The next chapter in the report relates to the Department of Public Expenditure and Reform. We had a discussion on the new single public service pension scheme. We were critical of the fact that the Department had not carried out its work before the legislation was passed, and it has accepted that completely. The Department says that, due to other pressures, it did not have the resources available to support the implementation of the legislation. That is dreadful. It goes on to say that the Department undertook a comprehensive analysis of the public service bodies to be included in the legislation in 2018, which was two years after the legislation was passed. It says it submitted a report to the Committee of Public Accounts in February 2019 and the only outstanding issue was the Dental Council of Ireland, which we dealt with last week. The Department has given us a complete update and that matter is now closed, but is only closed because of the committee's close scrutiny of the particular issue. The Comptroller and Auditor General had highlighted that, so at least that topic is now fully closed and being dealt with as a result of our vigilance on the matter.
The next item also deals with the single pension scheme. We recommended that consideration be given to investing these pension funds in a fund similar to the National Pensions Reserve Fund. It fully accepts this recommendation but the Department says it is a complex matter and would be a major change in approach for funding public sector pensions as contributions under the single pension public pension scheme are slightly different from the old arrangement. The Department further states:
Given the complexity of the matter, a substantial time and resource investment is required in order to ensure that the correct approach is arrived at. Accordingly, while this matter is progressing, it will not be concluded in the short term. The Department can update the PAC on progress, as required.
If somebody wants to come forward with amending legislation on how that fund is invested, that would be a matter for any Member of the House or of this committee, but not for the Committee of Public Accounts itself. We have highlighted the issue and the matter is now being examined.
The next item relates to leasing, and again to the Miesian Plaza. We were not satisfied that the balance between leasing properties and the acquisition of properties was correct and it accepts that fully. It has commenced a review, and has conducted a detailed assessment on two major projects recently. That recommendation is accepted by the Department, but we again have to follow its implementation.
The next issue refers to the credibility of the annual Estimates. We recommended that the Department of Public Expenditure and Reform should work closely with Departments with a history of requesting Supplementary Estimates, in order to ensure the Estimates presented to the Oireachtas are accurate from the outset. It notes that and hears what we are saying but does not want to accept that it presented inaccurate Estimates. I did not expect it to accept that, though we believe it.
It is saying "We hear what you say." We will ask for information on what is stated about the Department of Health because the Department of Health requires the biggest Supplementary Estimates each year. The bottom of page 9 states:
The creation of a new oversight group chaired by the Department of Public Expenditure and reform, to monitor spending and act as an early warning mechanism [in respect of the Department of Health Vote].
Monthly spending reports from Health to be submitted to the Cabinet Committee on Health each month, and
A quarterly health financial management memo to Government, to update Government on the overall health position.
I note the Government is voicing concern over health expenditure overruns at a much earlier stage in the year than was historically the case. I propose writing to the Department of Public Expenditure and Reform asking it to give us the background to this oversight group on the health Vote - who is on it; who chairs it and what its instructions are. I am pleased to see it is there, but this is the first I had heard of it and we now see it in print. Let us find out more about it.
On the Estimates, we recommended "that the Department of Public Expenditure and Reform takes all necessary steps to ensure that the Estimates are approved by the Oireachtas before the beginning of the calendar year to which they relate".
The letter notes this recommendation and states that the Estimates for 2019 were "published before the end of 2018 [on] 19 December 2018", which is fine. That is only the first step of the process, however. There is then the Revised Estimates process, which can include extra matters. They were published normally in February and go on for debate. We need to get the exact dates of when the Revised Estimates were published for the past two or three years, what the plan for next year is, and when the debate on the Revised Estimate can take place in the Oireachtas committee. While the Estimates are published early on, there is no Dáil debate on them until several months into the year when the Revised Estimates come out. The European Union has set timetables. We will ask for more specific details on the timetable for discussing and approving the Estimates, including the Revised Estimates by the Oireachtas.
On the Higher Education Authority we recommended "that, when drafting Higher Education Authority legislation, the Department of Education and Skills ensures that the Higher Education Authority is granted sufficient powers to allow it to provide effective oversight of the third level sector". That came as a result of the investigation into Waterford Institute of Technology. It fully accepted the recommendation and gave two pages of detailed response, referring to a number of changes to legislation. It states:
Currently, a Memorandum for Government is being drafted with the aim of submitting this for approval in June 2019. This Memorandum will seek approval for:
- the updating of the Higher Education Act, 1971 and the broad policy approach being adopted,
- the inclusion of a review power for the HEA in the legislation,
- the publication of the consultation report.
That is important. We highlighted practical issues over what is happening with spending. Here we find the legislation was deficient in the first place and it is now being corrected. Quite a bit of what we are uncovering in terms of following the taxpayers' money has its problems in defective or inadequate legislation in the first place. It is not for the Committee of Public Accounts to draft the legislation; our job is to highlight it. It is up to the Oireachtas, any Member of the Oireachtas or the Government to act accordingly. We have taken it as far as we can.
The next issue also relates to the HEA. We recommended "that the governing bodies of third level institutions acquire and maintain the appropriate skills" etc. It fully accepts that there should be an appropriate skills mix. The governing bodies should identify gaps themselves. There should be an annual self-assessment of the board. Under the Technological Universities Act 2018, greater emphasis has been given to this issue. This matter needs to be included in the proposed Higher Education Authority legislation. Hopefully it will be.
We come to the Revenue Commissioners. We had a recommendation for reducing the threshold at which they deem people to be high-wealth individuals for investigation. They fully accept the recommendation. We had a good outcome last week. They wrote to us last week saying they had done it and increased the number of cases now under this as a result of reducing the threshold from €50 million to €20 million for high-wealth individuals to be examined by the large cases division. There were 200 cases involved. This has resulted in another 475 being added, which is a very big increase. That is now being implemented and we dealt with that in correspondence last week. That is a very good outcome.
We recommended "that Revenue investigates the possibility of developing guidelines regarding out of court settlements for tax avoidance schemes in order to ensure a level of consistency in reaching such settlements in future". We discussed this matter. It is in our report, so people will remember what we are talking about. The Revenue Commissioners stated that in the majority of cases, like the ones we are talking about, there were out-of-court settlements and they reached settlements of €500 million in those cases. Maybe we did not delve into the detail. They say they have detailed compliance notes on that. The letter states that Chapter 8 of Revenue's "Code of Practice for Revenue Audit and Other Compliance Interventions" deals with that. We are pleased to see that.
On high-wealth individuals, we recommended that "consideration is given to requiring High Wealth Individuals to provide Revenue with an annual statement of assets held in Ireland". It states this would require a legislative change. Here we are. We highlighted a legitimate issue. When we delve into our stuff, again the problem is that the legislation does not cover it. It is not the Revenue's fault. I am highlighting that if any Member wants to deal with that topic by way of legislation, he or she should feel free to do so. It accepts the reality that it is a legislative issue that needs to be dealt with.
The next recommendation for the Revenue Commissioners dealt with the tobacco trade and the very low level of fines, which we felt were not a deterrent. They accept the recommendation, which is good. The response states, "The imposition of these penalties in individual cases is a matter for the Courts." Tax represents 80% of the cost of a packet of cigarettes. The Revenue Commissioners raise €1.4 billion in tax from tobacco products each year. They estimate that 13% of all cigarettes smoked in Ireland are illegal. Revenue estimates the loss to the taxpayer at approximately €229 million per annum. Between January and October of last year when we were doing our work, in the cases they prosecuted they followed up about €23 million worth of cases, which meant that 93% of their estimate of what was illegal was not detected or followed up on. Fines were issued for €140,000, which is fairly abysmal. They say it is up to the judges and the fines will be increased. I feel there is not sufficient detection of the issue if there is that level of revenue loss.
The next item also related to the Revenue Commissioners. We recommended "that the Minister considers whether separate identification of trading losses forward and capital allowances can be provided for in future legislation". Under the legislation, any business that has losses from a previous year can carry it forward against future profits to reduce its taxable profits in a future year. Most people accept that if a company has a trading loss, that is fair enough. Sometimes, if the losses are as a result of capital allowances relating to capital expenditure, we proposed that these be identified separately so that we can get a measure of all these losses forward. There is a big gap in knowing how the losses forward are made up.
The Minister noted the recommendations but under the scheme of corporation tax, they do not actually do the breakdown. The letter stated, "The amount of any trading losses... is not broken down between that which relates to capital allowances and that which relates to other trading expenses". That is exactly what we asked them to do. The Minister for Finance looked at this issue in respect of the banks, which is relevant to all corporate entities, in a report published in 2018. Again people might want to draft legislation on the matter; it cannot be done without legislation. The Revenue Commissioners made it clear that they have no legal authority to seek the information and the legislation does not require it.
If people feel it is a matter that needs to be dealt with by legislation, they should do so.