cody is the one with the information. The Tax Appeals Commission do not have that.

Mr. Niall Cody

We will-----

The next question is whether Revenue could consider the following system. Perhaps it might help reduce the flow of cases into appeals if Revenue had something in its notification giving people the right of a review because it is said there is not much of that. Again, in social protection, for example, if someone is not happy with the decision of a deciding officer, he or she can seek a review and it will be done by a different deciding officer. The turnaround is quick and it probably eliminates some unnecessary cases going to the Social Welfare Appeals Office. Is Mr. Cody with me?

Mr. Niall Cody

I am totally with the Chairman.

If Revenue had a way of resolving some of the cases internally without the need to go to the Tax Appeals Commission, it might ease the burden. What does Mr. Cody say to that?

Mr. Niall Cody

We have an internal and an external review process, as was mentioned. It is all available. We publish this. It is on our website. The tax practitioners do not like it because the results of the reviews show that Revenue is predominantly successful, and the numbers are quite small. Once the assessment is issued, the review process does not apply but before an assessment is entered there is a process, and we set out how many interventions we deal with. The number of appeals went up in the 2017 process. Some of this is accounted for by the fact that previously, when people used to write to us at assessment, they used to tell us they did not understand the process. This is lost a bit because of the formal appointment of the Tax Appeals Commission. We are open to exploring this. We made a submission to the Tax Appeals Commission asking whether there are ways we can tidy up some of these smaller cases. It is important to recognise that it is really a new office. There are procedures that we would definitely be interested in exploring to see how we could do them. We are open to anything that speeds up the process because the speedier it is resolved, the sooner we can collect the amount if it is due.

Mr. Cody gets my proposal.

I will raise a different topic. I am looking at Revenue's 2017 accounts of collection. Am I right in saying Revenue is involved in - I will I say it in layman's English - the loans for people in the fair deal scheme?

Mr. Niall Cody

We are.

For the nursing home support scheme there is €57 million. Did Revenue advance €57 million? Then there are the nursing home support scheme receipts, with the figure of €19 million. Did Revenue collect €19 million? I ask Mr. Cody to explain the two entries because people will probably be surprised to know about this. I am looking at pages 8 and 9 of Revenue's 2017 accounts. I ask Mr. Cody to explain this system to the public. Revenue approaches these people. Is it in scenarios where people defer their payments to later years? I ask Mr. Cody to explain what has happened because I know this gets lost between the HSE and the Department of Health, but Revenue seems to handle the actual transaction.

Mr. Niall Cody

Yes. I know that two weeks ago this issue was discussed here, and the Chairman wrote to us asking for information. Yesterday-----

Yes. We had Nursing Homes Ireland or somebody else in here-----

Mr. Niall Cody

Yes. Yesterday we sent the committee back a letter setting out-----

We will read it tomorrow. I ask Mr. Cody to give us the gist of it.

Mr. Niall Cody

It is fairly straightforward. Somebody applies for the fair deal scheme. The HSE deals with the applications, and if people have property, they can enter into essentially a loan scheme with the HSE.

We are the collection agent for the HSE once the period is finished. The legislation caps the amount of the repayment at 7.5% of the value of the property, capped at a three year maximum.

For a house?

Mr. Niall Cody

Yes, for a house. The maximum is 22.5% of the value of the house at the time the person goes into the nursing home. Once the person dies or leaves the nursing home process, the amount of the loan repayment is fixed by the HSE and referred to us for collection. The HSE has the facility to defer the process if, perhaps, a member of the family is still living in the house. In the period from November 2010, when the first case was referred to us, until March 2018, a total of 5,327 were referred to us at a loan repayment value of €101.6 million. Of those, 3,921 have been finalised, resulting in repayments of €69.8 million. In 632 cases, involving €16.3 million, that have been referred to us the amount is not yet due because there is a year from the date of death until the amount becomes due. These are people who died or left the nursing home within the year. There are 461 cases in which the HSE has advised us it has deferred collection of €7.7 million. In these cases the people involved did not apply for referral. The cases were referred to us for collection but the people involved then went back to the HSE and they had a reason for deferral. We mark them and do not follow them up. In 313 cases, we are looking at a liability of €7.9 million, and that is the debt available in these cases. Obviously it is a sensitive area and we deal with them in a very sensible and safe way. We sent the letter to the committee yesterday.

We will see it. I am sure we have it. We will get to read it in detail.

I have a quick issue which would have come up in the past. Is there a hotline where people report on their spouse or neighbour on these type of issues? It used to be a big thing one time. People used to ring social welfare offices. There was a report done. Perhaps Revenue had a system and it was probably a big issue. Is there much of this nowadays? Does Revenue have a line? Does this happen? If so, is there much collected through the line? I have heard it discussed on prior occasions. Is it still out there?

Mr. Niall Cody

We call them good citizen reports, and we are always open to good citizen reports. We do not operate a phone line. We say people can contact Revenue. We operate a phone line on drugs and cigarettes. On our website we have-----

What does Mr. Cody mean by drugs and cigarettes? Is it smuggling?

Mr. Niall Cody

Our anti-smuggling role on the illegal importation of drugs. With regard to people who have issues and who wish to make a good citizen report, on our site we have a reporting form that people can fill in and send in to us, in which----

With their email address? I am sure they do not want that.

Mr. Niall Cody

We are quite open to receiving good citizen reports, named or anonymous. If something reports something to us, obviously we assess the voracity of it. Obviously some people might be doing it for mischievous reasons. We look at any information we receive and compare it to information we have. If anybody reports to us, we do not report to them on the outcome-----

I understand that.

Mr. Niall Cody

-----of the investigation.

Does Mr. Cody know how many good citizen reports Revenue receives in a year?

Mr. Niall Cody

I do not have any figures here today.

Is it hundreds or thousands?

Mr. Niall Cody

I would say hundreds is far closer. It is not thousands. If there is no meaningful information-----

Mr. Niall Cody

It is a question of when we turn it from somebody sending in something stating, for example, that Niall Cody is up to no good, to stating that Niall Cody drives a van that appears at a market three times a week. We assess the information. There has always been debate. We have not gone down the line of using a phone.

That is fine. In other words, it is a minor issue from Revenue's perspective.

Are there many joint inspections between Revenue and the Department of Employment Affairs and Social Protection and-or the Garda with regard to people working while on social welfare, or not working on a job, and road tax with regard to green or red diesel? Are there many joint investigations-----

Mr. Niall Cody

We do-----

-----where Revenue goes onto a site where it believes people are not paying tax or are not properly recorded, or where people might be claiming a payment they should not be claiming? Does Revenue do this type of work?

Mr. Niall Cody

We do a lot of this activity. We have joint investigation units that work closely with the Department of Employment Affairs and Social Protection and the Workplace Relations Commission. We do multilateral and multi-agency visits to sites, and we also do a number of them on our own. We do approximately 5,000 site visits a year. In 2017, we did 5,201 and 2,186 of these were with other agencies, either the Workplace Relations Commission or the Department of Employment Affairs and Social Protection or both. The Garda is involved in some of them, depending on where we are. We do lots of work on the construction industry. We have spoken previously before the committee about subcontractors and employees. It is an active part of our job. Recently, I was chatting to somebody in the building industry who told me that Revenue was out on a job he was on the other day. He said he was delighted to see it. There will be times we will arrive at the front gate and somebody will go out the back. There are probably limited examples of this, but it does happen and it has always happened.

I wanted to ask about illegal sales of diesel but it has just been covered. With regard to tobacco, periodically we see good news stories, predominantly through An Garda Síochána tweeting and sending notices to the media about large-scale seizures, which are always very good to see. Customs and Excise plays a considerable role in this. In terms of small-scale tobacco sales in high street venues and markets, I want to focus on markets because I have a couple of markets in north county Dublin of very long standing. If they are not decades old they are possibly over 100 years old. They have been moved around a wee bit but they are still there and there is still quite a significant amount of illegal goods available. It is of huge concern to people in the constituency because the markets have been there for so long and it is a tradition. People do not like to break traditions just because some people are ruining it for others. It is a general observation as opposed to something specific about these locations. I know it is very common nationwide.

Mr. Niall Cody

We are very active on tobacco. There are a couple of things we try to do with regard to illicit tobacco. The big seizures are at point of importation and we seize a big container.

Generally, when it involves tobacco, Revenue leads. In certain cases we are supported by the Garda, depending on who is involved. We seize significant quantities of tobacco. In 2017, it was 34.2 million cigarettes and this year to date, it was 27 million. In 2016 it was 44.5 million cigarettes and in 2015 it was 68 million. Those are mostly large consignments. We also try to disrupt the supply chain within the market. That is much more difficult because one will never catch someone with thousands of cigarettes. They might have a few sleeves of 200. We are regularly at all the markets across the country. There are challenges, as the stock of cigarettes will often be somewhere down the road and be stocked up.

How far into the supply chain does Revenue go, and with whom?

Mr. Niall Cody

The legitimate supply chain is covered by our tobacco stamps. The regular wholesale retail trade is a controlled process, subject to excise. Our investigation into the illegitimate supply chain is based on intelligence and sometimes random sampling of retail outlets. Whether it is markets or retail outlets, we will go in and see if they are holding unstamped tobacco products out for sale.

Maybe I should refine my question. Of the large scale shipments that it captures at ports, does Revenue go back to the country of source? Is it looking at the haulage firms and whatever was supposed to be in the container according to the manifest? Is it engaging with Europol, Interpol and all those agencies?

Mr. Niall Cody

All that is integrated. On the large operations, we work closely with the Garda, the joint agency task force, Her Majesty's Revenue and Customs and the PSNI. We work closely with the European Anti-Fraud Office, OLAF, which part-funds our major scanners. If we come across new methodologies of smuggling or the involvement of international crime gangs or international hauliers, we feed that intelligence to our sister agencies across Europe and further afield, where necessary.

Does Mr. Cody know or have figures to hand as to whether there is any consistency on the sources of the large product seizures in recent years? Is it all coming in through the UK or through Holland, France or elsewhere?

Mr. Niall Cody

I do not have them to hand. One thing that happens with trends is that they change as Revenue and customs agencies are successful at countering and intelligence. Some of the things that are happening in Europe have had unexpected impacts on illegal trade. The migrant crisis and tightening of borders have had a significant disruptive effect on tobacco. The most interesting thing to happen in 2018 was the discovery of the illicit, illegal cigarette factory in County Louth in March, which we seized. We discovered 23.5 million cigarettes which were being manufactured in what one could describe as a hay shed. The Deputy may have seen some pictures of that. We found some 71 tonnes of tobacco from which 71 million cigarettes could be produced. That was a big operation, which is now before the courts. That was the first illegal cigarette plant found in the State, but also nearly the first in western Europe. It was an international operation. The cigarettes would have been due for export, as well as for domestic service.

On various forms of diesel and potential lost revenue, how many high street retailers in recent years have been apprehended selling illegal diesel, or petrol, although the latter is very hard to sell?

Mr. Niall Cody

Because of the existence of marked gas oil, green here and red in Northern Ireland, diesel gets laundered and put into the supply chain. It was a really significant problem from 2012 on because there were changes to the system of sulphur content. The diesel was indistinguishable once laundered. The Office of the Comptroller and Auditor General did a report last year on mineral oil and the work Revenue has done there. There has been a significant legislative process that culminated in the introduction of the new marker in conjunction with Her Majesty's Revenue and Customs. The level of retail traders engaged in selling illegal diesel has reduced significantly. In 2016, we closed nine and in 2017 we closed four but around the middle of the decade, multiples of those figures were closed down. The proportion of the vehicle market in diesel has increased anyway, but we have examined the additional revenue as a result of our work on fuel laundering and it has been really successful. While I would not be complacent, the levels of sludge found and reported by local authorities, which was a very serious problem four or five years ago, have gone down significantly. We are very careful about that process.

I do not think any of the dumping sites were in my constituency but they were very nearby. I recall them being in Meath or Louth or something like that.

This question relates more to process than to revenue but is it practical or feasible for such a firm to mix 10% of the capacity of whatever their forecourt tank is with an illicit product? Is it detectable? I know there are ISO standards and so on, but my question is are they really? In the past four or five years, rather than more recently, I received many complaints about suspected green diesel. About a decade ago, a former Fingal councillor's car was destroyed by green diesel. I wonder if it is prevalent. Is it as simple as watering it down to the point where it is not detectable?

Mr. Niall Cody

There are now two markers. There is the dye, green in our case and red in the North, and then the Accutrace marker, which is a detectable chemical marker.

The level of detection is quite sophisticated and the State Laboratory does all of the sampling for us, if a case is for criminal prosecution. The levels will be detectable if road diesel is diluted with washed green or orange diesel. Trace elements will be detectable and the case will be subject to prosecution. The Comptroller and Auditor General made a recommendation in the chapter on the issue - the random sampling of retailers across the board. We have done this and had no detections. This is not to say it cannot get into the supply chain by direct hauliers or direct couriers, for which we will still check. When we make interventions in businesses that have significant haulage interests, we look to make sure they are buying enough legitimately sourced goods from legitimate traders. We pay a lot of attention to this area. If members have details they wish to provide for us of retailers about whom they may have doubts, there is a good citizen report on our website.

Mr. Niall Cody

We are all good citizens.

The individual who contacts me most frequently about the matter is a regular communicator with the Revenue Commissioners. I know this for a fact because he has reams of letters to many organisations, including source suppliers and so on. I am confident that he has been on to Revenue.

Mr. Niall Cody

The good citizen report is important with regard to legitimate trade and parts of the legitimate supply chain. If a business deals with a range of customers who suddenly disappear and do not buy from it anymore, generally it will know the customers who are buying from it. We regularly meet trade groups and are told about the generality of shadow economy activity. One of the things we have said, through the hidden economy monitoring group for trade interests, is that if we are given specific details, we will follow up on each of them. It is not enough to say stuff is being sold somewhere down the road; we need hard facts. Legitimate traders generally knows what is going on in their local business community.

How many cases in the sphere of illicit diesel have Revenue taken to court? Does Mr. Cody have figures for recent years? How many cases have been successful?

Mr. Niall Cody

I have a range of figures. In 2017 we had four convictions for indictable mineral oil offences, which are serious. There were two prison sentences, one suspended prison sentence and one for community service. There was one summary conviction for mineral oil offences. Two mineral oil trader licences were revoked. For summary convictions for use of marked diesel, there were 212 fines, totalling €566,000.

Does that relate to the use of marked diesel for road use? Is there a minimum fine?

Mr. Niall Cody

In 2017 there were 212 fines, totalling €566,000. In 2016 there were 187 fines, totalling €493,000. These cases are published in our quarterly publication on a Part 2 list of tax defaulters, the settlements of which are not covered in the newspapers. There have also been 554 compromise settlements for the use of marked oil. This occurs when Revenue has made a settlement in lieu of prosecution. A total of €641,930 in compromise settlements was paid to the Revenue Commissioners. We publish the details in our annual report and headline results every year.

I thank Mr. Cody.

I have two last questions for Mr. Cody about the published settlements. I may have already asked this question, but it was a few years ago. It comes as a surprise to a lot of people when we read the tax settlements published in The Sunday Business Post and realise the money has not necessarily been paid. It is a surprise to a lot of people who assume Revenue has collected the money. I do not expect Mr. Cody to have the details, but for the settlements published for last year, how much did Revenue actually collect? If he has the information, I will take the headline figure, but it would be a useful chart for the committee to receive. I believe 99% of the public assume that if a person's name is in the newspapers having been caught for a sum of €300,000, he or she has actually paid it. The committee has previously established that this is not necessarily the case. Revenue may just have got a judgment against the person concerned and not collected the money. Does Mr. Cody have any information available on the matter?

Mr. Niall Cody

I do. In 2017 we published 289 cases.

What is the minimum figure due?

Mr. Niall Cody

I believe it was €35,000. There were 289 cases, in 91 cases of which there was some element of the amount unpaid. At the end of the period there was a total unpaid amount of €25.96 million

What was the total amount due in the 289 cases?

Mr. Niall Cody

I do not have the total figure for the 289 cases, but for the 91 cases, a sum of €53 million was published, of which some €26 million was not paid.

A sum of €53 million was published and-----

Mr. Niall Cody

Some €26 million was unpaid.

Therefore, only half of the money was collected.

Mr. Niall Cody

In the 91 cases about half of the money was unpaid. Of the 289 cases, nearly 200 had paid in full. I do not have the exact figure readily to hand.

Perhaps Mr. Cody might supply to the committee the total figure for last year.

Mr. Niall Cody

Yes. The legislation changed in 2012 to provide for publication. Prior to 2012 Revenue could not publish a case if a person did not pay the money. It was a situation where a case would not be published if the person concerned did not pay.

That was a great system.

Mr. Niall Cody

That is why we changed it. Some people may not have paid the full amount. They could game the system by paying nearly the full amount.

That is why there an understanding of the list that people had paid. Historically, if a person paid in full, it meant he or she had been caught. He or she was on the list.

Mr. Niall Cody

Yes, if he or she had paid in full. Revenue looked to have the legislation changed, especially when it came to the downturn when money was problematic. We were in a situation where a case could neither be settled, finished nor published. The legislation was changed in the Finance Act 2016. It has been changed again since. On the list for 2017, for example, we show the amount paid and the amount unpaid.

The committee raised that point this year.

Mr. Niall Cody

The list now shows the unpaid amounts also.

They are not published in the newspapers. Revenue has the list in its documentation.

Mr. Niall Cody

When the list is reproduced, some newspapers show it. This has happened in the last year, prior to which one could not have said a Mr. Niall Cody, for example, had not paid some of his tax, but now we actually publish the information.

Perhaps Mr. Cody might send the figures to the committee.

From 1 January 2019 the PAYE modernisation system will be introduced. People will not receive their documentation in the post; rather, they will have to log on to their computers to find out their details such as tax credits and so on. Revenue will probably conduct a big campaign ahead of its introduction to explain it, or perhaps people might only find out about it when they have a problem and so on. Will Mr. Cody, please, explain briefly at what stage Revenue is with the project and in a nutshell what it is about?

Mr. Niall Cody

It is about moving towards the integration of an employer's payroll system with reporting pay and tax details to the Revenue Commissioners.

On a weekly basis.

Mr. Niall Cody

As people are paid their wages. If one is paid fortnightly, as I am, Revenue's payroll system will report pay and tax and necessary details to us.

That really puts the Revenue Commissioners on top of knowing the PAYE and USC liability of every employer very quickly.

Mr. Niall Cody


It will probably help a little with collection.

Mr. Niall Cody

I spoke about hoping to move to mid-1990s levels in regard to employers-----

Mr. Niall Cody

When we report on 31 March, one reason there is a significant amount under two years is that the P35 is filed in mid-February. Usually with the P35, there is a balancing statement - a balancing liability when things are fixed up at the end of the year. It is one of the periods in which we have a spike in tax due. After 2019, that system will be gone. We will have a real-time feed and I hope we will be collecting the right amount as it falls due. The payment dates for the employer are still based on a monthly arrangement. They are still the same, but the reporting arrangement is different. We are engaged in a significant information campaign. We are out and about with employers and holding seminars, but the key stakeholders are many of the payroll providers - software providers - and they have been actively involved in the project for the past two years, developing their systems in conjunction with us.

Mr. Cody expects it to work smoothly enough. Is it similar to the UK system?

Mr. Niall Cody

It has similarities with the UK system, but, unlike that system, ours will be such that from the middle of next year we will be populating the employees' tax records with up-to-date information. Essentially, we will be getting rid of P60s, P45s, P35s and P30s. The information will all be available online. It is a really significant modernisation of the system which provides many opportunities to help people. Even when seeking mortgage approval, one will be able to give up-to-date real-time access to one's payslip.

In other words, Mr. Cody is telling me the next P60 I receive, early next year, will be my last. I hope it will not be a P45.

Mr. Niall Cody


The last P60 to be issued will be an historic document.

Mr. Niall Cody

The P60 is getting its P45 which is also getting its P45.

On that note, we will give ourselves a break - I will not call it a P45 - for the rest of the evening.

Mr. Niall Cody

I said I would give the Chairman the film withholding tax rate. It is 20%.

I only guessed it might be.

I thank our witnesses from the Office of the Revenue Commissioners and the Department of Finance. I also thank the Comptroller and Auditor General and his staff. We will be meeting next week in private session, possibly on Tuesday or Wednesday, to deal with our own periodic report. We will send word out. This day week, 5 July, we will be meeting representatives of the Department of Health and the HSE to consider the Department's appropriation accounts for 2016, Vote 38, and the HSE's financial statement for 2017.

The witness withdrew.
The committee adjourned at 4.15 p.m. until 9 a.m. on Thursday, 5 July 2018.