Written Answers. - PESP Tax Strategy.
Pat Rabbitte
Question:
30
Mr. Rabbitte
asked the
Minister for Finance
if his attention has been drawn to the comments made by a union leader (details supplied) that the tax strategy agreed under the Programme for Economic and Social Progress was glaringly inadequate and would have to be radically overhauled, if he will outline the Government's response to the comments; and if he will make a statement on the matter.
Significant steps have been taken in the past four years to improve tax compliance and combat evasion. The introduction of the self assessment system and the measures associated with it have made a major contribution in this regard. I am advised by the Revenue Commissioners that they are satisfied that programmes are in place to ensure the effectiveness of the self assessment system and that adequate staff resources are available for this purpose.
The programmes include the pursuit of taxpayers who failed to lodge returns. A measure of success of the programme is that 95 per cent of self assessment taxpayers lodged returns for 1988-89 compared with approximately 60 per cent in the pre self assessment era. They include also the examination of returns to identify cases meriting audit — in the year ended 31 December 1990 a total of 101,000 returns were examined, some 3,100 merited selection for detailed examination and of these 1,100 were selected for audit. They include an audit programme which is in operation nationwide and staff are progressively being released to audit work as other programmes progress. I should explain that under the provisions of self assessment inspectors of taxes have a period of six years in which to audit a return and any understatement of liability will be subject to interest and penalties. Cases chosen for audit in future years will, of course, if there seems to be a need to do so, be scrutinised for earlier years.
There are currently 45 inspectors engaged on self assessment audits. The programme is now being expanded progressively. The number of inspectors on audit work is being increased to approximately 100 during the year ended 31 December 1991, to cover the auditing of both income tax and corporation tax returns.
Furthermore, the auditing of income tax and corporation tax returns is only one dimension of Revenue's total audit capacity. There are also separate audit programmes covering the PAYE, value added tax and the construction industry. In the 12 months to 31 December 1990 audit visits have been carried out in some 25,000 cases in these areas. When taken together with the self assessment audits, this works out at about 9 per cent of taxpayers. This figure is very high by international standards. It has to be borne in mind too that the vast bulk of taxpayers comply with their obligations.
The details supplied with the question suggest a significant loss to the Exchequer based on a yield of £9,800 per audit. In the year to 31 December 1990, 694 audits were completed with a yield of £6.8 million i.e. an average yield of £9,800 per audit. However, as the cases concerned had been selected for audit because of certain unsatisfactory features in the returns and accounts, and not on a random basis, the yield cannot be taken as an indication of the general level of compliance in the community at large.
In addition to ensuring that those on the tax record comply with their obligations the Revenue Commissioners operate a specific programme in Dublin and the surrounding counties to identify those persons with a taxable income who have failed to register for tax purposes. During the year ended 31 December 1990, 6,787 visits were made for this purpose. These resulted in the detection of 746 persons not previously on record and a further 603 persons who had either understated their income from disclosed sources or who had omitted to disclose specific sources of income. This programme also operates in some country districts.
Finally, I should say that the Revenue Commissioners have recently announced a major new initiative to tackle tax defaulters. I have provided an additional £1 million in the budget to meet the cost of the extra staff required for this purpose. An additional £30 million is expected to be collected from tax defaulters this year as a result of the various measures under the initiative. This new initiative is in addition to the advanced audit programme and to the whole range of other collection and enforcement mechanisms now in place.
As indicated in theProgramme for Economic and Social Progress, the Government are committed to building on what has been achieved in improving compliance, ensuring prompt payment of liabilities, reducing arrears, developing audit programmes and tackling the black economy.
