COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 25 Jan 2024

Chapter 22 - Corporation Tax Losses

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

An Cathaoirleach

The witnesses are very welcome. We have received apologies from Deputies Verona Murphy and Imelda Munster. I remind all those in attendance to ensure their mobile phones are switched off or are on silent mode.

Before we start, I wish to explain some limitations to parliamentary privilege and the practice of the Houses as regards reference witnesses may make to other persons in their evidence. The evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected, pursuant to both the Constitution and statute, by absolute privilege. This means that witnesses have an absolute defence against any defamation action for anything they say at the meeting. However, they are expected not to abuse this privilege and it is my duty as Cathaoirleach to ensure it is not abused. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative they comply with any such direction.

Witnesses are reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges against any person or entity by name or in such a way as to make him or her identifiable or otherwise engage in speech that might be regarded as damaging to the good name of a person or entity. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative they comply with any such direction.

Members are reminded of the provisions of 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 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.

The Comptroller and Auditor General, Mr. Seamus McCarthy, is a permanent witness to the committee. He is accompanied this morning by Mr. Shane Carton, deputy director of audit at the Office of the Comptroller and Auditor General.

This morning we are engaging with the Office of the Revenue Commissioners to examine Appropriation Accounts 2022, Vote 9 – Office of the Revenue Commissioners; Account of the Receipt of Revenue of the State collected by the Revenue Commissioners 2022; the Report on the Accounts of the Public Services 2022, Chapter 20 - Assessment and Collection of Local Property Tax, Chapter 21 - Revenues Tax Debt Warehousing Scheme, and Chapter 22 - Corporation Tax Losses.

The committee members have flagged the classification of employment for contribution purposes and the financial implications of the misclassification of workers as specific areas of interest. We are joined by the following officials from the Office of the Revenue Commissioners: Mr. Niall Cody, chairperson; Mr. Joe Howley, collector general; Ms Andrea Dullea, principal officer; and Ms Leeann Kennedy, principal officer. We are also joined by Mr. Dermot Nolan, principal officer, from the Department of Public Expenditure, National Development Plan Delivery and Reform. To begin with, I call on the Comptroller and Auditor General, Mr. Seamus McCarthy, for his opening statement.

Mr. Seamus McCarthy

As members are aware, the Revenue Commissioners are responsible for the collection of taxes and certain 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 in law. Revenue accounts for these receipts and transfers in what is generally referred to as the Revenue account. The 2022 Revenue account was certified by me on 17 April 2023 and received a clear audit opinion.

Tax receipts payable to the Exchequer in 2022 amounted to a net €82.4 billion. This represented an increase of €14.9 billion, or 22%, on 2021. The tax heads that contributed most to the overall increase in receipts were: corporation tax, which was up €7.3 billion; income tax, which was up €4 billion; and VAT, which was up €3.4 billion. Non-Exchequer receipts collected by Revenue on behalf of other agencies amounted to a net €22.3 billion, an increase of 28% year on year. Pay related social insurance, or PRSI, contributions represented the largest category of such receipts. PRSI net receipts increased by nearly 19% on 2021.

In parallel with the audit of the Revenue account, I carry out examinations to assess the adequacy of Revenue’s systems for the assessment, collection and allocation of the revenues raised. Chapters 20 to 22 present the results of such examinations.

Revenue has been responsible for collection of the local property tax on residential properties since its introduction in 2013. The tax is administered on a self-assessment basis, with taxpayers required to declare the value of their property, in most cases within broad valuation bands, at a specific statutory valuation date. Reported payment compliance rates for the tax are very high. Any outstanding amounts of unpaid tax remain as a charge on the property and are often collected when a transfer of the property takes place, for example, through a sale or an inheritance. The net amount collected in 2022 was €500 million. This included arrears of tax of €51 million in respect of liabilities for 2021 and prior years.

Between 2013 and 2021, the tax liability was determined by the declared value or value band of the property as at 1 May 2013. Legislation enacted in 2021 required a new declaration of property values as of 1 November 2021, to apply for the 2022 to 2025 tax years. The legislation also provided for changes to the valuation bands and the associated payment amounts and brought an end to certain exemptions from the tax that had previously applied.

The examination found that the widening of the valuation bands provided for in the legislation did not fully reflect the increase in the sales prices of residential properties that occurred between the May 2013 and November 2021 valuation dates. While the differential suggests that a significant up-rating of valuations at November 2021 might be expected, this does not appear to have occurred. The report made a number of recommendations aimed at strengthening Revenue’s controls over local property tax, including those around the claiming of exemptions and payment deferrals.

The tax debt warehousing scheme was announced in May 2020 to support taxpayers whose businesses and incomes were significantly affected by public health restrictions associated with the Covid-19 pandemic. The scheme allowed eligible tax liabilities to be deferred interest free for a period and, if required, to benefit thereafter from a reduced interest rate until payment. Those availing of the warehouse facility were obliged to keep their tax returns up to date.

The amount of tax debt warehoused peaked at just over €3 billion in the first quarter of 2022. Many businesses subsequently paid off or reduced their debts. Nevertheless, at the end of July 2023, there were approximately 60,000 businesses or individuals still with warehoused debt totalling €1.9 billion. More than 3,400 of the taxpayers still availing of the scheme each had debts of €100,000 or more. Revenue had identified uncollectable debts totalling €85 million, mainly due to reasons such as business liquidations, examinerships, bankruptcy and cessation of trading. A total of 956 taxpayers had been removed from the scheme for these reasons.

The current scheme rules require taxpayers with outstanding warehouse liabilities to either agree a phased payment arrangement with Revenue or pay off their debt by 1 May 2024. However, as at the end of July 2023, just 4% of the outstanding value of the debt was subject to an agreed payment plan. Members are aware that potential changes to the scheme are currently being contemplated.

Corporation tax is payable on profits generated from income or gains. Subject to certain restrictions, companies can use eligible losses to obtain relief from the payment of corporation tax. The level of corporation tax losses brought forward has been relatively stable over recent years. At the end of 2021, approximately €242 billion of accumulated losses were available for offset against profits. This represents a significant potential reduction in future corporation tax receipts, of the order of €30 billion. Three major compliance projects on corporation tax losses undertaken by Revenue’s large corporates division since 2019 have yielded an additional €47 million in corporation tax receipts.

Finally, I will address the Appropriation Account for 2022. Revenue’s administration and operational expenses are charged to Vote 9 - Office of the Revenue Commissioners rather than to the Revenue account. Revenue’s total gross expenditure in 2022 was €492 million. Salary costs of €351 million account for over 70% of the spend. Taking account of appropriations-in-aid of €64 million, net expenditure under the Vote amounted to €428 million. At the end of 2022, there was a surplus of €14 million for surrender to the Exchequer. I issued a clear audit opinion in relation to the appropriation account. However, I drew attention to the non-compliance with procurement rules disclosed by the Accounting Officer in the statement on internal financial control.

An Cathaoirleach

As outlined in the letter of invitation, Mr. Cody has five minutes for his opening statement.

Mr. Niall Cody

I thank the Chairman for the opportunity to make my opening statement. In 2022, Revenue collected total gross receipts of almost €118 billion, including €22 billion in non-Exchequer receipts collected on behalf of other Departments and agencies. The net Exchequer receipts of €82.4 billion were up by 22%, or €14.9 billion, on 2021. Preliminary results for 2023 show that Revenue collected total gross Exchequer receipts of €127 billion.

Revenue’s gross expenditure in 2022 was €492 million, compared with €489 million in 2021. Revenue had 6,851 staff serving at the end of 2022 at a cost of €351 million. The other main item of expenditure was ICT, which accounted for some €72 million in 2022.

A new structure for LPT came into effect from 2022 whereby owners were required to revalue their properties based on the market value at 1 November 2021. The revised valuation determined the amount of LPT to be paid for each year from 2022 to 2025. Revenue’s administration of the tax, covering both service and compliance management, has shown that the majority of property owners make reasonable and honest efforts to value their properties. This aligns with the findings of our detailed analysis and comparison of self-assessed property valuation bands across the 31 local authority areas with CSO data.

The payment compliance rates for LPT for 2022 and 2023 are 97% and 95%, respectively.

The debt warehousing scheme was introduced in May 2020 to provide vital liquidity support to businesses impacted by the Covid-19 pandemic. The scheme allowed for the parking of certain tax liabilities relating to periods during which trading was restricted by public health measures. Under the terms of the scheme, most businesses were due to enter into an arrangement with Revenue to address their debt with effect from 31 December 2022. In October 2022, however, recognising the challenging economic situation facing businesses, Revenue announced a significant extension to the scheme whereby the timeline for making arrangements to address warehouse debt was deferred to 1 May 2024. Debt that remains in the warehouse is subject to an interest rate of 3% per annum, on condition current tax returns are filed and corresponding liabilities paid on time. This is a significant reduction from the standard interest rates of 8% and 10% per annum that normally apply to late payments of tax.

The balance in the warehouse peaked in January 2022 at €3.2 billion. At the end of 2023, approximately 58,000 taxpayers were availing of the scheme, with €1.756 billion currently warehoused. Almost 40,000, or 70%, of those availing of the scheme have warehoused debt of €5,000 or less, of which almost 30,000 have debt of €1,000 or less. Revenue’s approach to the payment of warehoused debt from 1 May 2024 will be flexible and tailored to each business based on its capacity to pay. Revenue will work with businesses so that they can continue to meet current liabilities as they arise, secure the viability of their business and minimise their interest costs.

Corporation tax losses are a standard feature of tax regimes worldwide. Data shows that the losses used per year, as opposed to carried forward, are broadly consistent, ranging from just under €10 billion to just over €14 billion in the most recent five-year period. Losses carried forward into 2021 increased by €10.6 billion to just over €222 billion. Approximately 28,000 companies used losses in 2021 totalling €12.2 billion, at a cost to the Exchequer of €1.5 billion. Losses carried forward can only be used where the company incurring losses becomes profitable.

The committee has also expressed an interest in the classification of employment, for which I have provided a briefing. Revenue’s role is to determine employment status for income tax purposes. Responsibility for PRSI classification rests with the Department of Social Protection, while the consideration of matters relating to workers’ rights falls within the remit of the Workplace Relations Commission. On 20 October 2023, the Supreme Court delivered an important judgment on the key factors to be considered when classifying an individual’s employment status for income tax purposes. The judgment brings welcome clarity and provides a decision-making framework to assist businesses to correctly classify workers between those who are employed or self-employed. Revenue will shortly issue detailed guidance to explain the implications of the judgment for tax purposes and is working closely with colleagues in the Department of Social Protection and the Workplace Relations Commission to update the joint code of practice on determining employment status.

I thank all Revenue staff for their professionalism, dedication and commitment, without which our achievements in 2022 would not have been possible. I draw the committee’s attention to section 851A of the Taxes Consolidation Act 1997 and my obligation to uphold taxpayer confidentiality. Subject to this constraint, I am happy to answer the committee’s questions.

An Cathaoirleach

I thank Mr. Cody.

Deputy Cormac Devlin

I welcome Mr. Cody and his team. It is good to engage with them again. I thank them for the information they provided in advance of the meeting. Mr. Cody referred to the net revenue collected by the Exchequer, which amounted to €67.5 billion in 2021 and rose to €87.2 billion last year, an almost €20 billion increase, which underlines the strength of the economy. I should say the headline strength of the economy, given there are underlying challenges, as we know, internationally and in various other quarters. As Mr. Cody did at the end of his statement, I thank the Revenue Commissioners for their professionalism, dedication and engagement with taxpayers. He referred to the debt warehousing scheme and I am conscious, as all the members of the committee are, of the letters that have issued over the past while and the flexibility and payment arrangements that are being afforded to the vast majority of companies where possible.

We have engaged previously on the local property tax, and Mr. Cody said there were changes to the tax bands announced in 2022, which is welcome. Revenue has had responsibility for the collection of the property tax since 2013, when it was introduced, and the sum collected is relatively consistent, at about €470 million per annum, a considerable proportion of which comes from my constituency, Dún Laoghaire, and the greater Dublin area. As part of the changes that were introduced in 2022, more than 100,000 previously exempt or non-liable properties were brought into the LPT system. Some people may have thought there would be an increase or uplift in the tax take at that point, but Revenue customers with payment methods fell between 2022 and 2023, with the compliance rate also dropping, as Mr. Cody said, from 97% in 2022 to 95% in 2023. It is estimated at about 80% for 2024, I think it is correct to say although, obviously, we are not yet through the year. What is being done to engage with those customers who have yet to pay or file and does Revenue have an indication of why compliance rates are falling? Is that Revenue's perception of how it will pan out for 2024?

Mr. Niall Cody

I thank the Deputy for his positive comments about what we have tried to do for businesses over recent years. On the local property tax, there is always a lag behind where we are at any time. It is consistent. Where we are now for the current year, at about 80%, is consistent with the same figures this time last year. There is always that lag. The figure fell from 97% to 95%, but if I am here this time next year, we will be talking about 97%, 95% and 80% with the years adjusted. It is cyclical. In 2022, there was an impact from Covid, as is covered in the comptroller's chapter, and we suspended enforcement activity.

For LPT, there is a November communication, a December communication and a payment date at the start of January. The single debit authority is taken from people's bank accounts on 21 March. That is the kind of compliant period. Normally what we do by the end of February is issue reminders to those who have not either paid or declared they are going to pay, but in 2020 and 2021, we suspended that because of Covid. A feature of tax compliance and tax payment - the collector general is here with me to talk about this - is that certain people will wait for a reminder before they act on-----

Deputy Cormac Devlin

Would it be fair to say that around March or April, Revenue will have a clearer picture, with probably a higher rate of compliance around that point, and that the lag will relate to stragglers throughout the year?

Mr. Niall Cody

Yes.

Deputy Cormac Devlin

Revenue estimates, as Mr. Cody said, that the 80% we are at now is a regular occurrence year on year.

Mr. Niall Cody

Yes, absolutely.

Deputy Cormac Devlin

We are not in the territory, therefore, of a dangerous lack of compliance.

Mr. Niall Cody

No, the compliance rate-----

Deputy Cormac Devlin

I might just change the focus. Mr. Cody said €51 million has been collected from arrears or those who have not filed. Does that include those who have deferred payment?

Mr. Niall Cody

No, the €51 million reflects what happened during Covid in that we suspended the compliance activity. In 2022 and 2023, we would have collected a significant amount of tax appropriate to 2020 and 2021-----

Deputy Cormac Devlin

I apologise for interrupting, but approximately how many property owners are in that €51 million?

Mr. Niall Cody

The average property tax is probably something around €400 or €500 when you take in all the bands. A significant proportion are in the first three rates. I would have to do a bit of mental arithmetic.

Deputy Cormac Devlin

For that cohort, is a payment arrangement added annually to their existing liability or what is the proposal to deal with that €51 million?

Is it a payment arrangement on an annual basis added onto the existing liability year-on-year? How is it proposed to deal with that €51 million?

Mr. Niall Cody

Generally, the arrears are collected in full. If people did not pay the 2021 LPT in 2023, they owe money for 2021 and 2022 and we would collect the two payments. We have fairly extensive payment options. A lot of people pay by direct debit over the year without any interest charge. People pay through deduction at wages. When the LPT was introduced in 2013, we tried to make it as hard to avoid and as easy to pay as possible, with a number of payment options.

Deputy Cormac Devlin

For the cohort that has deferred, for various reasons, how many have deferred since the introduction of the LPT since 2013? Has the figure increased year-on-year?

Mr. Niall Cody

We have the deferred figures. It will be a matter of laying my hands on them. The deferred figures have stayed fairly constant. I think there are about 30,000 deferred cases. That figure has stayed fairly constant.

Deputy Cormac Devlin

A lot of them are probably the same properties over a given number of years.

Mr. Niall Cody

Deferral arrangements very much have to do with people's income and ability to pay. The largest proportion is probably pensioners. If people differ, there is a reduced interest rate. Interest applies to the property at a reduced rate. The normal interest rate is 8%, but for deferrals it is 4% and was subsequently reduced to 3%.

Deputy Cormac Devlin

Mr. Cody might come back to me on the figures for the number of people who have deferred year-on-year. On how many properties is the LPT being collected, such as for properties that have been inherited or following the sale of a property?

Mr. Niall Cody

I will definitely come back to the Deputy on that before the morning is out.

Deputy Cormac Devlin

I am honing in on this because it is something we raised with the Revenue Commissioners when it came before us last year. It is a figure I am interested in obtaining. The Revenue Commissioners sent on a note afterwards. I want to see if there is a stable volume year-on-year.

Mr. Niall Cody

LPT is a very stable tax. It has been consistent throughout the period. The number of exemptions claimed was 20,350 and the number of deferrals was 11,598. In the context of 1.97 million properties, that is a very low figure.

Deputy Cormac Devlin

Okay. I thank Mr. Cody for that. I want to turn to debt warehousing. Mr. Cody said 57,811 customers with €1.75 billion owed money under the debt warehousing scheme. Two thirds of those customers have a low balance of under €1,000 but there are far more significant cases with almost 3,120 customers owing over €100,000. I note there was a significant reduction in debt levels between July and December 2023. How was this achieved? What element of write-off, if any, has there been in that figure?

Mr. Niall Cody

At its height, the figure was €3.2 billion and is now €1.75 billion. The bulk of that reduction relates to payments. About €200 million relates to businesses who had their debt warehousing status revoked because they failed to meet their current liabilities. A significant amount of money was paid before the 3% interest rate started to kick in. Originally the rate of interest was 0%. Businesses which could pay did pay. That was welcome. Close to a billion of the reduction was in actual payments. A number of businesses have entered into instalment arrangements. We published figures on this. Some €158 million is under phased payment arrangements. There was a €1.4 billion reduction and, as the Deputy said, most businesses in the 57,000 cohort have a small amount of debt. Some will be surprised to find out that they are in still counted in the debt warehouse figures because they have a small balance of less than €500. That will be picked up and worked out.

Deputy Cormac Devlin

Is there an element of debt write-off in any of that? Revenue has not yet got to the stage where people are engaging.

Mr. Niall Cody

People are engaging. The data warehousing scheme is the cheapest finance available.

Deputy Cormac Devlin

It is a far lower rate.

Mr. Niall Cody

Last week, I heard on the radio about people taking out finance to clear their debt warehousing. Why would people do that? I hear many commentators talking about this. Our key message is to keep viable businesses in place. The debt warehouse was introduced to keep viable businesses in place when they could not trade properly. It would not make any sense for us to suddenly pull the shutters down on everybody and say that they have to pay.

The key message I want to get out today is that businesses need to keep their current tax up-to-date and paid. That is the proof that they are viable businesses. We will make appropriate tailored arrangements for businesses to clear the warehouse over the period that is necessary for them to keep their current finances up-to-date, having regard to their financial position. At the end of this process, whenever that is, we want businesses to continue to trade.

We never had a debt warehouse before. We are now essentially managing a loan portfolio. We have chatted about the challenge for the Collector General and his staff who are used to dealing with normal tax debt. They now have to try to take different approach. We had to stand on our head through the pandemic. Our nature is to collect money, but we became a payment agency for a while. We now have to manage the fallout of that. We want to manage it in the best interests of businesses and the Exchequer. It is far better for the Exchequer that businesses continue to function, employing people and paying tax.

Deputy Cormac Devlin

That is evident. In terms of those arrangements and the flexibility I spoke of earlier, if somebody is unsatisfied with the proposed arrangements from the Revenue Commissioners what recourse do they have? Is there an internal appeals mechanism or is it independent? How does Revenue ensure that the fairest and most flexible system is afforded to businesses or individuals?

Mr. Niall Cody

We are not going to impose conditions. The key condition for us is that current tax is returned and paid. We will then accept proposals. I heard people speak about a 25% or 45% down payment. If a business cannot make a down payment this year and put that to us and state what it will be able to do, we will not be in a position of having appeals because-----

Deputy Cormac Devlin

I understand that.

Mr. Niall Cody

If we tried to impose a range of more than 5,000 cases, we would not have the resources to do that along with our normal work.

Mr. Joe Howley

I fully support that. To the foremost of our minds is to support viable businesses and protect jobs. As Mr. Cody said, once a business is viable and can keep its current taxes up-to-date we will work with it. We ask businesses to engage with us and we will work with them. We will work out a very flexible payment arrangement for the warehouse debt that is tailored to a business's individual circumstances.

We orientate our staff to think differently about warehoused debt. In fact, this day two weeks I will hold a conference for debt management staff in my division to reorientate them in that way to think differently. This is different. It is a Government support scheme and, as Mr. Cody said, it needs to be thought of as being in the realm of a loan system. There will be total flexibility on the payment arrangements. In fact, the down payment is almost a misnomer at this stage. We do not need a down payment. All we need is as little as €1 to set up a system in our IT systems.

Deputy Cormac Devlin

The Revenue Commissioners works on a payment plan. I appreciate this is completely counterintuitive for some of its team, but that flexibility is there. What is the level of non-engagement overall? Does the Revenue Commissioners have a figure for that as of yet? Does it find most taxpayers are willing to engage?

Mr. Niall Cody

We find a total willingness to engage. What we have been doing for the last few months is engaging with the roughly 5,400 cases that have debts in excess of €50,000, because they are obviously key to us. We have been phoning them and talking to them and their tax agents. We have got full co-operation there and, as the Chair has said, the time to start setting up payment arrangements has not arrived yet. The level of payment arrangements set up so far is low but we suspect that will increase substantially as the year continues.

Deputy Cormac Devlin

I thank Mr. Cody very much.

Deputy John Brady

The witnesses are very welcome here this morning. I want to start off with the issue of bogus self-employment. I welcome the Supreme Court judgment of last year, which I describe as a landmark decision on the issue. I will ask Mr. Cody a "Yes" or "No" question. Does he agree that it is a landmark decision on the issue of bogus self-employment?

Mr. Niall Cody

We really welcome the decision of the Supreme Court in the case. It gets lost that this is a case that Revenue took. We brought it through four levels of determination.

Deputy John Brady

I appreciate that. So does Mr. Cody agree that it is a landmark decision?

Mr. Niall Cody

It is a really welcome landmark decision, but I must stress that the court was concerned about the tax treatment of the drivers involved. The court was very clear that issues of employment rights were not before the court. It was a matter of tax treatment. What it really does is it brings up to date all the case law around employment status.

Deputy John Brady

I will get into a little bit more detail about courier drivers and the likes in a moment but I want to talk about bogus self-employment in the first instance. Does Mr. Cody agree that some employers who bogusly force their employees into self-employment are committing fraud?

Mr. Niall Cody

I think that, as the court recognised-----

Deputy John Brady

Is it fraud? Would Mr. Cody class it as fraud?

Mr. Niall Cody

On the use of the term "fraud", non-compliance with the law is an offence. On the question of fraud, there is a legal test on whether something is fraud. We take non-compliance and misclassification very seriously and we have consistently done so.

Deputy John Brady

Is it fraud if an employer knowingly forces an employee to be self-employed in order that the employer can forgo its employer PRSI? It is a simple "Yes" or "No".question. I am not talking about the court case or anything like that. Would Mr. Cody deem it to be fraud if an employer knowingly forces an employee to go self-employed?

Mr. Niall Cody

I think that would be illegal.

Deputy John Brady

Has Revenue ever tried to ascertain a figure as to how much is lost to the State on an annual basis? Figures have been put out there. For example, over an eight-year period ICTU estimated a loss of €640 million in the construction sector alone. We know bogus self-employment is not just prevalent within the construction sector, it is in the media, as we saw with RTÉ. I will touch on that in a moment. We also see it in education and in the gig economy. Given the court case and the Supreme Court findings, what actions have been taken by Revenue to try to ascertain a figure?

Mr. Niall Cody

It is practically impossible to put a figure on the potential loss. We consistently review the status of employment and self-employment when we carry out all our compliance visits, including visits to construction sites. I have given the committee some figures in the briefing material. The evidence does not suggest that bogus self-employment was rife prior to the Karshan decision.

Deputy John Brady

Does Mr. Cody dispute the figures produced by ICTU?

Mr. Niall Cody

I do.

Deputy John Brady

On what basis?

Mr. Niall Cody

I think they are overstated.

Deputy John Brady

Is Mr. Cody saying that based on comprehensive analysis by Revenue?

Mr. Niall Cody

Based on our visits and our examinations. The idea that every self-employed subcontractor is an employee, which is the inference from some of the figures, does not hold up.

Deputy John Brady

Okay. That is based on site visits and the scope section.

Mr. Niall Cody

It is based on the work we do, examining individual businesses and the relationships within them. My colleague, Mr. John McKeon from the Department of Social Protection, was in here last week and he said exactly the same thing.

The situation fluctuates. Sometimes the power relationship is different depending on how the economy is going. It is important to stress that in a lot of cases, the subcontractor wants to be self-employed but this is not always the case. We have examples where we have said we think this is an employment relationship and both parties disagreed with us. This is not simple. This is the judgment of the Supreme Court. If this was as simple as the Deputy may be implying, we would not have 189 pages-----

Deputy John Brady

I am certainly not implying that it is simple, but I make the point to Mr. Cody that comprehensive analysis has been carried out to show that in the construction sector alone, €640 million has been lost to the State over an eight-year period. If we extend that into all of the other sectors, that is potentially a massive loss in terms of revenue to the State over a sustained period.

I will move to the decision taken in 1997 that led the Revenue Commissioners to label courier delivery drivers as self-employed for the past 27 years. Mr. Cody is shaking his head. Does he dispute that?

Mr. Niall Cody

I do. I have discussed this at the committee before. We did not label couriers as self-employed. We had an arrangement whereby if a courier was self-employed, the main contractor could opt, by agreement, to pay the tax through the PAYE system. That was the case only if the courier was self-employed.

Deputy John Brady

Is that in the code of practice?

Mr. Niall Cody

This predates the code of practice and then the code of practice set out the conditions. If we labelled couriers as self-employed, why would we have ever taken the Karshan case, involving delivery drivers?

Deputy John Brady

Okay. Does Mr. Cody dispute that any precedential criteria were given to the classification of couriers going back to 1997?

Mr. Niall Cody

There were decisions by the scope section in relation to couriers and individual delivery drivers. Our interest is collecting tax that is due as efficiently and effectively as possible.

Deputy John Brady

I am just conscious of the clock. What actions or work have been taken by Revenue since the Supreme Court decision last year to ascertain how much money has been lost over a lengthy period?

Mr. Niall Cody

What we have done since the Supreme Court decision is that we have issued a notice to tell all businesses that engage subcontractors to review their position-----

Deputy John Brady

No. I am aware of that but what specific work has been carried out with a view to ascertaining how much has been lost to the State by the wrongful classification of courier drivers?

Mr. Niall Cody

What we are doing is we are asking businesses to review the position. From a tax perspective, there is no material difference in the tax treatment.

Deputy John Brady

Is Revenue asking them to voluntarily go and do that?

Mr. Niall Cody

What we want-----

Deputy John Brady

What specifically is Revenue doing in terms of an investigation? I am conscious, as is Mr. Cody, that a report on this specific issue was published by the Committee of Public Accounts back in 2021. It made a very serious recommendation that an independent investigation would be carried out. Has that recommendation ever being acted upon? Given the Supreme Court judgment of last year is that now going to be acted upon?

Mr. Niall Cody

We will be acting upon the Supreme Court judgment and will be reviewing the position.

Deputy John Brady

So Revenue is not going to listen to the recommendation from the committee that after-----

Mr. Niall Cody

I answered the recommendation and said that we have no authority to engage an independent inquiry. We did not accept that recommendation.

Deputy John Brady

I will come back to this.

An Cathaoirleach

Okay.

Deputy Alan Dillon

I welcome Mr. Cody and his officials joining us this morning. I would first like to get a deeper understanding on the efforts of the Revenue Commissioners to combat tax evasion and white-collar crime, particularly in regard to money laundering. Will he give a breakdown of the staffing within the Revenue Commissioners that deals with tax evasion and money laundering?

Mr. Niall Cody

We are not a competent authority in relation to money laundering. Tax evasion is a predicate indication of money laundering. We deal with the tax evasion piece. We have 6,800 full-time equivalents, of whom 3,200 are involved in compliance activity across a broad range. We do not specifically distinguish between various different types of tax evasion but our structure is organised such that we have a large corporates division, a high-wealth division, a medium enterprise division, a business division, a personal division, the Collector General and an investigation and prosecutions division. Serious tax evasion is a matter for each of those divisions having regard to their case base. Serious matters are for the investigation and prosecutions division. We were involved whereby a lot of the indications of money laundering include extensive exchanges of information at international level and offshore. Going back to the Committee of Public Accounts in the late 1990s when former Deputy, the late Mr. Jim Mitchell was Chairman of the committee, there was the whole bogus non-resident accounts issue, which led into the offshore accounts. In that whole area of offshore investigations that we carried out for 20 years, we collected more than €3 billion in serious tax evasion.

Deputy Alan Dillon

How regularly does Revenue co-operate with the Garda National Economic Crime Bureau?

Mr. Niall Cody

We engage with our partners in An Garda Síochána and with the Central Bank as cases arise. We are also involved in the Department of Finance, which shares the anti-money laundering area. Revenue is not the core member but we are an associate member and we attend as required. Every so often at EU level there are peer reviews and there is also the financial action task force, FATF. They come and visit us and we get a clear bill of health on our activity in that area, which we take very seriously.

Deputy Alan Dillon

With regard to the investigation and prosecutions division, how many personnel operate in that area?

Mr. Niall Cody

I can confirm these figures later but the investigation and prosecutions division has 1,200 people but that also includes border control. The core investigation and prosecution part of that division is probably 150 personnel. Each of the national divisions has people working on compliance, evasion and assurance.

Deputy Alan Dillon

My questioning is going towards reports by the International Consortium on Investigative Journalists, ICIJ, on financial transactions in Cyprus. This leads me to the Revenue Commissioners and whether it has conducted a comprehensive review into Irish-owned companies funded from moneys from Cyprus. Has Revenue conducted any review?

Mr. Niall Cody

We pay very close attention to the various publications of the ICIJ. In fact, I was at the committee a few years ago talking about previous issues around the Panama papers and so on. At the time we wrote to the ICIJ and asked them to exchange the information they had but I am afraid they declined. Every time the ICIJ produces a data source, we look to see if there are entities of interest from a tax perspective. In a lot of that kind of funds investment there is no Irish tax at risk. We look to see. Through all those offshore investigations and the Panama papers we would have had a yield but a relatively small yield because there was no significant tax at risk. We do, however, pay absolute close attention and we pay close attention to anything that is going on.

Deputy Alan Dillon

Does Revenue have a mechanism to see where Irish businesses are being funded through Cypriot bank accounts or legal entities?

Mr. Niall Cody

There is exchange of information on financial movements across the EU and the wider OECD. We get details of offshore assets in bank accounts with masses of data. We also exchange masses of data because Ireland is also a centre of significant financial services industry.

Deputy Alan Dillon

In Revenue's investigations, how many Irish firms are currently under investigation from sourcing money from Cypriot legal firms?

Mr. Niall Cody

I could not even say off the top of my head that there is any element of Cypriot money. There is no suggestion that all Cypriot money is in some way risky. I would not like that idea to go out there. We have an exchange of information with the Cypriot authorities as we do with all the other member states.

Deputy Alan Dillon

With regard to the Carey case, which is a high profile case, can Mr. Cody provide an update on that?

Mr. Niall Cody

I apologise to the Deputy. I did not catch the name of the case he referred to.

Deputy Alan Dillon

Is Mr. Cody aware of the Carey case? It is a case currently in the courts and under investigation. Is there an update from Revenue on that?

Mr. Niall Cody

I must be careful. I cannot talk about individual cases.

Deputy Alan Dillon

This relates to the urgency that Revenue has in investigating certain cases with An Garda Síochána. Has Revenue had any prosecutions to date around any findings of tax evasion or money laundering? How does Revenue recoup some of that in respect of its annual accounts?

Mr. Niall Cody

If we carry out an investigation and there is tax evasion, we seek to collect the tax, interest and penalties. We do refer a number of cases for prosecution. There were 21 serious evasion and fraud convictions in the past year. There were also 283 summary convictions.

Deputy Alan Dillon

I will move on to the Customs and Excise and enforcement. What types of trends is Revenue observing in this area? Are any specific violations becoming more prevalent?

Mr. Niall Cody

Last year was an exceptional year. The headline was probably cocaine.

The high-profile situation with the MV Matthew in November 2023 will be fairly familiar to everybody. It was a record seizure and a really good example of inter-agency co-operational work involving the Army ranger wing, which boarded the ship based on co-operation with MAOC N, which is based in Lisbon, and where we have staff member. It was also involved in this. The level of cocaine seizures was probably the highlight, and it was the lowlight in some ways. It has been really significant and it has been followed up by a big seizure a couple of days before Christmas in Foynes. There has been a very significant level of seizures in Rosslare.

Rosslare used to have six ferries during the week in winter and ten during the week in summer. Now, there are 36 ferries weekly, so that opens up whole new operations. On one level, our customs work has exploded. The last time I was here I was talking about 44 million import entries, compared to 1 million before Brexit. Yesterday, I was reading the up-to-date figure. Last year, we had 79 million import entries. They are all the legitimate returns to us, yet in those legitimate entries, there is hidden contraband, counterfeit, drugs, cigarettes-----

Deputy Alan Dillon

How has the Department responded to staff this, such as through officers at boats, airports and ports?

Mr. Niall Cody

I spoke about our investigation prosecution before the committee. The management division has staffing of approximately 12,000. Ms Kennedy has just shown me the figure of 12,058. Taking Rosslare as an example, before Brexit we had 18 allowance posts. They are available 24-7 because many of the ferries come in very early in the morning. That figure of 18 has now become 80. In 2019, we had a fairly significant recruitment because of Brexit. We made a business case to the Department of public expenditure on staffing for Brexit. We did a really successful recruitment in 2019 to get us ready for Brexit. However, it was a big challenge. There were IT systems to deal with that and there was a significant increase in customs receipts as a result of our closest trading partner leaving the Single Market.

Deputy Alan Dillon

I thank Mr. Cody.

Deputy Paul McAuliffe

I want to go back to the issue of the LPT, but before I do so, I thank the Revenue Commissioners for the work they do because, ultimately, all the other bodies that come before us and account for the public money they spend in a great part is done because of the work of the Revenue Commissioners. The delivery of service in the areas of the health service, education, etc., because of the Revenue Commissioners is very much appreciated.

Is there a figure for the number of properties where there was no level of engagement with or compliance with the LPT?

Mr. Niall Cody

The non-compliance rate, once you get over the natural lag that is in any tax system, is approximately 3%. I have been involved in the LPT from the very start. The first thing we had to do was build a register because there was no register of residential properties anywhere. Eircodes had not been introduced. We had to build up a register. The definition can be seen in the context of the vacant homes tax, because the property has to be habitable. That was a challenge in the context of finding the valid, actual, full number of properties. I do not think we will ever fully get it-----

Deputy Paul McAuliffe

I imagine at this point that Mr. Cody has probably settled on a number that the Revenue Commissioners have deemed liable for the tax but are not complying with it. He said 3%, but does he have a rough figure of what that might be?

Mr. Niall Cody

Every 1% is approximately 20,000 cases.

Deputy Paul McAuliffe

It is therefore the case that 60,000 homes across the country are not paying the LPT, are not engaging with the Revenue Commissioners in any way, have not applied for a deferral and there is no interaction between them and there is no interaction between them. What is the length of time for how the Revenue Commissioners would pursue that? Do they have a policy of allowing it to accrue and having it settled on sale?

Mr. Niall Cody

The difference between LPT and any other tax is that it remains a charge on the property. The charge accumulates. Even though property tax is actually quite low relative to other international countries, it still accumulates. It accumulates and interest accumulates. It remains a charge on the property. In a way, that becomes the backstop. Individual amounts compared to other taxes are low, but we do have-----

Deputy Paul McAuliffe

It is unlikely that debts would ever exceed the sale value of the property for example. Certainly, it would take a considerable time to do so.

Mr. Niall Cody

We will not be here when that happens.

Deputy Paul McAuliffe

No, but there will be properties that will not be sold, so LPT may never be recouped. Is there any long-term strategy for those? After five, ten or 15 years, we are starting to get into those-----

Mr. Niall Cody

We constantly look. Regarding some of the properties where there has not been engagement, there is a real challenge about knowing who the taxpayer and the owner are. It is not clear. There is the title. Some of them are probably owned by people who are not in the country. Correspondence is delivered and it is not seen because many people who own properties have left the country. To get that engagement, we need to know the definite owner. Part of our challenge around that 3% is that we actually do not know the definite owner. That does not mean we will ignore them. We are constantly working to improve the register and improve the LPT-----

Deputy Paul McAuliffe

Obviously, if they were to be sold at some point, the owner would come forward. I imagine the Revenue Commissioners have quite good relationships with the legal profession in ensuring those sales are-----

Mr. Niall Cody

Absolutely. The legal profession in a way becomes one of the clearances or one of the checks. The solicitor selling the property, and most importantly the solicitor representing the buyer of the property, will ensure there will be no LPT.

Deputy Paul McAuliffe

Do the officials have the value of what LPT arrears are recouped in any one year from executor resolutions of properties? They might provide us with that, if they could do so afterwards. In some way, it is a cost-free collection process from the perspective of the Revenue Commissioners.

Mr. Niall Cody

In a way, LPT is actually one of the more expensive taxes we administer. It is far more labour-intensive.

Deputy Paul McAuliffe

Is that because of the valuation process?

Mr. Niall Cody

No, it is because we are dealing with a case. We keep talking about a case base, but we have to remember that they are people. There is a population that is liable to LPT who do not normally have to engage with the Revenue Commissioners. On the nature of property ownership, they tend to be older and we get a lot of contact from people who wish to check and be sure that they have done it right. People go into the post office and pay it through the post office, but they actually do worry. Many older people are really worried that there is anything outstanding on their LPT. They therefore ring us.

Deputy Paul McAuliffe

That is my experience from dealing with many of those people as well. I am conscious of time. Mr. Cody said that identifying the owner is one of the key obstacles. I know from experience with the non-principal private residence, NPPR, charge when I was on the local authority that it was also one of the factors. However, I have come across the disgraceful issue of how for many years many women did not have their own PPS numbers.

They were assigned their husbands' PPSN with a "W" after it. I have come across a number of cases where a new PPSN is issued following the death of the husband and there is not an automatic connection between that and the local property tax, LPT, process. The LPT property can be registered either under the old number or the new number, and the person concerned may not even be aware that they have been issued a new PPSN. I came across a case yesterday of a person who has been collecting their old-age pension for two years on a new PPSN and they never even knew about it. Does Revenue engage with social welfare in regards to that process?

Mr. Niall Cody

We do. I thought for a minute the Deputy was going to mention a particular case. I was reading a report about W case and LPT, and that was the connection. We have a really close relationship with the Department of Social Protection. We have done various exercises on the W number. On the exact case the Deputy has mentioned, and the idea that the husband dies and the wife has never had a PPSN in her own right, there is a portion of those cases. We correct them as we come across them. I do not know how many years ago we did a-----

Deputy Paul McAuliffe

Is the person notified both by Revenue in terms of the LPT registration and the Department of Social Protection in terms of issuing a new PPSN? There does seem to be a communications gap there.

Mr. Niall Cody

I think there is a gap. We would normally pick up on income, earnings and jobs. I saw a case recently where the LPT was the only challenge and it was the W number. We are------

Deputy Paul McAuliffe

If Revenue could examine that, I would appreciate it.

Mr. Niall Cody

If the Deputy could give me details of the case------

Deputy Paul McAuliffe

I can.

Mr. Niall Cody

Cases always help. We will sort it out.

Deputy Paul McAuliffe

To be fair, Revenue has engaged with it to sort it and I am in the process of dealing with it.

Mr. Niall Cody

If there is a system solution, it is better.

Deputy Paul McAuliffe

I will move on to the issue of social media influencers, on which I imagine there is not much commentary at Oireachtas committees. I know Revenue issued 142 letters to social media influencers. I ask the witnesses to talk us through the process of selecting those people and also how it treats the different types of income they might have. For example, if a social media influencer receives a gift, a hotel stay, a product or a paid fee, how does Revenue intend to treat that? There will be people who may regard themselves as social media influencers but are getting a very small amount or low level of income. It is a new industry. How is Revenue approaching it?

Mr. Niall Cody

The reality is that it is a new industry, but the tax rules apply to them just like they apply to anybody else. It comes down to the basic income tax rules. If they are getting an income in money or in kind, they are liable to the self-assessment system. What is different over the last while is that we are getting third-party information in. They get money from somebody. We get data from the parent entity telling us, for example, Niall Cody is getting X amount. Some people return-----

Deputy Paul McAuliffe

Revenue is taking the information from the sponsor as such, rather than the influencer.

Mr. Niall Cody

We pay close attention to any business line. Over the last while, is have engaged in what we call our code of practice for compliance interventions. We have three levels of intervention. Level 1 is a reminder to somebody that if they have issues, they need sort them out. Level 2 is getting into an audit compliance intervention-type approach and is where we have seen returns that might not necessarily reflect the information that we have. I have seen some of the cases. Some of the people involved are actually very young and probably have no real understanding of it. What we are trying to do is to educate people to get them into the system. Our main interest is to get people to become compliant.

Deputy Paul McAuliffe

I have one last question. The social media space relies on people referring each other. It is like customer referral, where you walk into a shop and you are recommended somebody else. It is that idea of collaboration and referral and so on, where no money is exchanged. Obviously, that is not the target of what Revenue is doing. It is targeting where there is a benefit exchange.

Mr. Niall Cody

Ultimately, we are the tax authority and tax is payable on income. Sometimes that income is not in monetary terms. There are complex rules around that. There is gift tax and the like, and sponsorship. Some of it, like everything else in the tax code, gets very complicated.

Deputy Paul McAuliffe

If an influencer gets a free hotel stay or a free meal to review the product, that is not necessarily income, is it?

Mr. Niall Cody

There is a continuum over which one thing is taxable and the other is not. We have detailed guidelines around all of that. There are issues around brand sponsorship and cars being given to intercounty managers, or whatever. Some of that is not taxable because there is nothing given in return, and some of it is.

Deputy Paul McAuliffe

We may have the witnesses back to discuss all of that.

An Cathaoirleach

That could be a tricky area.

Mr. Niall Cody

That would be a failure on my part if the only success I have is somebody inviting back again.

Deputy Paul McAuliffe

I am going to stop in case I get someone in trouble.

Deputy Catherine Murphy

I welcome the witnesses. Probably the main reason we invited representatives of Revenue in today, and representatives from the Department of Social Protection last week, is the Karshan judgment and its implications. It is a very welcome judgment because it will clarify matters. Revenue is going to produce a document following on from that. When is it likely to produce it?

Mr. Niall Cody

I have Ms Dullea with me today because it is her job to draft the document. We have the current document with us. We have undertaken to finalise the draft and distribute it to all the parties that will have an interest in it, including the Restaurants Association of Ireland and various other external stakeholders.

Deputy Catherine Murphy

My time is tight and there are a number of questions I want to ask. I am not being rude. It is likely that the committee will write a short report following the meetings with Revenue and the Department of Social Protection. Obviously, there is a third entity, the Workplace Relations Commission, WRC, on the employment rights side. We could make a recommendation on the definition of employment and whether that needs a statutory basis. I read part of the Kashan judgment last week to the officials from the Department of Social Protection. It states:

The issue presents itself here in the context of drivers who provide delivery services for the respondent’s pizza business. The respondent (‘Karshan’ ) contends that these drivers were engaged as independent contractors under contracts for services, while the appellant (‘Revenue’ ) argues that they were employees retained under contracts of service. The resolution of that dispute determines which of two legal regimes governs the taxation of the drivers’ income.

There is a real difficulty when there are two legal regimes.

Mr. Niall Cody

I think what the court is saying there is that there is employment and self-employment. Those are the two different legal regimes.

Deputy Catherine Murphy

Okay, rather than the two Departments.

Mr. Niall Cody

What it is trying to say is that there are contracts of and contracts for services.

Deputy Catherine Murphy

That clarifies the matter for me. Revenue gave us a very helpful briefing note, which states that decisions of the individual agencies are not binding on each other. The three agencies are the scope section of the Department of Social Protection, Revenue and the WRC. The entities are independent but are they completely independent? In the past, has Revenue taken a decision of the scope section and used it in a determination on the Revenue side?

Mr. Niall Cody

The three entities work closely together and in most cases we have the same interpretation of the situation. We are all trying to establish whether a case is employment or self-employment. What will happen as a result of the Karshan judgment, is that it will probably bring closer alignment because the court really sets it out very well. The court leaves it open to say there are issues, especially relating to employment rights, that are not determined by the judgment because a whole raft of legislation underpins employment rights. The court essentially sets out the five tests and they are applicable to all of us.

Deputy Catherine Murphy

I am aware of that.

There was a change in 2019 because of the change in the flat rate of the tax allowance scheme. Am I correct to assume that change means that some people will now be assessed as self-employed rather than PAYE workers? How does now that play out, for example, for couriers?

Mr. Niall Cody

I am not 100% certain-----

Deputy Catherine Murphy

The flat rate tax allowance scheme-----

Mr. Niall Cody

Now I understand what the Deputy is saying. When we introduced PAYE modernisation and moved to a payroll system and payroll reporting, effectively that changed the nature of how allowances are claimed. In a way, it did not change anything, apart from the reporting mechanism. We had an arrangement where we recognised that a self-employed business is entitled to its expenses and we reckoned 40% would cover that. Then with PAYE modernisation that scheme ceased.

Deputy Catherine Murphy

Okay. An argument has been made that test cases were used in the scope section and they were used in turn by Revenue which historically defined couriers, for example, as a class of self-employed worker. Would Mr. Cody agree or disagree with that? What is his view on it?

Mr. Niall Cody

I have said already that I disagree with it. The arrangement we entered into was that if you were a self-employed person, such as a courier, the PAYE system could be operated to return the tax that was due. It did not determine that someone was self-employed. It was that if you were self-employed, this arrangement could be used. It had regard to the facts and circumstances of the case. As I said, we have been challenging bogus self-employment consistently throughout the past 20 years. We engage on it.

The relevant contracts tax was introduced in 1971 to reflect practices that were taking place in the construction sector. These sectors are traditionally a mix of principal contractors, subcontractors and employed people and that mix fluctuates as time goes on. New industries have grown up. One of the things we are interested in looking at is the idea of extending the scope of relevant contracts tax to sectors where there is subcontracting, where people are self-employed rather than employees. The biggest feature in recent years is the growth of personal service and managed service companies, the corporate structure. At the high end of subcontracting, it is rarely a self-employed person; it is a company. Companies present a particular problem. We cannot look through a company's structure to reclassify a company as an employee.

Deputy Catherine Murphy

I will move on. As I said, the document the Revenue Commissioners gave us is very helpful. I was surprised at the remarkably stable number of companies that use couriers and that it is quite a low number. It is not the only one. It is an example. We can see the consequences for the likes of RTÉ where there was a Revenue settlement and a major investigation is ongoing in the scope section. There are consequences. It is important that people actually see that. Are the Revenue Commissioners taking other cases similar to the Karshan case? Are any other cases like that pending or will that case be the predominant one to set the standard?

Mr. Niall Cody

We have a number of - I do not want to use the term "investigation" - examinations of companies that are involved in subcontracting that are ongoing in the past few years. We are now checking whether the implications of the Karshan case will change the interpretation in some of those cases. The big growth area is probably delivery services. In the e-commerce sector, there is a mushrooming of couriers, a lot of subcontracting and a lot of intermediary companies. The major companies will have subcontracted the work to companies that will have subcontracted it to individuals. The Deputy will see when walking around town that people do deliveries in their own cars. There is a shortage. We have examinations in the media, in the delivery sector, and constant examinations in the construction sector. Misclassification is not the only issue in these sectors. Some people are not operating in the system at all. Back in the day, there were times when we did site visits to construction sites and as we were going in the front door, lads were running out the back. That has been a feature of a lot of businesses-----

Deputy Catherine Murphy

Is there a growing black economy? Is it quantifiable?

Mr. Niall Cody

I would say that overall the levels of compliance are strong. In 2020, 2021 and into 2022, we essentially suspended compliance activity. We flipped to wage subsidy schemes and gave a lot of tolerance to businesses. The reality is that some people took advantage of it. I was looking at a case in the construction sector. Up to 2020, the company had X number of employees and X number of subcontractors. While the wage subsidy scheme was in place, the number of subcontractors that were converted into employees was high. The health restrictions were then lifted and they were reclassified as subcontractors. Much of that is done in agreement with both parties. Sometimes we look at a case, where neither party wants an employment relationship. Then something goes wrong. There was a big case in the UK - it has gone through all the levels - in which the employee was a subcontractor. This was well paid work. Then the person got injured and wanted to be recognised as an employee. The case went through all the stages of the UK courts.

Deputy Catherine Murphy

On the ones where they were employees under the wage subsidy scheme, and then they were not employees-----

Mr. Niall Cody

We are not happy with them.

Deputy Catherine Murphy

Is Revenue doing something? What can it do?

Mr. Niall Cody

We absolutely are. Essentially, you cannot be an employee when we are giving you money-----

Deputy Catherine Murphy

What kind of money is involved?

Mr. Niall Cody

I cannot talk about individual cases.

Deputy Catherine Murphy

Not in a particular company, but in that-----

Mr. Niall Cody

There are not many examples of it. What we call egregious abuse of the wage subsidy schemes was very low.

While I would not be shocked by any case, if some of them were seen people would say they were absolutely outrageous. In a way, it goes beyond tax evasion because it is abusing a support system that was put in place when public health restrictions applied. We take it very seriously.

An Cathaoirleach

We will suspend for ten minutes. The next committee members due in will be Deputies James O'Connor, Marc Ó Cathasaigh and Colm Burke in that order.

Sitting suspended at 11 a.m. and resumed at 11.13 a.m.

Deputy Catherine Murphy took the Chair.

Deputy Colm Burke

I thank Mr. Cody for his presentation. I was interested to hear about the black economy. There is a story in Cork about Revenue sending two female employees onto a building site to sell GAA tickets in order to gather names and addresses. That is going back a good few years. I believe it was quite a successful operation. That was well over 20 years ago.

We have got a detailed breakdown of the taxes. The big one is the increase in corporation tax receipts from €15.323 billion to €23.837 billion. A question arises in light of the way tax will have to be paid by big companies from now on and the fact that the rate of corporation tax is going to increase. What effect is that likely to have on that figure of €23 billion? Is it too early to estimate? Another question follows on from that. It is reported that up to ten companies are paying quite a substantial portion of that corporation tax. We therefore need to be mindful of the risk of these companies suddenly deciding to cease operations in our country. What is our position on that?

Mr. Niall Cody

Corporation tax receipts have grown significantly over the past ten years. In 2020, total CT receipts were just under €12 billion. The 2023 figures are nearly double that. Significant changes are coming as a result of the OECD agreement and what is called pillar 2, which involves a minimum effective rate of 15% on multinational enterprises with a global turnover in excess of €750 million. That has come into play. The Irish legislation was introduced in the Finance Act, which was signed at the end of December. This is essentially the first year of it. The 2024 accounts for pillar 2 are due to be reported in June 2026, so the impact will be felt in 2026. It is very complicated. There are just short of 200 pages of the Finance Act implementing pillar 2. There are more than 600 pages of OECD guidelines and that is not the end of them. In some ways, people look at it and think that the 12.5% rate just goes to 15% for these big companies but it is far more complicated than that. It is completely different. It is like a new tax. These measures have to combine to give effect. Approximately 1,600 groups in Ireland are impacted, comprising approximately 9,000 companies. We have implementation groups to develop the IT systems. The IT systems then have to be integrated to exchange information across the OECD. There is a big body of work to do through 2024, 2025 and 2026 to implement the new rules. The rules also provide that Ireland can retain its 12.5% rate for the vast majority of companies. There are 250,000 companies here and the current system will continue for the vast majority of Irish entities. However, there will be a significant impact for the large companies. The issue around cost-----

Deputy Colm Burke

To clarify, the 12.5% rate remains in place for the vast bulk of companies here and only the large companies will pay the 15% rate.

Mr. Niall Cody

Yes, the large multinational groups will pay the additional tax.

Deputy Colm Burke

Are there any projections at this stage? For argument's sake, let us say the level of business remains exactly the same in 2026 as it was in 2022 and 2023. If those two years are used as a baseline to project receipts for 2026, is there likely to be a downturn in the amount of corporation tax paid even though the rate is increased to 15%?

Mr. Niall Cody

The Department of Finance leads on forecasting. Yesterday, the Estimates for the Department of Finance and the Office of the Revenue Commissioners were presented and the Minister was having this same discussion about the implications with Deputy Doherty.

What the Minister said is that his officials are working on it and he should be in a position to have indications within the next few weeks. But if you look at the volatility of corporation tax receipts for the last ten years, it shows that it is the hardest tax to forecast because it is hugely influenced by profitability.

Deputy Colm Burke

Absolutely, I fully accept that.

Mr. Niall Cody

On the monthly Exchequer returns, there is no other country that has such a concentration on the monthly Exchequer returns. Corporation tax goes up one month and it goes down the next month.

Deputy Colm Burke

In fairness, in overall terms, over the past ten years we have done reasonably well in the growth in relation to getting that tax in.

Mr. Niall Cody

It has been exceptional.

Deputy Colm Burke

As a result, that has been able to contribute to the further development of infrastructure in this country.

I will refer to the excise returns. There is little change in excise returns. In fact, the returns are less in 2023 than was the case in 2021. Is there an explanation for that? The number of people in the country, the amount of goods imported and all of that has increased in that period. Is there a particular reason as to why excise returns are down for that period?

Mr. Niall Cody

The main reason excise receipts over the past year are down is because of the reductions in excise on fuel that was brought in as a result of the fuel crisis. The Government cut excise duty on petrol and diesel by 20 cent or 25 cent. The other excise returns have stayed fairly stable. There has not been increases in excise duty on alcohol for a long time. It is fairly static. Excise duty on cigarettes goes up, generally by 50 cent every budget. It stays fairly stable because there is a problem; we see it in the context of cigarette smuggling. Obviously, the economics of it, as every time there is an increase in excise duty, it increases the margins that people can avail of.

The big change in excise over the last year and a half is the reduction in excise on petrol and diesel. That has been clawed back. Either 1 April or 1 May will be the date of the last restoration of the excise duty on diesel and petrol.

Deputy Colm Burke

I will touch on one other issue in relation to tax. Income tax has gone up quite substantially from €26 billion to €32 billion. The number of people working in this country has gone up by approximately 800,000. We have gone from 1.8 million people up to 2.6 million people working. Of the 2.6 million people, is the Revenue aware of the number of people who are working here who are not Irish citizens or who have come in from abroad? Does Revenue have the exact numbers who are paying tax here and who are working here?

Mr. Niall Cody

Yes. We publish comprehensive statistics on the make-up of the PAYE case base. I actually picked it up off of my desk to bring with me and said to myself that the committee would not ask me about that so I left it back on the table. We published it in April. It is a comprehensive look at the income levels, background, age profile and gender profile of the 2.6 million. The link to the document would have been sent to the committee with the briefing but I can certainly give it-----

Deputy Colm Burke

Mr. Cody might get someone to send it on to me.

Mr. Niall Cody

Yes.

Deputy Colm Burke

Can Mr. Cody give us an idea from that document of what kind of numbers are we talking about, of the 2.6 million people?

Mr. Niall Cody

A significant proportion of the people who are paying PAYE are non-Irish.

Deputy Colm Burke

My understanding is the number is over 500,000. Am I correct?

Mr. Niall Cody

That is correct. It is at least that.

Deputy Colm Burke

These are people who are physically working here-----

Mr. Niall Cody

Absolutely.

Deputy Colm Burke

-----who are not Irish citizens but have come here to work but are paying their full tax.

Mr. Niall Cody

It is considerable. I know, last week, John McKeon outlined the proportion of the Ukrainians, because we have tracked that since the start. There is approximately 18,000 of them in full time. Approximately 25,000 of them have worked at some stage, which is a really considerable number when one thinks of the number of them who are pensioners, children or in full-time education, as well as the number who have to provide childcare. Irish nationals made up the largest proportion of employees, at 74% of the share. So 25% of employees were not born in Ireland.

Deputy Colm Burke

Mr. Cody is talking about one quarter of the 2.6 million.

Mr. Niall Cody

One quarter of the workforce. Some of them are in the multinational sector, the tech sector. If you go down to the Grand Canal area, there is a significant proportion of non-Irish.

Deputy Colm Burke

I will touch on one other issue. I raised this previously and I am still getting the same answer every time I raise it.

Mr. Niall Cody

I could guess what it is.

Deputy Colm Burke

I refer to the issue in relation to the most recent judgment. The problem I have is in relation to the home school tutors. It is regarded that it is the parents who are employing the tutors. It is the Department that is paying and it is deducting the tax.

The problem is the category. They are categorised as class S, which puts them at a huge disadvantage. They are restricted from working. They can only do certain hours. They can only work certain weeks yet they are regarded as being self-employed.

Mr. Niall Cody

Not by Revenue.

Deputy Colm Burke

Not by Revenue, but by the Department. The Department is quite clear. For instance, one cannot start home tuition in the middle of August. One has to wait until 1 September. One cannot do it in the middle of July. One is restricted as regards the days and the weeks of the year that one can work, but then one is regarded as self-employed.

Mr. Niall Cody

Not by Revenue.

Deputy Colm Burke

The point I make is that this is an issue. The Revenue took on the Domino's Pizza judgment. I am saying here is a Department dictating the rules as to when one can and cannot work, dictating the hours one can work per week but at the same time, a person cannot provide that service in which he or she has experience during the holiday period. Therefore, technically, someone is dictating the rules as to when such a person can and cannot work. Then the problem is that the person is in class S, which is a huge disadvantage as regards the weeks a person is not working in respect of his or her entitlement. That is a problem that we have and it has not been resolved.

Mr. Niall Cody

We have spoken about this before. We have had parliamentary questions and have discussed it before.

Deputy Colm Burke

Yes.

Mr. Niall Cody

I will not challenge any other bodies about how they do their job.

We looked at it. This goes back to an audit on the Department of Education which was finalised in, probably, 2014. It was the subject of a chapter in the Comptroller and Auditor General's report of 2015. We analysed it at the time. In our view, the parents were the employer of the home tutor when we analysed the facts and circumstances of the case. The Department agreed, maybe reluctantly, that it would collect the tax through the PAYE system.

One of the things that we are doing as a result of the Karshan judgment is that shortly, I will write to my fellow Accounting Officers, advising them of the Karshan decision and recommending that they review the treatment of workers - I use the term "workers" loosely - in their own Departments and bodies under their aegis. I know, as I pay close attention to the discussion that goes on here, that there are sectors within the broad public sector for which Karshan has implications.

I think any responsible body will look at Karshan and ask if it has implications. I have seen some of the commentary on the Karshan judgment by advisory firms. I know John McKeon talked about the code of practice. One worry I have about the code of practice is that it would become the guidebook for achieving what you probably do not want to achieve. It is a question of how you structure a contract. That is why the court decision was really useful. It said that there may be a written contract but that we have to have regard to the actual facts and circumstances. The written contract is valid to determine the status only if it reflects the reality. There is no doubt that if you set out a code of practice as to how you treat someone as self-employed or employed, that becomes a guide to structuring something in a way that may not reflect the true facts. That is what makes this hard. We cannot issue a guidance. When Anne finalises the draft guidelines, she cannot say that this category by and large comprises employees without having regard to the facts and circumstances. Generally, public bodies do not fall within the publication rules, but every time there is a tax settlement the Comptroller and Auditor General publishes it, so it becomes a matter of record in the accounts. We do this every so often as regards what the rules are. Karshan, in a way, does not change the law but definitely does change the interpretation in certain circumstances.

An Leas-Chathaoirleach

I have just a few questions. We will have a second round, and Deputy Stanley will be back in a few minutes.

As regards the local property tax, my big issue is how it is distributed. There was a baseline survey. It has nothing to do with Revenue. Essentially, however, the distribution discriminates against areas that have growing populations and gives an advantage to areas that are geographically big. That is my big issue with it. One thing that was brought to my attention recently by a constituent was that he received his bill and, when he looked at it, it was for a different property in a different county. His name was on the top of the letter and it was addressed to him. I know that when there are a very large number of bills to send out there will be the odd mistake. Are there problems, GDPR issues, within the system that have presented at all, or would that be a very isolated case?

Mr. Niall Cody

There would be very isolated cases. I would be very interested in seeing the example, but-----

An Leas-Chathaoirleach

I will get it for you.

Mr. Niall Cody

We normally do not send bills in that way as regards property tax. It works kind of differently. Every so often, where you merge two databases, name and address and any issue around a tax, there have been a small number-----

An Leas-Chathaoirleach

Okay. If there is not a general problem, I will just send the example to you.

Mr. Niall Cody

There is not a general problem.

An Leas-Chathaoirleach

Fine.

I wanted to ask you about the domicile levy. It was introduced in 2010 and, if I remember correctly, I think there were a little over 20 - it might have been 25 - people liable. I understand that that number is decreasing now. How many are we talking about?

Mr. Niall Cody

It was introduced in 2010. In the first year there were 36 liable for the domicile levy, and that is now down to 11. It is probably better to look at 2021 because there is always a bit of a lag. In 2021, the figure was 15, so it has just more than halved.

An Leas-Chathaoirleach

Do the Revenue Commissioners have open interventions with people at the moment?

Mr. Niall Cody

We constantly review the domicile levy and the programme. I will say a few things about the levy. It was introduced in 2010 and the thresholds have not changed. To be liable for the domicile levy, you have to have a worldwide income that exceeds €1 million, Irish property greater in value than €5 million and Irish income tax liability of less than €200,000 in a year. Many of the people pay some income tax in Ireland. The €200,000 has stayed at the same figure, so the €200,000 is worth a lot less than it was-----

An Leas-Chathaoirleach

As regards people who go off to work in the Middle East and try to get a deposit for a house, nobody is trying to apply a tax to people in that kind of category. It is really high-net-worth individuals-----

Mr. Niall Cody

As regards our high-wealth individuals, we have talked about our HWI case base here before, and it was the subject of a review by the Comptroller and Auditor General. We have a dedicated team that looks at HWIs: whether they continue to be residents or non-residents, whether they have liability to the domicile levy and whether they pay it. That is an ongoing part of that team's core work.

An Leas-Chathaoirleach

During the Covid pandemic and the resulting restrictions, concessions were made. Did anything show up during that time?

Mr. Niall Cody

We made limited concessions in respect of people who were in the country at the time and were prevented from leaving because of travel restrictions, but they were very time-bound. A number of people probably thought we were not generous enough in that-----

An Leas-Chathaoirleach

I would love to see those letters.

Mr. Niall Cody

The idea was "I was in Ireland. I left Ireland. I came back to Ireland." However, that was after the public health restrictions had been introduced. They thought they could have a second go at the idea. Through the Covid pandemic, we tried to be fair to people, having regard to the facts and circumstances, but it was a restricted concession.

An Leas-Chathaoirleach

As a consequence, was there anyone who ended up within the system who did not qualify?

Mr. Niall Cody

The numbers involved are so small that I cannot talk about that.

An Leas-Chathaoirleach

As regards money that has been in another jurisdiction being repatriated for people who may have been in NAMA, is that something you will look at?

Mr. Niall Cody

As I said earlier, we are interested in whether flows of money indicate that there are tax issues. If you went abroad, worked abroad and brought back money, that would not generally give rise to a tax-----

An Leas-Chathaoirleach

That is not really what I am-----

Mr. Niall Cody

A lot of the entities you are probably talking about lost a lot of money, so it is losses and in a way it is an area-----

An Leas-Chathaoirleach

It is unlikely to have a Revenue implication because they could write it off against-----

Mr. Niall Cody

It may have an implication under the chapter about losses and the related area around losses. Some of our programmes involve the restriction of losses carried forward. It does not lead to money immediately but it eventually does.

An Leas-Chathaoirleach

What I am trying to get at is a very small number of people who, on the face of it, would have lost everything in the crash and who then, suddenly, are quite wealthy again and how that happened. It is that kind of category of person that I am-----

Mr. Niall Cody

Our interest is in whether there are tax implications. Often there are and sometimes there are not.

Deputy Brian Stanley resumed the Chair.

An Cathaoirleach

Coming back to tax warehousing, there are small business with cash flow problems for whom this is becoming liable. I will give an example of one business which owes €21,000 or €22,000. I think they have another month or two to pay it. It is a small cafe-type business and energy costs have gone up, etc. At the moment they are being charged 3% interest, I understand. At the point it becomes due, they are not in a position to pay it. They do not want to close the doors. There are a couple of people employed in it. What happens there?

Mr. Niall Cody

We have said all along that in a case like that one of the €21,000, the key issue for the company is to continue to pay their current liabilities and engage with us on debt that is in the warehouse. If they cannot afford to pay anything off that debt this year, once they engage with us and set out the circumstances, that is fine.

An Cathaoirleach

What level of interest would be charged afterwards? The due date is 1 May.

Mr. Niall Cody

The rate of interest now is 3%.

An Cathaoirleach

What will happen after 1 May is the question. Will that increase?

Mr. Niall Cody

No. It remains at 3%.

An Cathaoirleach

It remains at 3% annually.

Mr. Niall Cody

It was part of the conditions of the warehouse scheme that the 3% would apply to that debt once it stays in the warehouse. The way they stay in the warehouse is paying their current taxes. If they fail to meet current liabilities, the €21,000 comes out of the warehouse; then it attracts the 10% rate and also attracts immediate debt enforcement.

An Cathaoirleach

So there is a path forward for them.

Mr. Niall Cody

Yes.

An Cathaoirleach

What is the figure for the amount of debt outstanding at the end of 2023?

Mr. Niall Cody

Is that the overall debt as opposed to the warehouse?

An Cathaoirleach

The overall is in excess of €1.7 billion, is it?

Mr. Niall Cody

The breakdown of tax debt is there is just under €3.6 billion debt available.

An Cathaoirleach

The €3.6 billion, I understand from the documents, was at the height of it.

Mr. Niall Cody

No. We have debt in addition to the warehouse. The total is €3.6 billion. Of that, €1.7 billion or €1.8 billion is in the warehouse. Then €348 million of it is under appeal so is not available for collection. There is €63 million of it undergoing insolvency. We talk about debt available for collection. There is €1.4 billion available for collection and that is going through various stages. Back in 2019, the debt available for collection was under €1 billion. That was always our target. Most of it was less than two months old. During Covid we suspended applying interest or referring cases to the sheriff. The reality is-----

An Cathaoirleach

So there is nearly another €2 billion there as an overhang from Covid, along with this.

Mr. Niall Cody

There is probably €500 million that would have been paid in the normal course. Of the €1.4 billion we have available for collection, we would expect if we had not had Covid and all things being equal, it would be under €1 billion now.

An Cathaoirleach

The overall debt you said was-----

Mr. Niall Cody

It is €3.6 billion.

An Cathaoirleach

The Revenue Commissioners would normally try to carry no more than about €1 billion. There is €2.6 billion of excess, in total.

Mr. Niall Cody

There is €350 million subject to appeal. The €3.6 billion is really €3.2 billion.

An Cathaoirleach

How much was written off in 2023?

Mr. Niall Cody

I will get that figure.

An Cathaoirleach

Okay.

Mr. Niall Cody

We write off about €250 million to €300 million every year.

An Cathaoirleach

Okay. What about the number of debtors who have not engaged with Revenue?

Mr. Niall Cody

Is that in relation to the warehouse?

An Cathaoirleach

Yes.

Mr. Niall Cody

Mr. Joe Howley spoke about the engagement we have had. We are contacting all those that owe----

An Cathaoirleach

Is there an estimate of the number or percentage from which Revenue is not getting a response?

Mr. Niall Cody

It is too early to say. The critical dates is 1 May. If I was a business with debt in the warehouse, I would not have to do anything with it until the run-up to 1 May, though I would prefer if they answered our calls. As I said earlier, there is no better financing available than the warehouse debt.

An Cathaoirleach

Payment plans will have to be put in place. As of July last, seven months ago, only 4% had repayment plans. What is the figure now?

Mr. Niall Cody

Does Mr. Howley want to talk about the overall engagement?

Mr. Joe Howley

Yes. On the engagement, we are doing an outreach programme by contacting and talking by phone to the 5,400 cases with large debts in the warehouse. For the vast bulk of the other debt, we are dealing with representative bodies. Last week we had a webinar with the Small Firms Association in conjunction with the local enterprise network. We had several hundred participants in that webinar. Next week we will have a similar webinar with the Restaurants Association of Ireland and its members throughout the country. We will continue that programme. That is how we are engaging with the bulk of the smaller debts in the warehouse.

On instalment arrangements, as of the end of December, 2,116 customers in the warehouse had entered into a phased payment arrangement for their debt. The total debt involved in those phased payment arrangements is €158 million.

An Cathaoirleach

At what point was that?

Mr. Joe Howley

That was at 31 December. As regards phased payment arrangements, we are completely flexible in what we do in that space. For businesses entering such arrangements, there are flexibilities available over the course of the arrangement. For example, if they hit a difficult period for cash flow at this time of year when the hospitality sector is at a lower ebb, they can apply for a repayment break of up to 12 months. They can get 12 months free from making those payments back to us.

An Cathaoirleach

Is there a time limit for the ones that are warehoused? It was said if there is a plan and engagement and if the business is paying Revenue what is owed in the current years and its current tax affairs are in order, there is no panic over what is warehoused, but what length of time will people be given to spread that out over? Is it a number of years?

Mr. Joe Howley

We tailor the arrangements to suit the circumstances of each business. At the moment, we are targeting arrangements of up to about five years. For traditional debt in the past, we had a limit of three years. In individual cases, if there is a viable business that needs more time, we will engage with it and are open to giving more time if needed.

An Cathaoirleach

Would there ever be a case where a member of a government would instruct that there be a writedown?

Mr. Joe Howley

No.

An Cathaoirleach

No. That is all right. I had to ask the question.

Mr. Niall Cody

We value our independence, but I think the Government values our independence nearly more than we do. I have looked at the history and all the debates. Every Minister for Finance emphasises the fact. Every so often, Opposition TDs will ask the Minister, through a parliamentary question, to instruct us to do something. The last thing the Minister wants to do is instruct us.

An Cathaoirleach

I thank Mr. Cody.

Mr. Niall Cody

The total write-off figure as uncollectable last year was €87.7 million.

An Cathaoirleach

As regards the repayment plans, the latest figure is 2,116. It is small when one considers the overall amount and what is shown on the graphs supplied by the witnesses. As it is coming of age now, there will be an acceleration of that.

Mr. Niall Cody

I purposely included the table in my written statement, though I did not read it out. I keep reading about the nearly 60,000 cases. Of them, 44,000 have less than €5,000. You are really talking about a core of 12,000 to 13,000 that have debt over that amount. In fact, it is quite a high figure that have engaged. Businesses have their businesses to run and the deadline only becomes a factor this spring. Last week, the Minister stated that he has asked us to work with his officials. Some of it is just to provide clarity. We are glad to be here today to address this. I refer to what Mr. Howley said about our flexibility. We want to reassure people. We expect that in the next couple of weeks we will be issuing-----

An Cathaoirleach

A number of small outlets are worried about this. It is useful for us to have that information.

Mr. Niall Cody

We will be issuing a comprehensive guideline in the next fortnight, setting out the terms and conditions and what needs to be done to maintain one's position.

An Cathaoirleach

I will move on to the issue of PAYE overpayment and allowances not being claimed in 2023. There have been reports that approximately 300,000 workers have not claimed full tax rebates. It is estimated that approximately €200 million was refunded to taxpayers but there could be as much as €450 million or €500 million still due to PAYE workers. Much of it hinges around PAYE workers claiming the rent credit or for medical expenses. This year, there will be mortgage interest relief. There are three big pieces there. There may be others. I am trying to find out what is going on with this. It is obvious that Revenue took in very healthy sums of money last year. That is all to the good because it is available for public services, capital works and so on. With regard to what is due back to taxpayers, however, it does not seem that the rent credit is being picked up. Are there figures in that regard? Is it not time for a serious campaign in respect of those three issues, namely, the rent credit, medical expenses and mortgage interest relief? Has there not been a failure in communicating to the public that a tax rebate is already available on the rent credit and medical expenses and that people are either not claiming them or not claiming them properly? With mortgage interest relief coming in, there is another layer on top of that. That relief will be welcome for many people who are in extreme difficulty with their mortgage repayments and high mortgage interest rates. If the public are not aware of it or not accessing it, however, what is happening there?

Mr. Niall Cody

We published the up-to-date statistics on Tuesday. Since PAYE modernisation, we have immediate data. Before 2019, there was a P35 process and we did not have the data. Now we have payroll data as it happens. After 15 January, we publish detailed statistics on the PAYE programme. We launched an information campaign this week. Members will hear radio advertisements on how to claim and how easy it is. In terms of how the PAYE system works, we provide a preliminary end-of-year statement that a person can look up on myaccount.ie. That sets out the information we have and whether the person has a potential repayment or liability or is balanced. Of those who have not filed a return, the preliminary end-of-year statement suggests that 61% of them have a balanced tax position, but they could be entitled to additional credits. We will not know whether they have such an entitlement unless we are made aware of it. Unless the person is claiming health expenses in real time, we will not know whether he or she has health expenses to claim. People have to claim that. We will not necessarily know if they have rent tax credit to claim unless they claim. Of the others, 27%, or 619,000, appear to be in an overpayment position and 276,000 appear to have underpaid tax for last year. The message we have is for people to go onto myaccount.ie in the Revenue system, look up their preliminary end-of-year statement, which sets out their position, and then click the button to review their tax liability for 2023. In the 2023 return, we will have pre-populated the return with the information we have. For most people, all they have to enter is if they have health expense or the rent tax credit. From next week, the mortgage interest facility will be available. The other piece is that those who have additional income that is not taxed through the PAYE system are obliged to return that as well.

An Cathaoirleach

Mr. Cody referred to people going online. Is it not the case that significant numbers of workers who may be entitled to this are not online? As regards advertising campaigns, a local council might place an advertisement in a local paper regarding a Part 8 planning permission or notice of a road closure and perhaps 3% of the audience will see it. I am not blaming local authorities in that regard. The issue is how to get the word out. It is clear there is an information gap here or it is not percolating down or being received. What can Revenue do to improve that? A significant number of people should be claiming these reliefs but are not doing so.

Mr. Niall Cody

In the first two weeks of the year, we have already received 470,000 income tax returns. Five years ago, we would receive fewer than 200,000 income tax returns in the full year. Last year, it was approximately 1.1 million income tax returns-----

An Cathaoirleach

Is this from PAYE workers?

Mr. Niall Cody

From PAYE workers. That figure is for up to the end of last week. It is probably close to 600,000 now. The environment has changed completely. The system is really easy to use. Some people have a concern that if they return something to us, they will end up owing us money.

Some people say you are better off leaving those lads alone. There is a four-year timeframe in which you can claim. Some people say they will do so every few years because the money will mean more if it is a lump sum. However, in the last few years we have radically changed how you claim. You can claim health expenses as you suffer and get the money back through your wages, but most people still claim at the end of the year because they end up with a few hundred euro.

An Cathaoirleach

How do those who are not online do it?

Mr. Niall Cody

You can send in a paper return and we will process it, but the reality is that it is so much easier to return online. A paper income tax return is a daunting document because it has to cover the whole set of circumstances that we do not know you have. There is a lot about whether you have foreign income or foreign bank accounts. Most people do not. The standard PAYE individual has a job and gets paid, and then the tax is deducted. The person might have some social welfare during the year, and one of the challenges is making sure that it is not taxed in real time. The person may have a small rental income, and that will have to be returned. They will have health expenses. They may have rent credit, obviously if the mortgage interest is now the new one. Again, that will be available next week. To claim your mortgage interest, you need to have a statement from your financial institution of the interest you suffered in 2022 and 2023. It is an allowance on the difference, depending on the mortgage balance at the end of the year.

An Cathaoirleach

In view of what is happening, although Mr. Cody states speed is now gathering, and given that the mortgage interest relief is coming or has come on stream, could the Revenue Commissioners consider improving communication? I know a significant effort is being made but clearly a number of groups are not being captured. Some could be people who are not online, including workers who are paying everything they should be paying or paying over and above it.

Mr. Niall Cody

Let me outline one of the things we have done for nearly the past ten years. Since there is a four-year limit, we consider every year those people who have not claimed anything for the four years. Before the fourth year expires, we write to them and state that, per our records, they have not claimed anything but have paid tax, and we give them a reminder. We have written to people stating they appear to be owed money by us and that they should do what we outline. Some of them do not respond to a direct letter.

An Cathaoirleach

Could it be monitored? With the rent credits, medical expenses and mortgage interest relief, there are three sections now.

Mr. Niall Cody

There are also tuition fees. A range of other credits are available. We try to address these on our website. One of my colleagues will be on Newstalk tomorrow morning to talk about how easy and quick it is to claim. It is also free. There are many agents in this space who will do it for you but do so by retaining an element of your refund. We wonder why a straightforward PAYE taxpayer would pay somebody to do it. The other problem with some agents is that if, when they do the four years, one year involves a liability and they send in documents for the three that involve repayment, we block the repayment, leaving you trying to sort out the year for which you have a liability, holding things up.

Really interestingly, we have now developed a programme for transition year students on the basic things that need to be done. The first thing many transition year students will do will be to get a part-time job, which brings them into the net. It is a really interesting little programme that we have developed in conjunction-----

An Cathaoirleach

Mr. Cody hears the point I am making.

Mr. Niall Cody

Absolutely.

An Cathaoirleach

The position on those who are being left behind should be monitored. If communications could be improved, it would be useful. Many workers are hard-pressed at the moment.

Deputy Catherine Murphy

I was completely confident online. The system is so user-friendly and is incredibly easy to use. I have helped a few people out with getting online. I have used the system myself and have got to say it is a genuine example of a really good automated system that is user-friendly.

I take the point that the Chair has made on people who are not comfortable with technology. It may be that there are groups with whom workshops could be done. That you would pay somebody to do the return for you when you could do it yourself, with a small bit of guidance, is-----

Mr. Niall Cody

The taxpayer agent group is really important. Agents are really important in making sure people are compliant with their tax obligations; however, for an ordinary PAYE worker, it is hard to see a need for them.

Deputy Catherine Murphy

All the information is available. It is really only a question of double-checking that what is on the screen is right and clicking a box. Uploading medical receipts is really user-friendly and easy. It is encouraging people. Very often, people are a little concerned because they might end up with a tax bill rather than a refund, but the system really works and should be complimented.

High-wealth individuals are defined as those with more than €20 million, including people who are non-resident. How many investigations does the Office of the Revenue Commissioners typically initiate in a year? I realise we are talking about relatively small numbers of people but are investigations ongoing? Is there rotation? In what way does it work? How do the Revenue Commissioners monitor individuals to ensure compliance with the domicile levy?

Mr. Niall Cody

We have a dedicated division that deals with the category of high-wealth individuals. As with any other part of our case base, the division reviews using all the data and information we have. I believe I said before at a meeting of this committee that, by and large, the level of compliance with the law among high-wealth individuals is very high. By their nature, they are well advised and need to have tax agents working with them. They are very careful, by and large, in meeting their obligations and in structuring. In 2022, we carried out 271 interventions of various types – I talked about levels 1 and 2 – and these would have resulted in an additional yield of €15 million.

Deputy Catherine Murphy

So it is well worth having the unit.

Mr. Niall Cody

Much of the work of the unit is just assurance. There is really complex work in this regard. The division also has lead responsibility in anti-avoidance. This is not limited to the high-wealth-individual case base. I do not want to give plugs but The Currency gives really good coverage of various court cases in which we are involved. We do not comment on them. There are some significant anti-avoidance cases. They are complex and some of them run for ten years-----

Deputy Catherine Murphy

When someone is writing an article, it is required that it be substantial enough, and that is-----

Mr. Niall Cody

That builds on the work of the Tax Appeals Commission. I have said before that one of the biggest developments in tax administration over the past however long is the establishment of the Tax Appeals Commission. The law provides it publishes its determinations on an anonymised basis. That is an important body of work. It shows some, as we would see it, fairly aggressive and egregious tax avoidance schemes that we will challenge.

Deputy Catherine Murphy

I will return to a point Mr. Cody made about the increase in work with regard to customs. The land bridge is pretty much the real issue. Some of that would have gone through customs in the UK and now we are seeing a larger volume by virtue of the fact that the land bridge is being avoided because of Brexit. Mr. Cody talked about the increase in the number of customs officials. Does he have a request in for additional staff? Is there sufficient staff? Has he done a piece of work on what would be needed? There are huge volumes here. I am sure much will be done based on information rather than at random, but there will be some degree of randomness as well.

Mr. Niall Cody

I mentioned earlier the Minister was at the finance committee about the Estimates yesterday. We have always taken a careful approach to our staffing requirements. In the context of Brexit, in 2016, we were given out to at one stage for having certain work done. We started working on the implications of Brexit before the referendum, just in case. In 2017 or 2018, we put a business case to DPER and the Department of Finance around projects of what we would need if Brexit happened. In fairness to the Government, DPER and the Department of Finance, we were supported. Our staffing has gone up by about 1,000.

Deputy Catherine Murphy

But there is more than a doubling in terms of-----

Mr. Niall Cody

Technology and the investment in technology is critical.

Deputy Catherine Murphy

Are there asks that still have to be delivered on? I am sure there are.

Mr. Niall Cody

Every year, we have to operate within the overall Government framework. I have been asked many times at committee and in parliamentary questions whether we have the staffing needed. I think any of my colleagues would say that if we had more staff, we would do more stuff. We have got huge support in my term from the Ministers for Finance and public expenditure and reform in the Estimates process.

The big challenge we have in the next couple of years is around the implementation of the international tax arrangements. There is a skill set required related to transfer pricing and financial accounting. The nature of the tax computation has changed for the multinationals. There is a real shortage of expertise across the board. The practitioner firms have the same issue because this is new. We put a business case in the Estimates. We did work in the Estimates process around 23 additional higher level staff. That is approved and we started recruitment. I think we will struggle. It is not the budget that is our problem.

Deputy Catherine Murphy

Expertise.

Mr. Niall Cody

The struggle is attracting people, because they are not there. I know from talking to some of the practitioners that they are going outside the EU to try to get people on it.

Back to customs, customs is kind of divided in two. There is trade facilitation, which is processing all the entries, and there is our anti-smuggling border control piece. A huge part of that is driven by intelligence, as the Deputy said. A huge part is also driven by the giant action task force and our close working relationship with An Garda Síochána, the Naval Service and I mentioned the Army Ranger Wing, the members of which became customs officials for the day. There is then our international co-operation with Europol, Interpol, the Maritime Analysis and Operations Centre, MAOC-N, and the European Anti-Fraud Office, OLAF. I have to mention them all because OLAF funds some of our scanners. I talked about our staff. I know the Deputy tabled a parliamentary question recently about our dog teams. The most obedient Revenue staff are our 30-odd dogs and the work they do is exceptional.

Deputy Catherine Murphy

Finally, there was an article in the Irish Daily Mail a couple of weeks ago about VRT. One of the issues was that in November 2021, the TAC ruling against Revenue confirmed that, in some cases, officers had been applying the wrong test to establish if someone was resident in Ireland. My question comes up in that article as well. How many cases are being looked at? Has a liability been worked out at this stage? How prevalent is the problem that was identified?

Mr. Niall Cody

There were two issues put together in that case. The Tax Appeals Commission case was about a transfer of residence and in the individual case, the appeal commissioner found in favour of the person. Subsequent to that case, there have been three further cases about transfer of residence, which were all found in favour of Revenue.

Deputy Catherine Murphy

Were they three individuals?

Mr. Niall Cody

Yes. The transfer of residence is all about somebody coming from elsewhere. I think that case was somebody who had come back from London to work in Ireland.

The other issue is around the non-registration of vehicles for VRT and VAT. We have compliance workers and we engage in multi-agency checkpoints. If you bring in a car from the UK or outside the State, you have 30 days to register it for VRT. We have a role in ensuring that tax is paid where it is due, so we have ongoing activity with regard to enforcement of VRT.

An Cathaoirleach

I will return to the misclassification of workers or bogus self-employment. There was the Karshan case and there is now a five-step framework. I think most people would accept the fact that there is now a framework is a step forward.

I refer to the tax and duty manual from the Department. I understand this was the position up to 2018 on how couriers were treated for tax purposes. I heard the explanation Mr. Cody gave in that it is for tax purposes. The answer was that couriers are regarded as self-employed for PRSI purposes as result of a social welfare appeals decision. In the interest of uniformity, the Revenue decided without prejudice to treat them as self-employed for tax purposes. Mr. Cody has stated that a number of times here, both at this hearing and on previous occasions. Would Mr. Cody accept that perhaps muddies the water somewhat in terms of people's read of that or that employers were treating people as self-employed who were not self-employed as a result of that statement?

Mr. Niall Cody

When the Cathaoirleach talks about muddying the waters, the area is a complex one. There are different views. The same set of circumstances present different views, but when we discussed this before, we sent the details of the figures. The figures in 2018 show there were fewer than ten employers operating the PAYE system in relation to 154 couriers. I think the Cathaoirleach said to me after that those figures were not as big as he expected. In 2004, the figure was 264 individuals for fewer than ten companies.

An Cathaoirleach

Would Mr. Cody accept this has caused some confusion or may have created the wrong impression? I can see where Revenue is coming from with it, but I am saying this may be a factor in misclassification. He does not think so; okay.

Mr. Niall Cody

I could not give an opinion on that.

An Cathaoirleach

On the scale of it, Mr. Cody correctly said, I think, that it is hard to put a figure on it. We have seen figures that are widely different like €800 million, and then fractions of that, per annum. As I understand it, the employment status investigation unit conducted 90 investigations in 2021 and found a 44% level of misclassification. I thought that was a very high percentage of workers the unit found from those 90 examinations and that was the level of bogus self-employment. Would Mr. Cody accept that is high and cannot be dismissed too easily?

Mr. Niall Cody

We do not dismiss it-----

An Cathaoirleach

I am not saying you are, but-----

Mr. Niall Cody

-----and, Chairman, they are social protection. I know you discussed that with-----

An Cathaoirleach

That Department classifies and Revenue collects the tax. I understand how it works. However, would Mr. Cody accept that figure shows there is a significant amount of it? There were 90 investigations that found a 45% level of misclassification. They are not my figures. They are from the employment status investigation unit.

Mr. Niall Cody

Absolutely, it is high.

An Cathaoirleach

It is nearly one in every two.

Mr. Niall Cody

We could say it is a very well-targeted examination case base.

An Cathaoirleach

Yes, I understand that. It was not random.

Mr. Niall Cody

We have been doing this forever and we have been challenging misclassification every year in individual cases. The challenge we have is people not on the books at all for either self-employment or employment and we always look at the question of whether subcontractors are properly subcontractors. I have spoken before about how I worry about stuff I have seen in the construction sector. For example, to see a general labourer as being a subcontractor is just not right, because there is no general-----

An Cathaoirleach

I am aware of cases of it.

Mr. Niall Cody

And we challenge that. You get them into qualified tradesmen who work in different areas who determine their own hours. You have to come down to the idea it has to be a sole trader with no employees. Then what we look at is the idea of whether they supply their own materials and equipment. It is a range.

An Cathaoirleach

I am aware there are a multitude of factors taken into consideration.

Mr. Niall Cody

We look at it and the overall levels of self-employed-sole trader-subcontractors has gone down and the reason is the corporate structure. Social welfare can look through the corporate structure, so in the Chairman's figures there, social welfare is saying in some cases that although it is a company, it looked through the company and, for social welfare purposes, it is treating a person as an employee. We cannot do that.

An Cathaoirleach

When the Department of Social Protection was before the committee last week, the officials said they had investigated 1,739 workers, and again there would have been some level of targeting across 523 employers. The Department found a 12% misclassification or one in eight. It underlines that what is there is significant.

Mr. Niall Cody

It does, but the Department can look through the corporate structure and we cannot.

An Cathaoirleach

While we are on the subject, Mr. Cody said Revenue did not have the authority to organise an inquiry into it, but what has been done this year on targeted examinations and scrutiny of it? When it comes to targeting certain industries for examination, which are the big ones Revenue is targeting?

Mr. Niall Cody

Is this with respect to misclassification or just generally?

An Cathaoirleach

Misclassification. Which are the top four sectors?

Mr. Niall Cody

Construction is always in our top numbers.

An Cathaoirleach

What about couriers?

Mr. Niall Cody

Recent work has involved examining rates across multiple sectors, including construction, medical locums, food delivery riders, couriers and brand ambassadors in the motor industry.

An Cathaoirleach

What about media?

Mr. Niall Cody

We have looked at media. Again, I am always precluded from talking about small sectors because we have a duty of confidentiality. I am aware there was a discussion at the committee last week, but we would not be able to have that same kind of discussion with the committee. On the media sector, any of those sectors-----

An Cathaoirleach

What about IT? It is fairly prevalent in IT.

Mr. Niall Cody

From our experience, what is more prevalent in IT is the use of company structure. Generally, the higher the income, the more likely it is to involve a corporate structure. The lower the income, the more likely it is to be employment versus self-employment, and that is where the bogus problem arises in our case. The challenge we all have is that the whole gig economy is very different and there are developments going on at EU level looking at this area. If we had not been successful in Karshan, we would probably have been looking at putting proposals to the Department of Finance. I have a concern that if a person is paid less than the minimum wage, it is hard to see why he or she should be self-employed and similarly if a person is paid less than the standard rate for the industry and being treated as self-employed. What we thought we might have to propose if we did not win Karshan is the bringing in of a system where if a person's hourly rate was more than a certain amount, he or she must be taxed under the PAYE system regardless of his or her status.

An Cathaoirleach

Before we finish, I want to touch briefly on corporation tax losses. At the end of 2021, there were approximately €242 million of accumulated losses available for offset against profit. I understand how it works, in that losses in this year can be written off against profit next year under the system Revenue has in place, but I have a question about the change. From 1 January this year, as I understand it, companies with a turnover of in excess of €750 million are now into the 15% category. What is the big challenge in that area in terms of that happening? Big companies put a lot of time and effort into accountancy, taxation and looking at those, as well as legalities and everything else. There is huge investment by big corporations in legalities and accountancy and we expect that, but will we see a decline in corporation tax because of that 15% factor? There will be more tax brought in if we are charging 15%, but will companies, especially multinationals, obtain a greater level of expertise and use other practices to try to move money around?

Mr. Niall Cody

The global work that is done on international tax is under Pillar I and Pillar II. Pillar II is what is being implemented and it brings in this minimum effective rate across the multinationals in all countries in which they operate. There are detailed and complex rules involving calculations and computations and then there is exchange of information between all of the countries in which the multinationals operate. The reality is multinationals will be paying the minimum effective rate of 15% and-----

An Cathaoirleach

On a turnover of more than €750 million.

Mr. Niall Cody

Yes, on a turnover in excess of €750 million and there would be huge reputational issues for entities that do not abide by that.

An Cathaoirleach

It kicked in on 1 January. The corporation tax receipts last year were up again, including in the last quarter, if I remember correctly. Is there any evidence that there was a bit of front-loading going on to try to come in at the 12.5% rate?

Mr. Niall Cody

There is no evidence-----

An Cathaoirleach

Is there any evidence of creative accountancy?

Mr. Niall Cody

There is no evidence of that at all. The reality is most entities are trying to understand how the new rules are going to work because it is not as simple as saying there is an extra 2.5% from 12.5% to 15%. It is a completely different kind of computational base and then they are merged to make sure they are doing the 15%. The challenge-----

An Cathaoirleach

Does Mr. Cody forecast that the income from corporation tax will be stable in the current year, that it will hold up, based on what he is seeing to date? I know it is early days but-----

Mr. Niall Cody

It is only the second week of January.

An Cathaoirleach

I know that but Mr. Cody does have-----

Mr. Niall Cody

There is no reason to doubt the forecasts.

An Cathaoirleach

I suppose it is based mainly on the last quarter, in terms of the health of companies and the health of our tax receipts.

Mr. Niall Cody

In reality, the only way to look at the corporation tax receipts is to look at the annual figure because of the rules around when companies pay their first preliminary tax, their second preliminary tax and the balance in charge. The fluctuations that take place on a monthly basis are not an indicator.

We publish details on corporation tax receipts and there is a huge concentration, with the top ten entities paying well over 50% of the total corporation tax take. The receipts are hugely influenced by individual companies. Sometimes the Department of Finance gets criticised for not doing the forecasts right, but we see companies reporting quarterly profits and they are either undershooting or overshooting their own quarterly profit forecasts. It really does fluctuate depending on their profitability. We have no reason to believe that 2024 corporation tax receipts are going to be widely different from what we estimated.

An Cathaoirleach

Is that based on what has happened in the past four months or so?

Mr. Niall Cody

Yes.

An Cathaoirleach

What percentage do the top ten companies pay?

Mr. Niall Cody

The top ten companies paid 57%.

An Cathaoirleach

Was that in 2023?

Mr. Niall Cody

No, that was in 2022. The 2023 figures will be in our corporation tax report which will be published in April. That 57% is the highest it has ever been. In the previous year, it was 53%. I think 2020 was the first year they went over the 50% mark.

An Cathaoirleach

That figure has been mentioned before. In 2022 it peaked at 57%.

That concludes our questions. I thank the witnesses from the Revenue Commissioners and the Department of public expenditure for attending and for helping us to prepare for today's meeting with the information they supplied. I also thank the staff of the Office of the Comptroller and Auditor General for their work in assisting the committee. I take it that it is agreed that the clerk to the committee will seek any follow-up information requested and carry out any agreed actions arising from the meeting. It is also agreed that we will note and publish the opening statements and briefing documents provided for today's meeting.

We will now suspend until 1.30 p.m. when we will discuss correspondence and any other business.

The witnesses withdrew.

Sitting suspended at 12.35 p.m and resumed at 1.42 p.m.