Central Fund Related Accounts - Revenue Account 2019

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

We are joined by the Comptroller and Auditor General, Mr. Seamus McCarthy, a permanent witness to the committee. I remind all those in attendance to ensure their mobile phones are on silent mode or switched off.

Today we will engage with officials from the Office of the Revenue Commissioners. The matters for examination are, from the Comptroller and Auditor General appropriation accounts 2019, Vote 9 - Office of the Revenue Commissioners, and from the Central Fund related accounts, Revenue Account 2019.

To assist us in our examination of the matters before us today, and with regard to public health guidelines, we are joined from the Revenue Commissioners by Mr. Niall Cody, Cathaoirleach of the Revenue Commissioners; Brian Ó Baoill, accountant general; and Ms Angela O’Gorman, principal officer. They are all very welcome. I thank Mr. Cody and his staff for the briefing material they have provided for this meeting.

Witnesses are protected by absolute privilege in respect of the presentation they make to the committee. This means that they have an absolute defence against any defamation action for anything they say at the meeting. However, witnesses are expected not to abuse this privilege and it is my duty as Chair to ensure that this privilege is not abused. Therefore, if witnesses' statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that witnesses comply with any such direction. While we expect witnesses to answer questions asked by the committee clearly and frankly, witnesses can and should expect to be treated fairly and with respect and consideration at all times, in accordance with the witness protocol.

Members are reminded of the provisions within Standing Order 218 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 policies. Members are also reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.

I ask that members and witnesses remove their masks when speaking to ensure they can be heard properly, and that when members are leaving and taking their seats, they sanitise the area.

I now call on the Comptroller and Auditor General, Mr. Seamus McCarthy, for his opening statement.

Mr. Seamus McCarthy

The Office of the Revenue Commissioners is responsible for the collection of taxes and a range of other levies and charges, and for their prompt transfer, either to the Central Fund of the Exchequer, or to other fund accounts or public bodies, as provided for by law. The Commissioners account for these receipts and transfers in the annual Revenue account. The account for 2019 was certified by me on 17 April 2020 and received a clear audit opinion.

Total receipts into the Revenue account in 2019 amounted to over €84.2 billion. Revenue made repayments to taxpayers totalling €10.1 billion in the year. As a result, the net receipts brought to account in 2019 amounted to just over €74.1 billion.

Tax receipts payable to the Central Fund amounted to a net €58.3 billion in 2019. This represented an increase of approximately €3.7 billion or 7%, compared with 2018. Note 1 to the account provides a breakdown of the receipts for the main tax headings. Other than capital acquisition tax, which experienced a very marginal decrease, all tax receipts increased year on year when compared with 2018.

Non-Exchequer receipts increased from a net €14 billion in 2018 to €15.8 billion in 2019, an increase of 12.9% year on year. Note 2 to the account presents an analysis of these receipts. This indicates that pay related social insurance, PRSI, receipts accounted for €12.3 billion of the total in 2019. These receipts are payable to the Social Insurance Fund.

Also included in non-Exchequer receipts was €2 billion received under the VAT mini one-stop-shop, MOSS, scheme in 2019. This was up 43% from the €1.4 billion collected in 2018. The receipts represent amounts collected on behalf of other EU member states under place-of-supply VAT rules in place since 2015. These apply to businesses registered for VAT MOSS in Ireland which provide telecommunications, broadcasting or electronically supplied services to consumers across borders. VAT MOSS receipts collected by revenue authorities in other member states relevant to services delivered to Irish residents are disclosed in the note on tax receipts.

Revenue’s administration and operational expenses are charged to Vote 9 - Office of the Revenue Commissioners, rather than to the Revenue account. The Vote had total gross expenditure of €449 million in 2019. Salaries totalling €319 million continue to be the largest element of spend for Revenue.

The initial estimate for Revenue for 2019 was €446 million. Subsequently, a Supplementary Estimate of €4.1 million was provided to meet certain costs incurred by the Office of Public Works on behalf of Revenue, relating to new infrastructure it required at Dublin Port, Rosslare Europort and Dublin Airport in preparation for Brexit.

Appropriations-in-aid of the Vote for 2019 totalled €70.5 million. Over half of this is accounted for by payments received in respect of the agency service provided by Revenue to the Department of Employment Affairs and Social Protection related to the collection and pay-over of PRSI receipts.

Net expenditure under the Vote amounted to €378.5 million, and the surrender for the year was €4.2 million.

In my report on the appropriation account for 2019, I draw attention to non-compliance with procurement rules. This is disclosed by the Accounting Officer in the statement on internal financial control.

I thank Mr. McCarthy. I now call on Mr. Cody to give his opening statement.

Mr. Niall Cody

I thank the Chairman for the opportunity to make my opening statement.

I understand that today’s meeting is to focus on the 2019 appropriation account and the account of the receipt of revenue of the State. I understand that we are not going to deal with Chapter 14 on tax appeals today. As requested, I will keep my comments brief.

I am accompanied today by Brian Boyle, accountant general and Angela O’Gorman, Comptroller and Auditor General and committee liaison.

In the context of today’s discussions, I draw the committee’s attention to section 851A of the Taxes Consolidation Act 1997 and my obligation to uphold taxpayer confidentiality.

In relation to the Revenue account, as the Comptroller and Auditor General has highlighted the key receipts, in the interest of time I will move on to the appropriation account. Revenue’s estimate for 2019 was originally €446 million. A Supplementary Estimate of €4.1 million was obtained for Brexit infrastructure. The final Estimate was €382.7 million net of appropriations-in-aid. The net outturn was €378.5 million.

Pay and associated costs accounted for €319.1 million of the gross outturn of €449.1 million. There were 6,959 people working in Revenue equivalent to 6,708 full-time equivalents at the end of 2019. In 2019, we continued to invest in ICT systems, which was the second largest item of expenditure at €57.4 million.

In 2019, we delivered a range of measures to support voluntary compliance and implemented a robust response to non-compliance.

We had over 4.2 million customer contacts and supported compliance for 3.2 million employments, 1 million businesses and 1.4 million property owners. We continued to enhance and improve our range of online services, improving taxpayer experience while minimising the risk of non-compliance.

Revenue continued to engage in extensive and detailed Brexit preparedness and contingency planning. Our planning is strongly focused on facilitating legitimate trade, enhancing competitiveness and supporting business while managing compliance risks.

PAYE modernisation delivered the most significant reform of the PAYE system since it was introduced in 1960. Real-time payroll information facilitates the collection of the right tax at the right time and the enhancement of online services to PAYE taxpayers.

On the tax compliance front, we carried out over 566,000 compliance interventions, yielding €548 million in tax, interest and penalties, in 2019.

The Covid-19 pandemic presents very significant challenges for the economy, both for businesses and individual workers. Our investment in real-time payroll reporting meant that we were able to quickly re-engineer our PAYE system in conjunction with the payroll software sector to support employers and employees. The temporary wage subsidy scheme, TWSS, provided more than €2.8 billion in support to 66,500 employers in respect of 664,000 employees between 26 March and 31 August. The employment wage subsidy scheme, EWSS, replaced the TWSS from 1 September and to date over €795 million has been paid to over 38,000 eligible employers in respect of 410,000 employees. Businesses can now also register for the Covid restrictions support scheme, CRSS, through the Revenue online service, and over 10,000 businesses have applied. The first payments were claimed through the scheme on Tuesday and well over €20 million will be paid out by the end of this week. The debt warehousing scheme has parked €2.2 billion in tax arrears on behalf of businesses suffering a Covid-19-related trading downturn.

The committee has also expressed an interest in bogus self-employment and I have provided information in advance of this meeting.

Last March, the country faced into an unprecedented and uncertain future. We responded immediately to support compliant businesses through the uncertain environment. We also looked beyond our mission, which is "to serve the community by fairly and efficiently collecting taxes and duties and implementing customs controls", to see how we could use our operational know-how, technology and systems to support tax-compliant businesses. In conjunction with our colleagues in the Departments of Finance, Public Expenditure and Reform, Social Protection and others we developed legislative and technology solutions and implemented schemes within the tightest of timeframes.

We also supported the HSE and the Department of Health with contact tracing and data analytics assistance, including the temporary deployment of resources. We have reprioritised our work and shifted to new ways of working. Our secure and sophisticated ICT framework allowed us to quickly pivot to remote working and today we have over 5,000 staff working from home dealing with taxpayers, taking and making telephone calls about a wide variety of issues such as Brexit preparations and tax repayments, and dealing with complex international tax issues, etc. There have been almost 3 million customer contacts so far this year compared to 4.2 million for all of 2019. We have not diluted our role in tackling smuggling as well as countering excise fraud. The last six months have seen significant seizures of drugs and cigarettes and we continue to work closely with An Garda Síochána and our international partners in tackling illegal activity.

If the pandemic had not happened the big focus this year would have been Brexit preparations. However, we have continued our preparations across all fronts in staffing, technology, infrastructure and engagement with business, in partnership with our colleagues in the other State agencies. There remains uncertainty about the final outcome of Brexit, but it is clear that as the UK leaves the Single Market and the customs union there will be significant change for imports and exports to, from and through Great Britain.

I cannot speak highly enough about how my colleagues have responded to the changed environment arising from Covid-19. They have developed new schemes, implemented complex systems at unprecedented pace and changed work practices to better assist taxpayers and businesses. I have no doubt that we have made a few mistakes along the way, but we have also learned a great deal in a short space of time, and we have adapted and shown our resilience as we have gone on. I am very proud of how Revenue responded to the pandemic. Our staff adapted very quickly to new ways of working, many using their own devices to work from home. Our managers and staff at all levels have engaged with and supported each other through a challenging work environment. I want to take this opportunity to thank them all for their commitment and professionalism in these challenging times.

Finally, I will again draw the committee’s attention to section 851A and my obligation to uphold taxpayer confidentiality. Subject to this constraint, I will try to answer any questions from the committee.

I thank Mr. Cody for his opening statement. I also wish to join in commending his staff. They have dealt this year with an unprecedented situation in the administration of the TWSS and the EWSS and the various other changes that they have had to make. To be honest, towards the end of March some of us had doubts about how all of this was going to be managed. It was managed, and by and large the feedback from the public has been very good. I want to acknowledge that. I ask Mr. Cody to pass that on to his staff and employees in Revenue.

Our first speaker this morning is Deputy Verona Murphy and the second is Deputy Alan Dillon. Deputy Murphy has 15 minutes and I will issue a reminder after 12 minutes.

I reiterate what the Chairman has said about Revenue's co-operation with the Department of Social Protection and how things worked for the employers and employees of the country. It is greatly appreciated. It made my job as a public representative easier that we had such ease of access and were able to get things clarified. I thank Mr. Cody for that and for coming in here this morning.

Our witnesses will not be giving me any details or breaching any confidences. My focus this morning is to speak to them about Brexit preparations, particularly the infrastructure. Due to time limitations, I ask our guests to be as concise as they can. I have a number of questions. Can Mr. Cody tell me what the overall cost of Brexit preparations has been for Revenue?

Mr. Niall Cody

It is quite difficult to put an overall cost on it because we started preparing for Brexit in 2016. We started before the referendum result in the UK. In the 2017 budget we put forward a case to the Minister at the time for funding to facilitate ICT development. In that budget, we got €2 million in additional funding on the ICT framework to start work before anybody knew how anything would work out. We then started engagement with our colleagues on the infrastructure side and set up various working groups. Eventually, the Government - and I do not use the word "eventually" the way it sounds there - set up a group chaired by the Secretary General of the Department of Public Expenditure and Reform on infrastructure development. The OPW was then engaged to develop the facilities in Dublin Airport, Dublin Port and Rosslare Europort.

With regard to infrastructure, the OPW figure for 2019 was €36 million on physical infrastructure in those particular locations. That is what led to the €4.1 million supplementary budget. The €36 million was apportioned between the various agencies. The Department of Agriculture, Food and the Marine was the biggest element because it has the biggest requirement for physical infrastructure. That work continued into 2020. I believe the figure for Revenue in next week's Supplementary Estimates for 2020 expenditure is €13.7 million. I can give all of the actual details to the-----

The ICT infrastructure has cost in excess of €57 million.

Mr. Niall Cody

No. Our ICT expenditure in 2019 was €57 million but that covers-----

Everything such as payroll-----

Mr. Niall Cody

-----our ongoing expenditure.

Mr. Niall Cody

Every year we have expenditure of between €55 million and €60 million on ICT, and the customs element is part of that. The other big figure then is staffing.

Is the additional accumulated staff to deal with Brexit included in the figure that Mr. Cody has given for 2019 and did it include the extra 458 staff members?

Mr. Niall Cody

What we originally had in 2017 was a requirement for an additional 40 staff and in 2018 we looked for the big number of 600 staff. They are in place. We recruited people. Originally, there was a plan that it would be gradual but when it looked likely that there would be no deal on 31 March we recruited staff.

Those staff are on the books since March 2019 at the very earliest.

Mr. Niall Cody

They are in place but in the current Estimates we have a requirement for an additional 300 staff, whom we hope will be in place by the end of January.

Mr. Niall Cody

Those staff are assigned to the various-----

I see the breakdown here. I have some questions on this. Have the staff already been rotated on a 24-7 basis or is that Brexit preparation?

Mr. Niall Cody

Dublin Port has not been at 24-7. It is probably at 20-7 but from January, it will move to full 24-7, as will Rosslare. As the Deputy knows, the number of staff required to fill a 24-7 schedule is fairly significant.

It is and this is what concerns me if they have not been on 24-7. There were 130 people in Dublin Port and there are an extra 95 staff. If an extra shift has to be accommodated with 95 staff, it is not a huge increase. I know it is 73% but given what we expect from Brexit and what it will entail, it is not really a sufficient increase.

Mr. Niall Cody

We came up with our original figure of 600 and this is what led to the additional-----

Mr. Niall Cody

-----requirement for 300. We are in the process of recruiting to fill the gaps.

What Mr. Cody is saying is we have the 600 and we need an extra 300, who are not yet in train.

Mr. Niall Cody

They will be.

They have not been trained, however.

Mr. Niall Cody

The way our systems work is much of our work will not take place at the port. Because of how customs works, a lot of it is post-clearance work. One of our other big import points is the postal system, and it will become increasingly so in a Brexit environment where the post from the UK will all be imports. We are satisfied that we-----

As in every item of post will be regarded as an import?

Mr. Niall Cody

It is around goods.

Mr. Niall Cody

Parcel post will be one of the biggest changes and we are working with An Post, which has moved its full parcel operation to its Dublin 12 complex with a state-of-the-art package process. We are embedded with it.

What portion of staff will carry out physical checks as opposed to paperwork and administration? Will they be combined working in the port or will they be outside the port?

Mr. Niall Cody

Some will be in the port and some will be outside the port. Some of the work will take place at approved warehouses. How customs works, and the Deputy knows this, is with green, orange and red routing. In green routing, goods are allowed straight through to their final destination. Orange routing requires documentation checks and red routing sometimes requires physical examination of the goods. The percentage of goods that generally is red routed is between 1% and 2%. The big difference is the volume and the 100% increase exponentially as the UK leaves the Single Market and customs union. We have approximately 1.6 million customs declarations pre-Brexit. We anticipate this will increase to 20 million post-Brexit.

Mr. Niall Cody

A lot of this takes place through the express carriers so it is not-----

On the traffic light system Mr. Cody mentioned, what interaction has he had on how it will operate? Is he depending on Internet service on the ships? How will it work?

Mr. Niall Cody

The system will work as it does at present. The big difference between pre-Brexit and post-Brexit for customs will be that at present imports are primarily not roll-on roll-off and the big change is because of the shift as the UK leaves the community the roll-on roll-off traffic will now be imports coming from Britain.

Mr. Niall Cody

This is the challenge. The basic system exists. The customs routing system exists. The challenge then is to ensure we can notify the hauliers on the ferry what their routing is.

Mr. Niall Cody

Yes.

Has this been trialled at this point?

Mr. Niall Cody

We have trialled it.

How did it go? When was it trialled?

Mr. Niall Cody

I remember we spoke about this at a meeting in Dublin Port when the Deputy was in her previous role. We went on the ferries at that stage. We had recent trials on the ferries with mixed results, I have to be honest.

Given that certain ships on routes do not have an Internet facility at this point in time, it would not be easy to trial it.

Mr. Niall Cody

Yes, this is the challenge with some of the ferry companies and engagement is ongoing. They will have to-----

The difficulty this week in the media is that Stena Line is apportioning blame to Dublin Port. It states the infrastructure for Revenue and inspections is in the wrong place. The port's answer to this is that the shipping companies should alter their schedules. This could throw Revenue's system into disarray. In essence, what the ferry companies are saying is they will not alter their schedules but they will reduce capacity for trucks on the ferries, which totally throws into disarray the Irish Maritime Development Office's report that states we have sufficient capacity. The whole problem is that we are only six weeks out and we do not have a significant coherent plan that states Revenue is working with the ships, the ferry operators and the ports. It seems we are at a very late stage to be trying to say this is all going to work and it has cost so much money. As Mr. Cody said, 2016 was when we started discussing Brexit. I sat on the customs consultative committee in my previous role for three years and I cannot see now, when we are six weeks out, that we are any better off than we were on day one, except that the IT system is there but it is not up and running and it has not been trialled. Is there a list of customs clearance agents available to the supply chain?

Mr. Niall Cody

I want to go back to the preparedness. Right now, we are in a situation where all sorts of various groups are getting very concerned about their own position. It is really important to recognise there will be significant change and a lot of parties involved in this. I listened to some of the discussion during the week. Nobody wants to change what they are doing but the reality is the UK is leaving the EU.

I have very limited time so I do not need to engage in that discussion. I want to ask about contingency plans for bad weather in this country. We are an island and we are greatly dependent on shipping. The current system is that if people receive paperwork from anybody in the supply chain in preparation for a vehicle entering the port, there has to be a movement reference number. This is generated because the truck or vehicle is destined for a particular ship. The paperwork then moves on to a pre-boarding number. If, for any reason, that ship cannot sail and do we have a system in place whereby the vehicle can be moved without having to undergo the whole procedure again, in which case we can just change the ship that it boards?

Mr. Niall Cody

It is really important that any truck on a ferry has the proper paperwork.

This is a truck going to the port to leave the country, which is not yet on a ferry. If, for whatever reason, the ferry does not run, and the same would apply on the land bridge if it gets to the UK and cannot get on the ship, what is the plan if the ship does not sail? Instead of having to endure all of the procedures again, is there a simple operation whereby the ferry operator is changed and the paperwork is already cleared?

Mr. Niall Cody

I will have to get back to the Deputy with the specific details.

It is a significant issue given that we are an island. Dublin Port's infrastructure is very congested and has been for two years. Come January and Brexit, we are going to face significant issues. The manager of Dublin Port admitted this week that the infrastructure is in the wrong place. Can Mr. Cody tell me the percentage of inspections Revenue purports to do post-Brexit? For instance, Mr. Cody said the current percentage is 1% to 2%. In light of a twelvefold increase in traffic given the land bridge may be diverting, what percentage of inspections does Revenue purport to do? A five-minute inspection per vehicle would lead to logjam in the city, probably for a whole day.

Mr. Niall Cody

We expect that the percentage of checks will be the same, but it is of a bigger volume. We expect it will be 1% to 2% of the number of trucks that are coming through. The Deputy is right. One of the things that is really interesting is that facilities are being developed-----

I will leave it at that. Mr. Cody said it will be 1% to 2% of the volume. On any morning of the week in Dublin Port, 300 trucks arrive on two ferries, which means 30 to 60 of those trucks will be inspected.

Mr. Niall Cody

I do not want to mislead the Deputy. We are only one of the agencies.

I appreciate that.

Mr. Niall Cody

The Department of Agriculture, Food and the Marine and environmental health will have a higher proportion of-----

I have one other significant question. Does Mr. Cody believe it would be better, and it would lead to less congestion, if there was a contingency plan to deal with the land bridge traffic that circumvented the common transit convention? It would lead to no regulatory checks. Would it better if those trucks were taken out of the customs system and put on direct ferries?

Mr. Niall Cody

If traffic stays within the Single Market and does not involve the land bridge, it will be unaffected by Brexit.

That would take the pressure off the Revenue system.

Mr. Niall Cody

It means we will have no role with them, apart from if they were involved in illegal activity.

I thank Mr. Cody.

Perhaps Mr. Cody would respond in writing to Deputy Murphy's previous question. I know she has a specific interest in this area.

The question was in regard to costs.

Mr. Niall Cody

If I may, it is important to say that even with all the best planning and best systems in the world there will be significant disruption. The facilities are being developed. For example, in terms of facilities at Dublin Port, ultimately, when it is finalised, it will have the capacity to park 177 trucks. If 177 trucks are required to be presented between ourselves, environmental health and the Department of Agriculture, Food and the Marine the process of moving those through that parking facility and whatever time a check takes is a significant disruption on business. It is important that everybody realises that with the best-----

The real answer, as pointed out by Mr. Cody, is that traffic within the Single Market that does not need to enter the third-country traffic will be disrupted with all of the other traffic. We should have been preparing for that eventuality.

Mr. Niall Cody

The reality as well is that we have no control over what happens in Britain and we have no control over the land bridge.

I thank Mr. Cody and I call Deputy Dillon.

I join colleagues in welcoming Mr. Cody, Mr. Boyle and Ms O'Gorman to the meeting and I thank them for the speed with which they have implemented the new schemes with the Department of Social Protection and the other complex systems in these unprecedented times where work practices have changed. The manner in which they have assisted taxpayers and businesses is to admired.

I would like to get an understanding of Revenue's response to the immediate and uncertain environment that Covid has presented. A key component of the Government's response to Covid was the temporary wage subsidy scheme, TWSS, and the employment wage subsidy scheme, EWSS, where Revenue had assumed responsibility for both. The schemes were built around its PAYE real-time infrastructure, or PAYE modernisation. How has the system coped with the additional work during this period?

Mr. Niall Cody

I am smiling because I am tempted to say I do not know because it is nearly too early to say. I do know that we have paid out in excess of €3.6 billion between both schemes. The TWSS was before the Dáil on 26 March, the Seanad on 27 March and signed into law on 27 March by the President. On 27 March, we paid out our first amounts under TWSS. If this was normal times and we were asked to do something like this in our area of competence, we would probably say that it would take from the budget timeframe of early October to January 12 months, or 15 months, to develop a system like it.

I was talking to the person who was trying to draft the legislation on the Sunday night before it was brought before the Dáil. We were chatting and he was telling me how he proposed to draft it and I said to him that there were no final decisions at that point by Government because the Cabinet was meeting on the Monday or the Tuesday. We implemented a scheme that was complex. I had intended to use the phrase "in jig time" in my opening remarks but my board colleagues would not let me use it. I think it has been exceptional. The system, because of the investment in PAYE modernisation, was the basis on which we could do. We developed PAYE modernisation, which, to me, is one of our biggest achievements over the past ten years, but we had no idea when we were developing it what it would be used for. It is important to recognise all of the work that was done by the software developers association. We need them to engage with us to have the systems engaging. From our perspective, it has worked really well.

We have a tail to TWSS. I mentioned that we made mistakes. Some were mistakes we knew we were making. At the introduction, the transition phase of TWSS from 26 March to 4 May, we paid out €410, which was the maximum, to each employee even though we knew all of them were not entitled to the full amount. The choice was about getting the money paid out to employers or waiting until we had the full system developed. We decided, in conjunction with the Department of Finance and the Minister, that it was more important that we got money to the employers when they were facing what they were facing. Now, we are in a process of reconciliation, in respect of which Mr. Boyle is chairing a working group. I imagine at times when he is at lengthy meetings about this, he thinks that was a terrible mistake and that we should have paid €300 and we would have a lot less reconciliation to do. We made conscious decisions. I sometimes think that we forget what it was like on 12, 13 and 14 March. We really did not know what was going to happen. We did not know what businesses would be able to do. I mentioned in my opening remarks that we made mistakes. For the most part, that is aimed at the Comptroller and Auditor General whose team is already in examining all of the mistakes we made in TWSS and EWSS but they were made for the right reasons. We will get through them.

The system has worked really well. Our investment in real time has been worthwhile in terms of how we administer the tax system. I was taken by the committee's press release that it was going to look at efficiencies in how we operate our business.

What has been shown is that real-time systems are the new way forward, integrating our systems with business and moving away from tax returns that are made to comply with our requirements. The PAYE system is integrated with normal payroll, for example.

On that point, I wish to refer to the transition from the temporary wage subsidy scheme, TWSS, to the employment wage subsidy scheme, EWSS, and the facilitation of payments to employers. TWSS payments were made within 48 hours, but we are seeing major delays of up to six weeks in EWSS payments. This is causing many SMEs and other businesses significant concerns. Mr. Cody mentioned reducing that period for employers who pay staff week or monthly. Has Revenue enacted measures to reduce it? We are hearing concerns on the ground from constituents and businesses.

Mr. Niall Cody

Under the July stimulus package, the EWSS was the successor of the TWSS. It is based on integrating payments in the PAYE system's monthly cycle. The package was announced at a time when it seemed that the pandemic situation was improving for business. The system was built on a monthly arrangement. As the situation grew more difficult, we received the same complaints about cash flows. We moved to accelerate the process. Since 9 November, we are back to pushing out payments on receipt of payroll. We make EWSS payments every day. We have paid out €795 million under the EWSS. According to the most recent figure I saw, which was yesterday, €130 million or so was the payment in respect of the November payroll. The EWSS is now running on the same cycle as the TWSS did.

Regarding employees' liability for PAYE, USC and PRSI, how does Revenue intend to recoup those taxes for the Exchequer, what systems is it using to do so and over what timeframe will this be done?

Mr. Niall Cody

The TWSS was not subject to tax in the normal run by the employer. The €2.8 billion that was paid out directly was not subject to PAYE or USC. Through PAYE modernisation, we make available to all employees a preliminary statement of liability in mid-January. Based on our information, it sets out whether an employee owes us money or vice versa. That becomes the basis on which a taxpayer can claim additional credits, health expenses and so on or can report non-PAYE income. In mid-January, employees will be able to look to see what their end-of-year statements look like. That will incorporate any liability that arises under the TWSS.

No liability arises under the EWSS because it is run through payroll and is a subsidy to the employer and PAYE normally operates on wages. Regarding the pandemic unemployment payment, PUP, the feed from the Department of Social Protection will also be incorporated. This matter is currently under consideration in the Finance Bill, but it is anticipated that, once the Bill is passed, the PUP will be subject to PAYE but not USC, given that social welfare liabilities are not subject to USC.

In January, an employee will be able to see whether he or she owes us money because of the TWSS. If he or she does, the employee will have the opportunity to pay us. Alternatively, we will collect it over the following four years through a reduction in tax credits.

Will that be done retrospectively?

Mr. Niall Cody

There will be a liability for 2020, which will be collected from 2022 to 2026 by an interest-free reduction in credits. Some people will like to pay at once and others will have the opportunity to spread it over four years. That is how the system will work.

I thank Mr. Cody for attending. Like other Deputies, I acknowledge the considerable work that was done during the period in question. I hope we will be as forgiving in one or two years' time when Mr. Cody is before the committee again to discuss this year's accounts and reconciliations. It was a unique period. By the same token, we should ensure that good practices are maintained.

I wish to focus on the issue of cash flow for three groups - employees, businesses and the Exchequer. Tying in with the last matter Mr. Cody discussed, what is the total liability under the EWSS and the PUP?

Mr. Niall Cody

It is difficult to set out what the liability will be because of numerous interacting factors. In the first instance, it depends on what salary someone was normally on in January and February. It depends on whether someone received the PUP or the TWSS. It depends on how long someone was-----

I appreciate that there were different circumstances, but has Revenue made projections of what the liability might be?

Mr. Niall Cody

The total for the TWSS and the PUP is probably going to be in the region of €7.5 billion. At an effective rate of 12.5%, the liability will be approximately €900 million. The liability on the PUP will probably be lower. The rates went from €350 to €203 and there were 240,000 or so people who were on the PUP throughout, although the numbers have gone up again. Some 250,000 people will probably have been on the PUP for most of this year. Their liability will be low, given the reduction in the rate.

A liability in the region of €1 billion could have to be collected.

Mr. Niall Cody

In that region.

Some €250 million each year for four years is a significant amount of money for all concerned - the Government and the people involved - in managing their finances. How we communicate this liability to people in January will be important. The standard form where someone has to look at paragraph 4 will not be good enough. Clear communication will be needed.

Mr. Niall Cody

I would say it would be paragraph 1 rather than paragraph 4.

We should not cause people fear in January by presenting them with a figure but the period of payment is unclear. Obviously, Revenue has communicated the liability to the Department, given its impact on the collection of taxes.

Mr. Niall Cody

In the normal course of events, we feed in all of our information to the Department.

The second group I mentioned comprises businesses. Many businesses have been saved by the TWSS and the EWSS. Without doubt, they would have closed without those Government interventions. However, many have told me that leaving the EWSS will cause them cash flow issues because they will quickly go from having a great deal of support to none. We need to consider how that will be managed. Has Revenue discussed what will happen with the Department? Is it intended to review what will be done with the EWSS next year?

Mr. Niall Cody

The Minister has made it clear that he will review the EWSS. The legislation provides a mechanism for an interim review. The EWSS is to run until the end of March. In the discussions on the Finance Bill, it has been indicated that this matter will be kept under consideration. We are also dealing with the Covid restrictions support scheme, CRSS, now.

The problem with Revenue is that we use initials for everything. We are now looking at CRSS and how it will work. We also have a debt warehousing provision which is important and is neglected a lot. There is over €2.2 billion in debt warehousing that would have been payable between March and now. We have effectively parked that to allow businesses to deal with other cashflow issues.

That will be a significant issue for the three groups I mentioned at the outset.

Mr. Niall Cody

It would be really good if, in a year or two, we were here talking about this in an historical way and dealing with problems that may arise when we have done something. It would be great if people were giving out to me for collecting taxes and all that goes with that.

I thank our guests for their hard work this year. I want to return to some of the discussions that Mr. Cody had with Deputy Verona Murphy and the issue around share of single authorisation for simplified procedures, SASP. I understand that centralised clearance allows economic operators to declare goods in one EU member state and, obviously, the UK is now removing itself from that process. It also allows economic operators to centralise the accounting and payment of customs duties for all their customer transactions in the supervising member state. Of course, it also allows Government an immediate insight into real-time data and, as Mr. Cody said, real-time systems are the way forward. I am under the impression that centralised clearing will not be fully operational in Ireland until 2023 due to the requirement for supporting electronic systems. Will Mr. Cody give an update on where we are with implementing that system? Are other EU countries further ahead? Do they have a fully operating SASP system in place?

Mr. Niall Cody

The SASP system is in place and we are probably one of the biggest beneficiaries of the SASP system. One can see that in our probation account and the Comptroller and Auditor General has outlined some of the figures. We realised €18.03 million in SASP in the 2019 accounts. The big change is that much of that relates to clearance in the UK that is payable here. We have already seen the change this year because of the impact of the pandemic, but we anticipate a significant reduction to the SASP money that we will receive next year.

There was a projection of €15 million for this year so the expected yield is approximately 15% higher than that.

Mr. Niall Cody

Yes.

What does Mr. Cody expect next year?

Mr. Niall Cody

We expect a significant drop.

Okay. That is because the UK will be removed from those figures.

Mr. Niall Cody

Because the UK will not be a-----

The Revenue's website states that the centralised clearance will not be fully available until 2023.

Mr. Niall Cody

Yes. I mentioned about the IT development in relation to customs. The Union customs code, UCC, is being introduced over a ten-year period to 2025. We have to invest significant moneys. We introduced this week an automated import system as part of the UCC. It has been integrated and implemented in stages.

If we think of it as a project, what percentage is complete at this stage? How much of SASP is in place? Are we over the 50% line?

Mr. Niall Cody

We are. I can get the Deputy a detailed note on that, if she likes.

There are, obviously, benefits to business in terms of the level of disruption that they will be experiencing in Brexit, and SASP will support them through some of that. It is also a particular insight for Government into what is happening. I would appreciate an update on that.

Mr. Niall Cody

If the Deputy thought it would be useful, we could give her an update on the UCC development. There are many integrated pieces.

Mr. Niall Cody

Every country in the EU is implementing it over time.

I had another question to ask about a different area but I will stick on this for a moment. That legislation and those EU directives came in in 2016. Are other countries ahead of us in implementing them?

Mr. Niall Cody

No.

Mr. Niall Cody

Various countries do elements of it, depending on how they prioritise elements of the UCC. There are different stages on different elements of the UCC and we have had to concentrate, essentially, on the import scheme as part of the building blocks to ensure that we are properly ready for Brexit and the significant increase in the levels of imports. SASP is only a relatively small element of the overall customs import system. Most imports are outside the SASP system.

The website states it will not be completed until 2023. I presume that Brexit put some kind of a rush on some of these issues. Since we are over the 50% mark, is Mr. Cody able to give us a timeline for when SASP will be fully completed?

Mr. Niall Cody

I will get that timeline for the Deputy.

I thank Mr. Cody.

I reiterate what has been said in thanking the staff in Revenue for dealing with all the challenges that 2020 has brought. Who would ever have thought that we would be talking a no-deal Brexit scenario as the second priority, weeks before it may happen?

I would like to discuss the issue of bogus self-employment and the impact it has on Exchequer funding. I wonder, first of all, if Revenue has an estimate as to the rate of bogus self-employment, or an estimate of what it costs the Exchequer?

Mr. Niall Cody

We do not have an estimate of what it costs because, like any non-compliant activity and all of the tax gap, it is difficult to put an estimate on any of those figures.

I am sure that Mr. Cody has seen various estimates that have been put forward by other organisations and presented to other committees in these Houses. One suggested a figure as high as €1 billion. I have seen everything from €80 million to €1 billion. Is it something that Revenue prioritises? I noted in one of Revenue's briefing documents a reference to different types of intermediary-type practices that are now being used to absolve companies from paying adequate contributions to their staff. Bogus self-employment is probably the most long-standing of those practices. Will Mr. Cody categorise where the issue falls on Revenue's list of priorities?

Mr. Niall Cody

It is important to put it all in context. There is bogus self-employment and then there is actual self-employment.

Mr. Niall Cody

It is also part of an actual-----

To clarify, what we are talking about is people who work primarily or exclusively for one company but that company, through its arrangements, has standardised its employees as self-employed. We have seen instances of that in the construction and other sectors. That is what I am referencing.

Mr. Niall Cody

We have put a lot of work into addressing bogus self-employment. Our joint inspection units do regular site visits to the construction sector. As the Deputy mentioned, and as our briefing document stated, the system has evolved a lot. I have spoken to a previous configuration of this committee and to the joint committee on finance about bogus self-employment. The trend is very much towards company structures - personal services companies and managed services companies that are set up to provide the employment to the principal contractor through a company.

We have no legal entitlement to look through that corporate veil. We have carried out extensive projects in respect of those companies and their tax compliance. The matter was the subject of an examination by the Comptroller and Auditor General a few years ago. We have done our exercises on medical services provided through companies and across the board. Part of the challenge is that there is no legal basis to look through the corporate structure-----

A test case was presented to the Oireachtas that had been made by the Department of Social Protection with the agreement of the Revenue Commissioners. It was done primarily in respect of the courier sector. I understand that practice has ceased. Will Mr. Cody confirm that and whether a cost associated with the test has been extrapolated? How much did it cost the State? Was there any legal basis for its implementation? I have found it difficult to find a legal basis for that test case having been sanctioned.

Mr. Niall Cody

I will have to get back to the Deputy about that. When he talks about a test case, I am not 100% certain. If he has a reference, it would help.

We will get that. It was publicised in the House.

Mr. Cody mentioned inspections or investigations within the construction sector. Will he confirm whether Revenue has carried out any similar investigations in respect of this issue within the meat-processing sector?

Mr. Niall Cody

What we do in the meat processing sector is keep an eye on the employment status. Most of the meat companies have employees or recruit through agencies. If they recruit through agencies, the agency has a role as the employer in that context. We are keeping a very close eye on it and pay close attention to what is said in this House about various practices. We are also very open to any information from trade unions and we are in regular engagement with various agencies around practices. The challenge is that it is a matter of contract law and sometimes the relationship is unequal. Unless we can get information that allows us to look beyond something, we are sometimes constrained.

The biggest driver, from a fiscal point of view, is the employer's PRSI. That is the big saving, but other workers' rights arrangements are not the subject of our control. Two years ago, I think, there was a consultation by the then Department of Employment Affairs and Social Protection and the Department of Finance, which we supported, and I think we gave the committee a link to the report and the documentation we provided. That highlighted the challenge, as has been experienced in other jurisdictions, where the legislation has looked at, effectively, a different type of worker and having a different set of rules-----

A particular type of company engages in this. Can I extrapolate from what Mr. Cody stated that he accepts there remains an issue with bogus self-employment?

Mr. Niall Cody

The relevant contracts tax was introduced in the construction sector in 1971 as a requirement in respect of subcontracting and its variants. This is a factor in all jurisdictions and will always be one we have to take care of. A commission on tax and social welfare is being set up and the area needs a lot of consideration.

I thank our guests for their presentation. I wish to raise the delays arising from Covid-19 in dealing with certain issues. A number of people have contacted me about family members who have loans under the fair deal scheme. As our guests will be aware, the moneys must be paid back and that is done through Revenue. The problem now is that because of Covid, there is a delay in taking out grants of probate. A number of people who contacted me are concerned that they will be charged interest because they cannot complete the probate in time and, therefore, cannot collect the funds to pay back Revenue. Will people be accommodated in circumstances where there is a genuine delay beyond the control of the executors?

The second issue I wish to raise relates to vehicle registration tax, VRT. Our guests' submission did not include a breakdown of VRT. I presume it comes under customs duties but I do not see a figure for VRT for any of the years in question. Could we have a figure for the amount collected through VRT?

On a connected issue, in Cork it now takes up to six weeks from the time that someone applies to have a car assessed for VRT to the time when the matter is reviewed. As our guests will be aware, none of these vehicles can come in without having being paid for. Suppliers, therefore, lose a great deal of money and have to wait up to three months before they can get that money back. My understanding is that some car importers in Cork are having to go as far as Galway, Waterford, Kerry or Limerick to have cars assessed for VRT. I received a response from the Minister for Finance yesterday that was totally unsatisfactory, and I do not accept it. I raised this issue two months ago and nothing has been done. I ask our guests to respond to the issue of delays in Cork in dealing with VRT.

Mr. Niall Cody

I was conscious that the Deputy had asked a parliamentary question about VRT in the context of Cork. Part of the challenge, clearly, is Covid. We are talking purely about second-hand car imports, mostly from the UK, which have to be registered for VRT through the national car test, NCT, operation, and Covid restrictions have obviously impacted on that. The NCT also provides a pre-inspection system whereby it calls out to the garage and has increased the level of call-out available. There is a problem in Cork, Tralee and Limerick and the NCT is looking at dealing with that. We keep it under review. In the normal course, this is not a problem but Covid has limited the opportunity for Applus Car Testing Service, the company that runs the NCT, to provide those facilities.

I understand that the Deputy recently asked a parliamentary question about the fair deal scheme as well. If I recall, we said we would, of course, have regard to the circumstances. I know that the fair deal scheme and the collection has been the subject of a special report. We operate as agents for the HSE. In the first instance, if the HSE tells us not to, we do not collect. As was a matter for the report, we take a very pragmatic approach to the application of interest, having regard to the exceptional circumstances that the fair deal is-----

To go back to the VRT issue at the two centres in Cork, there does not seem to be a problem in other areas. I understand that it takes less time to get VRT approval in Tralee, Waterford and Galway. Can the problem in Cork be dealt with?

Mr. Niall Cody

We are engaging with them and hope to have something. We will keep it under review. This crops up at some stations at various times. We will follow up on the matter. I think that there is probably additional pressure now as well.

Mr. Niall Cody

Brexit will change the nature of the importation of second-hand cars completely.

I am aware of that.

Mr. Niall Cody

Some would say that there is a concern with regard to ensuring that cars are properly registered before January. I will follow up with the team in respect of the Cork operation for the Deputy.

I would appreciate that.

The question raised by the Deputy is a very important for his constituency and for businesses in the region. Whatever Revenue can do to expedite the problem and get back to the Deputy with a satisfactory answer would be welcome.

Mr. Niall Cody

The Deputy also asked how much is raised from VRT. From the point of view of the accounts, VRT is treated as an excise duty so it is incorporated in the €5.5 billion figure in that regard. VRT runs at approximately €1 billion but we can give the Deputy the actual breakdown. Most VRT actually comes from new cars but the majority of the work involved in VRT comes in respect of the importation of second-hand cars.

I accept that.

Mr. Niall Cody

We can provide a breakdown. If I took out my phone, I could probably I could find the summary breakdown of new cars, second-hand cars and VRT for 2020 or 2019.

I appreciate that.

I will allow Members back in for a second round but first I wish to revisit the area of bogus self-employment. Revenue obviously collects PRSI, as I understand it, and the ESB decides the status. There would appear to be evidence to suggest that Revenue has arrangements on an ad hoc basis with different sectors and agreements with certain companies. The courier sector is one that has been highlighted to me. In 2000, the Committee of Public Accounts wrote to Revenue about couriers being treated as de facto self-employed people. The response received at that time indicated that there was a special bespoke tax agreement between Revenue and a group of couriers that were represented by an accountancy firm or group of solicitors. While the staff involved that the time were listed as employees, they could change their status to a class S PRSI contribution. I understand what such a contribution is. This issue was referred to a few moments ago in terms of avoiding the payment of employers' PRSI, which is obviously a major concern to taxpayers and to employers who pay the balance of what is due on the basis of the different income bands. The agreement to which I refer was discontinued, as I understand it. How much was lost in employers' PRSI contributions as a result of that special arrangement? Are there more bespoke agreements with individual companies and sectors? Why did the deal come to an end in 2019?

Mr. Niall Cody

We do not enter into bespoke agreements with companies that are not in accordance with law. We deal with companies and we look at the facts and the circumstances of particular cases. We do not enter into bespoke arrangements. We will give any business an opinion on its tax treatment and we publish guidelines.

I asked about workers with class S stamps being listed as employees. While in every other way it would have appeared that their work practices and the directions they received at work indicated that they were employees as opposed to being self-employed, what I have referred to would indicate that there was some type of arrangement reached at that time with couriers or with a group of couriers. My information is that the deal in this regard came to an end in 2019. Is Mr. Cody familiar with that?

Mr. Niall Cody

I am not familiar with the details. I am aware, because I pay attention to things, of a lot of the commentary that is out there. On the actual agreement, I am not familiar it but I can look into the matter. I want to set some of the context as well of what we do in these cases. We were recently in the High Court in respect of status of employment case. I can talk about the matter because it is a High Court case and is in the public domain. The matter in question relates to a food delivery company and its tax status. We would have established that in our view the people involved were employees. We were successful at the Tax Appeals Commission and the matter was appealed to the High Court. That is the type of stuff that we do.

In the context of the contractual facts, as the Chairman has pointed out, the Department of Social Protection is the policy owner. Its scope section is the authority on-----

The contractual arrangement does not always reflect what the worker wants because it can be a contract or an arrangement of unequals.

Mr. Niall Cody

I stated earlier that the relationship is not always equal.

Mr. Niall Cody

It also depends a lot on the state of the economy at any particular time. We have seen this in the construction sector. When the construction sector is buoyant, nature of the relationship changes. When there is a downturn, the nature of the relationship changes again.

Of course. Market and supply, unfortunately. Between 1998 and 2000 a lot of visits were made, particularly to construction sites. As I recall, approximately 12,000 workers were found to be misclassified as self-employed, which is in the region of 20% of the workers investigated. What has been done about that since?

Mr. Cody mentioned that information for the unions is useful. The Irish Congress of Trade Unions carried out its own research and found that 22% of construction workers were misclassified and calculated that this ran into a loss of hundreds of millions in revenue. I would take it that Revenue is concerned about the loss of a portion of employers' PRSI. How many inspections are carried out annually? How many inspections have been carried out this year?

I was struck by the success of the visits and inspections by Revenue staff and how they showed an issue existed. Any of us with friends who work in the construction industry know that there is an issue in this regard. We also know about it because our constituents have complained to us. Obviously, the workers are not in a great position to complain because if a person complains or raises the issue, he or she will be out on his or her ear, particularly if he or she is operating on the basis of bogus self-employment. How many inspections of the construction sector and other sectors are carried out annually? How many inspections does Revenue hope to carry out this year?

Mr. Niall Cody

I have a piece on the 2019 figures which, I think, would be useful to the Chairman.

In 2019, officers from Revenue's joint investigation units, along with other Revenue staff, conducted 829 Revenue stand-alone construction site visits, interviewing 3,476 contractors, subcontractors and employees on-site to make them aware of their compliance and other statutory obligations. Additionally, we carried out a further 844 construction site visits in conjunction with either the Department of Social Protection or the WRC to include 39 visits with both and we interviewed a further 3,176 individuals. On a combined basis, these 1,673 visits in 2019 reflect an increase of 14% over the previous year. As a result of these activities in 2019, 297 individuals were registered as new employees for PAYE and an additional 97 subcontractors were reclassified as employees.

I know that Oireachtas committees have discussed site visits before but these are unannounced and not the normal audit arrangements. When we do site visits they are unannounced and there have been a lot of colourful tales over the years about people running out the back as quickly as we are running in the front. There is a problem and we are carrying out these site visits because the sector is not completely free of practices of which we would not approve. We pay close attention to this but there is a challenge in the area. I know a lot of people in the construction sector and our officers are in the community and they know what happens. We pay close attention to it and we follow up as best we can. This year is somewhat different because of the environment we are working in where the site visits are constrained because of Covid-19.

I thank the witnesses for their attendance today and for their responses. Many of the questions around Brexit have been asked and answered. At the outset, I wish to thank the Revenue Commissioners for the work which they have done, particularly in recent months. I mention the speed and agility with which it has responded. Mr. Cody has commented on the ICT abilities of the organisation and that certainly was not in doubt, particularly for us as public representatives who deal with the Revenue with such a volume of queries. I have been amazed by the measures taken with staff. Mr. Cody says that 5,000 of Revenue's employees are working from home and putting that in train alone is quite remarkable. I want to put on record that it is appreciated. Everybody has worked at lightning speed. I forget what phrase Mr. Cody used for it but it is true that the organisation has responded exceptionally well to this crisis.

I refer to the TWSS, the EWSS and the CRSS, particularly in relation to SMEs and the self-employed. Great flexibility has been shown to those who are employees of organisations and those deadlines have been pushed out. I ask for forbearance or flexibility around the SMEs and the self-employed, given the circumstances in which they find themselves, particularly in recent weeks with level 5. It is important because the deadline is 10 December and I ask the Revenue Commissioners to show a bit of flexibility there. The witnesses might comment on whether the Revenue has given consideration to such a move. Those in that sector, both the self-employed and SMEs, would face a 5% liability on their 2019 returns. Given everything that has gone on, particularly in those sectors, it would be a good move to show a bit of flexibility.

The witnesses might come back to me on my second question, which is on the ports. Mr. Cody mentioned Dublin Port in particular in his opening remarks and the preparedness of the State in the face of Brexit. On the volume of seizures that have taken place across the State - Mr. Cody mentioned the amount of contraband that has been confiscated and seized - can he give us an indication of how much of an increase that has been on the 2019 figures and on what additional resources have been put in place for that?

Mr. Niall Cody

The pay and file self-assessment deadline is legally 31 October. We extended it to 12 November for those who file and pay electronically and that is the standard approach we have had for a long number of years. In the light of the current environment, we have extended that to 10 December but in addition, and in the context of the Finance Bill that is before the House, we have extended the debt warehousing arrangement that is in place for self-assessed taxpayers. That was for employers' PAYE, PRSI and VAT. In the Finance Bill, it is being extended to liabilities under self-assessment for 2019 where the taxpayer has suffered a reduction of 25% in income as a result of Covid-19. That is important because it allows accountants to assess their clients and to say that if a client has a likely liability that it is not able to pay, the return should be filed by 10 December. Some people will not have a liability so it allows them to manage their portfolio of clients in a way that the exposure can be minimised. We have already told the tax administration liaison committee, which is where we engage with the accountancy bodies and the Law Society, that we will take a pragmatic approach on individual cases. I appreciate the remarks members have made and the thanks we have received but it would be great if we were back to members giving out to us for not collecting money, instead of thanking us for paying out a load of money. It would be great to get back to that place.

I ask Mr. Cody to come back to me, particularly on the seizures at the ports and he might also include the VAT MOSS scheme. I note the Comptroller and Auditor General said there was a year-on-year increase since 2015 on those filings. Mr. Cody might include some more information on that.

Mr. Niall Cody

On seizures, in 2019 we had a fairly significant level of seizures of €37.2 million. The Deputy is interested in the 2020 figures. We have seized about 40 million cigarettes in recent months, which will mean 2020 will be one of the biggest years for seizures in which there is not a spectacular incident. A couple of years ago we had a spectacular incident with a tobacco factory and another year we seized a shipload of cigarettes in Louth. This year, both cigarette and drug seizures have been significant. We had a press release yesterday detailing a seizure of about €600,000 worth of drugs. There have been significant seizures between ourselves and the Garda, which is evidence that certain activities are still continuing, unfortunately.

I thank the witnesses for coming today. I want to raise two issues. First, the temporary wage subsidy scheme and how it applied to people who employed childminders in their homes. I had two queries this week about people who employed a childminder in their home. During the first period of restrictions from March to June, the childminder was not able to come to work and they wanted to maintain the link with the childminder and make sure he or she had money. They both checked and they were given a general response from Revenue laying out who could claim and they both assessed that their circumstances fit the criteria.

They both received letters within the past ten days from Revenue to say that domestic employers have not been eligible for the temporary Covid-19 wage subsidy scheme, TWSS, and that they needed to refund the entire amount. Had they known that in March they would have taken a different approach. They would have ensured that the childminder went on the pandemic unemployment payment. The intent of the scheme is to make sure that they or the childminder were not out of pocket. Can we reconcile that to make sure that they do not become liable for a very significant amount that has been paid over that period? That is surely not the intent of the scheme.

Mr. Niall Cody

If the Deputy can provide me with the details of where they were told they were eligible I would certainly be interested in that because TWSS was a support system for businesses that suffered a reduction in turnover. It was not an open system whereby they were impacted in some way by Covid-19. We would never have seen domestic employment - childminders - as covered by the TWSS.

I can see that. That is the reason that came back to them but from their perspective they were hearing that it is to maintain a link with an employee and to make sure that nobody is put out by the fact that there have been changes in circumstances. When those mistakes are made in good faith, particularly where there is an obvious alternative in that they could have put them on the pandemic unemployment payment, is there a way in which Revenue can consider these cases given the very understandable circumstances in which somebody may have interpreted the advice differently or wrongly or made a bona fide mistake and is now liable for several thousand euro?

Mr. Niall Cody

We are engaging with all employers that were in TWSS around their eligibility. I know there are a very small number of cases of the type the Deputy is talking about.

I would think it is a very small number.

Mr. Niall Cody

In some ways that is evidence that, in most cases, people did not have this misunderstanding. We are looking at the individual cases.

Can I come back to Mr. Cody on that? People have never faced these issues before and the documentation from Revenue and other sources is complex. The purpose of the scheme is to provide support and assistance to people who are in extremely stressful difficulties in their households and businesses at a time of a pandemic. Mr. Cody has intimated that twice in terms of their failure to interpret that correctly. These are people who are well able to keep their tax affairs in order on a year-by-year basis. This is something very different. There is an onus on the State in terms of the way it communicates with people. There is no element of sharp practice, fraud, stupidity or anything else in this case. They had an alternative and they have made a genuine mistake, one that anybody here could have made. A measure of care by the State is an appropriate response for the sort of people I am describing.

Mr. Niall Cody

I cannot deal with the individual cases in this forum. We will take a pragmatic approach, as we do in all cases. However, we are implementing a legal system-----

Mr. Niall Cody

-----and that is our responsibility.

I appreciate that but there have been a number of cases that, through quiet representations, I and other Deputies have managed to get reconciled. It is a question of tone and how we speak to people who have made genuine errors and are now in difficulties on foot of those.

I want to raise one other case with Mr. Cody. It concerns a gentleman who made his payroll submissions by paper. Is it correct that he would not then have been allowed to participate in the scheme according to 2.9 of the guidance on the operation of the temporary Covid-19 wage subsidy scheme?

Mr. Niall Cody

If he made his payroll submissions in the normal course by paper my understanding is that we provided a facility for which they could. It is an online system. We had a system where if one did not use software one could enter into that but I would have to get the details and check that out for the Deputy.

He has been excluded on foot of that. I am very happy to send Mr. Cody the details because it would be wonderful to get these issues reconciled.

Mr. Niall Cody

I am happy to receive them.

I think the Deputy has made the connection and hopefully she will get the two cases solved. There will be a few like that across the country.

The witnesses are very welcome to the Committee of Public Accounts. In the previous Committee of Public Accounts one of the issues we considered was whether it was Revenue's role to collect carbon tax, how it is spent and whether it is spent on what it was intended for, which is a policy area. We know, however, that the increases in carbon tax are ring-fenced but not the base, so to speak. Does Revenue have a role in advising Government on that kind of approach?

I want to raise another area, that is, gambling taxes. That has changed considerably in recent years with online gambling and there are significant downsides to that in terms of harm, etc. The Finance Act 2002 exempted a good deal of on-course taxation on betting but a lot of gambling happens online now. Is that something Revenue has done work on in terms of what people are gambling on? Is it something Revenue has considered? What interaction would there be between the Revenue Commissioners and the Department of Finance on something like that?

Mr. Niall Cody

We collect the carbon tax along with the excise duty on mineral oil, for example - solid fuel tax. We collect it as we collect any other excise duty or all the other taxes and we transfer that money to the Exchequer. Whether there is a policy around how it is spent is not within our remit. We also collect the betting duty. It was probably 2015 when the changes were brought in to make the online providers of betting services liable to the betting tax. We have the normal bookmakers and then the online platforms that are registered here. That increase probably led to a doubling of the betting tax liability but again our role is to collect the money. We have spoken previously about the area of gambling and betting. I have certainly spoken about it previously here. Legislation is coming on the whole area of gambling but it has been coming for quite some time. The previous Minister of State, Deputy Stanton, had done a lot of work on it in respect of a gambling commission but that is still on the preparation books. I believe the Department of Justice is the lead Department in that area.

Some of the betting tax is confined to two areas, that is, horse racing and greyhound racing. How is that separated out from the other taxes on gambling that are collected?

Mr. Niall Cody

Again, in terms of when the betting duty is transferred into the Exchequer, and so much of it goes to the horse and greyhound industry, is not a matter for ourselves. It is an amount that is the betting fund distributed on that basis.

We have no role in how the tax is distributed. It is not an attempt to say this money came from betting on horse racing and that has to be identified because it goes to horse racing. We just collect and transfer the full betting duty to the Exchequer.

Online a person can almost bet on two flies going up a wall. Has the Revenue a role in looking at that profile at all?

Mr. Niall Cody

No. Our role is in the receipt of the betting duty - the 2% on the total. Obviously, the challenge over the years has been to incorporate non-established betting providers, and that was legislated for in 2015 or 2016. It did result in a fairly significant increase in betting duty receipts but betting duty receipts are a relatively small total amount of the total moneys that we collect.

Continuing on from Deputy Catherine Murphy, do we still have an issue with fuel laundering?

Mr. Niall Cody

We have put an awful lot of work into tackling fuel laundering over recent years. Again, it has been the subject of a lot of discussion here.

It will have to be a "yes" or "no" answer, I am afraid, as I have only three minutes. Do we still have an issue with fuel laundering?

Mr. Niall Cody

It would be very foolish of me to say that we do not have a problem with it. Again, it is a bit like black economy activity.

That is grand. So we do.

Mr. Niall Cody

We have actually-----

Can Mr. Cody quantify the value of the problem?

Mr. Niall Cody

No, but we have significantly reduced the level of it. We produced a detailed report. In the material that we sent to the committee, we sent a report on mineral oil tax which tries to establish the level.

Here is one for Mr. Cody. This committee is about value for money. There is a diesel rebate scheme for licensed operators.

Mr. Niall Cody

There is.

It is not in being at the moment because the floor of that does not meet the requirement of the pump price for the operator to be paid, so the carbon increase that we were discussing earlier will not be rebated. The effect is to give fuel launderers the opportunity to raise their heads again. Equally, the Revenue Commissioners were handed, virtually on a plate, the ability to detect anybody who may be using laundered fuel by virtue of the fact that people would be signing up for the diesel rebate scheme. Has the Revenue carried out any investigations into the number of operators who were entitled to claim it and those who actually signed up to claim it? Mr. Cody can come back to me on that. Ultimately, what this committee is about is value for money. The objective of that scheme cures one problem while benefiting a sector to stay on the straight and narrow and not give the opportunity to launderers to come back.

I have a minute left to go back to what we discussed earlier. It is, again, about public money and the value that the public gets for how its money is spent. It will probably be a "yes" or "no" answer again. Is it fair to say that the land bridge traffic, as it currently stands, now must operate under the common transit convention, CTC, which causes customs procedures, not only for SMEs but also for Revenue, to be brought into play at minimum unit loads of 150,000? That could turn into multiples of that when it comes to the common transit convention paperwork. Given the cost of administering the CTC and the bond that goes in place, which is basically going to clog up ports with traffic of the EU Single Market either on the land bridge or into the UK, would that money not be better spent from a public money perspective providing shipping infrastructure that allows the Single Market traffic to flow freely without being interfered with by customs? For the small SMEs of this country, it is purported that one customs transaction will take an hour. That is not feasible for many small businesses. Does Mr. Cody advise Government in this capacity and would he be in agreement with that statement? I refer to public money and value for money.

Mr. Niall Cody

As we said earlier, the impact of Brexit will increase costs on business and on SMEs. Regardless of what trade deal there is, for customs formalities, as I stated at the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach of the previous Dáil, to put a figure of €70 to €150 per transaction is probably not far out. That is a huge cost on business and will be a big impact. The extent to which businesses can divert from the land bridge, and that has regard to the nature of the goods, is something that will seriously have to be looked at by business. The indications from the ferry companies, and I know the Deputy has spoken about it, are that they will be able to provide the additional facilities. I do not know.

Was Revenue involved in the Irish Maritime Development Office, IMDO, report?

Mr. Niall Cody

No.

I thank Mr. Cody. I do not want to hold up anybody else.

Mr. Niall Cody

I have some information on the whole diesel laundering piece.

We can do that again. It is not a problem. I thank Mr. Cody.

Mr. Cody might share that. Obviously, it is an issue of concern for the committee.

Mr. Niall Cody

There is a lot of work there. There is a lot of really interesting information on it.

That would be appreciated.

Revenue works with international partners, with An Garda Síochána etc. in tackling smuggling. Has the Revenue ever made data access requests to telecommunications companies or social media companies under the Communications (Retention of Data) Act 2011, and if so, would they have been routinely granted? What would have been the basis for those? Have there been many?

Mr. Niall Cody

I actually came across the report. We are subject to review by a judge on our use of the Act. I was looking for some papers for today and came across the report but I thought I did not need to open that because I did not need it for today. I know exactly where it is in my office.

Mr. Niall Cody

We are subject to review by the judge every year. We have a small number and that is available. There was a review by the former Supreme Court Chief Justice, Mr. Justice Murray, which found that - I hate to say this in some ways - of all the agencies that were involved in this area our processes and procedures were the best. It is not a routine exercise. It is approved by authorised officers at principal officer level.

What would be the main reasons and would there be many of these? Mr. Cody stated there were small numbers. What would he mean by small?

Mr. Niall Cody

It is all to do with smuggling. We talked about fuel laundering. It is all in the sphere of fuel laundering, cigarette smuggling or drugs.

Could Mr. Cody give us a note on how many and if any were refused?

Mr. Niall Cody

Yes. On the process and the small number, in fact, we probably can give the Deputy a copy of the report. I will have to look at that. That will set out all that detail.

That is perfect. I thank Mr. Cody.

Mr. Niall Cody

I have a figure for Deputy Burke on VRT. In 2019, we collected €942 million.

I will raise another issue related to home care. I think Mr. Cody will accept, as I think everyone does, that in the case of a lot of home care, people cannot get it without having to pay cash. That is recognised. In fairness to those who are providing the home care-----

Mr. Niall Cody

I will be looking for names and addresses off the Deputy if he has them.

Maybe Mr. Cody might be, but that is the reality. Let us not ignore the fact. We have 720,000 people over 65 years of age. By 2030, there will be 1 million.

There will be a significant increase, therefore, in the demand for home care. With regard to the meat industry, we allowed people to come in from abroad. If an employer wants to bring someone in from abroad to work, it must guarantee that the person will be paid more than €30,000 per annum. The meat industry has been allowed to bring people earning less than €30,000 per annum. If a family brings in someone from abroad to live permanently with its elderly relative and is paying that person a salary, it cannot bring that person in unless it pays him or her €30,000 per annum or more. Revenue will not take accommodation and food being provided to the person providing care into account. Revenue makes no allowance for that. If someone has free accommodation for 12 months, has probably earned €80 to €100 per week and has had all of his or her meals provided, that is not taken into account in coming to the figure of €30,000. Would Revenue consider reviewing that issue because we will not be able to deal with this problem over the next six to seven years unless there are major changes? Israel allows people to come in for a maximum of five years. I ask that Revenue gives serious consideration to this type of scheme, in other words, allowing for accommodation to be taken into account in arriving at the figure of €30,000.

Mr. Niall Cody

We have no role with regard to immigration. When the Deputy talks about the-----

But it has a role in deciding what is taken into account as regards payment.

Mr. Niall Cody

We have no role in this area.

But allowances are provided to various people in different work areas. Is this not an area at which Revenue should be looking if we want to exclude and take away what we are turning a blind eye to?

Mr. Niall Cody

Unless there is something I do not know about, which is not beyond the bounds of possibility, we do not have any role in work permits.

I accept that.

Mr. Niall Cody

We do not set the thresholds, that is, the monetary amounts, or the rules that apply when there is benefit-in-kind or-----

However, Revenue makes recommendations about what is workable. Much of the current system as it applies to home care is not workable

Mr. Niall Cody

We have no role in the area. We are not involved in setting these-----

I think it has been made clear that it is not the role of Revenue.

Mr. Niall Cody

We are increasing our role in all sorts of areas but we are not there yet.

Mr. Cody said that he would come back to us about bogus self-employment in writing. Could I prompt him to examine correspondence that was sent to this committee by Revenue on 9 August 2000? The reference I am told is PS 3422M/00. That correspondence enclosed letters dated 7 March 1997 and 3 April 1997 to K. Ryan & Co, which represented courier firms, an issue we discussed earlier. The Revenue letter to the Committee of Public Accounts stated that the letters outline the agreement reached for tax purposes. It might give Mr. Cody an indication of the issue raised by the Chairman and myself. I reiterate that bogus self-employment is a crucially important issue because of the income that is lost but also because it breaches the social contract in which we are all engaged with significant repercussions. There has been significant political debate regarding pension age. If we do not take in enough PRSI receipts, it gives succour to those who want to force people to work longer. I ask for a tough approach on the part of Revenue. If ten people working in the same place all have their accounts to Revenue presented by the same company and all have similar working hours and arrangements, Revenue can be fairly sure there is bogus self-employment. Likewise if somebody is working in a meat factory and earning the minimum wage, Revenue can be fairly sure he or she is not genuinely self-employed. If somebody coming from eastern Europe finds himself or herself working in a meat factory under a new company and he or she decides out of the goodness of his or her heart to give that company half of his or her wages, there is a problem.

I will go completely left-field in my final question. An article in the Irish Examiner on appointments within Revenue caught my attention. It was very strange. It outlined appointments to principal officer level over the past number of years and indicated that out of ten appointments this year up to September, nine were awarded to female candidates while in 2019, nine were made to female candidates and two to male candidates. Revenue denied that there was any gender imbalance. Could Mr. Cody indicate whether all of those appointments are internal or external? What is the current overall gender balance at principal officer level? I imagine that like most Departments, there is probably an historic gender imbalance that predominantly affects women. Will any corrective measures will be taken to ensure we have a correct balance across the Civil Service?

Mr. Niall Cody

A total of 63% of Revenue staff are female while 55% of principal officers are female. In 2011, 8% of principal officers were female. I started smiling when the Deputy started talking about coming from left field and what it turned out to be because I smiled when I saw that article as well. We do not engage in discrimination on any grounds. Our recruitment and competitions are all subject to scrutiny by the Public Appointments Service. The post of principal officer referred to by the Deputy would have been filled by interdepartmental open competition and internal competition. The organisation is increasingly reflecting the actual gender breakdown so it is quite a positive story. I am disappointed that Deputy Catherine Murphy left before this because for the past five years in this committee, we have always had a chat with her and Deputy Connolly about gender. I would always have to remind them that my predecessor was also a woman. To put it in perspective, we had an assistant principal conference that was reflected in the article where all the assistant principals would have been here before Covid at which that claim was made to me. I answered from the stage that there was no discrimination. We have published the gender pay gap on our website in anticipation of changes that are coming with legislation for Revenue. It is a really interesting read.

That answers the question. The figures since 2011 that were outlined show that Revenue has made a significant leap forward in terms of-----

Mr. Niall Cody

This is something that cannot be dealt with in one year. It is a progression and we can see the level of AOs and HEOs. Approximately three years ago, that level reached 50%. It was much lower for females. That progression is needed at the grades below PO for it to be reflected at PO. Female representation at all management grades has increased year on year and that is automatically reflected in the fact that-----

I am not casting aspersions one way or the other.

Mr. Niall Cody

I know the Deputy is not.

Whenever an appointment process is heavily skewed, whether that be by geography, gender of whatever the case may be, it is natural that questions will be asked.

Mr. Niall Cody

I have no problem with the question.

The Oireachtas has a bit of catching up to do. I will ask one brief question before Mr. Cody goes. On the legal situation with bogus self-employment, the social contract has been mentioned and the concern is that employer's PRSI in this State is, on a European-wide basis, not high. It is low compared to most of our European counterparts. It is important that is collected. Workers pay their part. With regard to Revenue, it appears there is no effective legislation in place to deal with this issue. Can Mr. Cody confirm if this is correct and there is a gap or lacuna in legislation? Is that his summation of this? Is legislation required to deal with the issue of bogus self-employment?

Mr. Niall Cody

I would not go as far as that. I am taken by the Chairman's opening comments about commenting on policy. There is a policy issue here about how legislation is developed to deal with particular circumstances. I said earlier regarding the nature of the relationship and the use of corporate structures that there is no legal basis to look through the corporate structure. In a way, legislation has evolved in other jurisdictions that has not here.

The other point, which the chairman mentioned earlier, is that social insurance ultimately is primarily a matter for the Department of Social Protection, which owns the policy and the legislation. The PRSI system is complicated, with multiple classes. There has long been talk of modernisation and reform. There have been various discussions on integrating PRSI and USC. Any time it is looked at, it is hugely complex and difficult to modernise because it impacts in various different ways.

I am interested in Mr. Cody's reply from a Revenue point of view that he has identified it as a problem and our European counterparts are ahead in terms of-----

Mr. Niall Cody

The consultation and the summary that was produced a few years ago summarised those issues.

----- the legal definition of "employee" and "self-employment". We are anxious to make further headway with this.

We have covered a wide range of issues in the past couple of hours. I thank the witnesses for joining us and providing the information on all the issues that have been raised. I also thank the Comptroller and Auditor General for attending and assisting the committee. Is it agreed that the clerk follow up information and carry out any agreed actions arising from today's meeting and is it also agreed that we note and publish the opening statements provided by Revenue for today's meeting? Agreed. I thank everybody for attending.

The witnesses withdrew.
The committee adjourned at 1.34 p.m. until 4.30 p.m. on Wednesday, 25 November 2020.