Vol. 414 No. 6
1 Mr. Noonan (Limerick East) asked the Minister for Finance if his attention has been drawn to the fact that the Comptroller and Auditor General has identified a total of £2,718 million in outstanding taxes on 31 May 1991; if he will outline the plans he has to ensure its collection at an early date; and if he will make a statement on the matter.
33 Mr. McGrath asked the Minister for Finance his views on whether the fact that there is £2,718 million in outstanding taxes is a cause of concern and anger to taxpayers and in particular to PAYE taxpayers; and if he will outline the steps he proposes taking to collect the outstanding amounts.
89 Mr. Currie asked the Minister for Finance his views on whether the fact that there is £2,718 million in outstanding taxes is a cause of concern and anger to compliant taxpayers and in particular to PAYE taxpayers; and if he will outline the steps he proposes taking to collect the outstanding amounts.
I propose to take Questions Nos. 1, 33 and 89 together.
Arrears was one of the major problems in the taxation area inherited by the Government that took office in 1987. Since that year, radical action has been taken by the Government to deal with these problems. The following measures have been taken: an amnesty was brought into effect in 1988; the phased development of the self-assessment system and accompanying audit programme for personal and company taxation was started; the basis of assessment for income tax and corporation tax was changed from a preceding year to a current year basis; a withholding tax on professional fees was introduced; tax clearance requirements were introduced for public contracts and grants; the system of tax enforcement by sheriffs was improved; the power to attach assets of tax defaulters has been granted to the Revenue Commissioners; and a collection initiative, funded by the allocation of £1 million in the 1991 budget, facilitated the collection of arrears remaining after the 1988 amnesty amongst other things.
As well as the general measures which I have outlined above, a specific programme to review tax arrears which had not been discharged under the 1988 tax amnesty was launched soon after the effects of the amnesty was analysed. The objectives of that programme were to agree or finalise the amount of liability, determine the most appropriate form of enforcement for collectible arrears and identify arrears which might be uncollectible, e.g. where businesses were defunct or where a taxpayer's whereabouts cannot be established. The programme involved, among other things, direct personal contact with the taxpayer or taxpayer's agent.
The extra resources provided in both the 1989 and 1991 budgets have enabled Revenue to build on and develop the original post-amnesty review of arrears. The programme will result in the collection of £30 million in entrenched preamnesty arrears in the current year. As to results, all these measures are contributing to better collection and enforcement of tax obligations as evidenced by the ongoing reduction in outstanding amounts over the period, i.e.: 31/05/87 — £4,172 million; 31/05/88 — £4,107 million; 31/05/98 — £3,501 million; 31/05/90 — £2,985 million; 31/05/91 — £2,718 million. An overall reduction of £267 million, in the amount outstanding is noted for the most recent 12 month period reviewed by the Comptroller and Auditor General. It is also noted that this reduction occured in a period during which over £7,000 million in additional charges fell due for collection.
I must emphasise that the figure of £2,718 million mentioned by the Comptroller and Auditor General must be considered in its proper context. As the Comptroller and Auditor General points out, the Revenue Commissioners estimate that only £426 million of the £2,718 million is likely to be collected. The reason for the difference is that the figure of £2,718 million consists largely of estimates which were made by tax inspectors in the absence of returns from taxpayers. Therefore, to quote a figure of £2,718 million without putting that figure into its proper context gives a misleading impression. In addition, the Revenue Commissioners' achievements in collecting £171 million of entrenched preamnesty arrears since 1989 is quite impressive when viewed against the figure of £426 million.
There has been considerable success in recent years in dealing with arrears as detailed in this reply. In 1992, the existing arrears programmes will be maintained and will yield a further £30 million of entrenched arrears. In addition, I am considering the scope for further collection initiatives.
(Limerick East): I thank the Minister for his very lengthy reply. Could the Minister explain why, of the £2,718 million in outstanding taxes on 31 May 1991, Revenue expect to collect only £426 million?
There is a number of reasons for that. Under the pre-assessment system, where a taxpayer did not make a return — and about 40 per cent of the self-employed made no return — the inspector of taxes had to make an assessment of tax due. These assessments are almost always considerably greater than the amount due, and this has been proven in the last three or four years.
(Limerick East): If an amount in excess of 80 per cent of the £2,718 million is uncollectible why is it not written off? Why do Revenue continue to publish figures which give, as the Minister said, a very misleading picture?
I have been considering that matter for the last few weeks. There are a number of other issues involved. The old system was so inefficient that many of the assessments appealed were left in abeyance. It took such a long time for Revenue to deal with these cases that a large number of the companies had gone out of business and were untraceable. At present the Revenue Commissioners are going through these arrears case by case and are writing off those they cannot follow through. However, it would not be acceptable to write off all of them. Since the inception of this system in 1989 the section dealing with arrears have collected practically £200 million in old debts. Therefore it is worth homing in on these old accounts for at least another 12 months, and a judgment will then have to be made whether to continue following them up. The arrears have been reduced by £1.5 billion in the last few years and if that figure of £200 million continues to decline and from looking at the profile of the arrears since 1987, I believe it will, it is unlikely that a great amount of money would be collected after the 12 months.
(Limerick East): As the people who are advising the Minister, both in Revenue and in his Department, estimated that less than £25 million was collectible under the terms of the amnesty, whereas between £600 million and £700 million was collected, would he be wary of advice from the same source now, that only a very small amount of outstanding taxes is collectible, considering that the advisers proved so widely wrong in the past?
I appeal for brevity for obvious reasons.
I will be brief. The people in Revenue who advise me have put forward many arguments in answer to that question but I will not go into that now. However, it is worth following up the remaining arrears for a limited time. Otherwise money which could be collected from people with very large debts may not be collected. In reply to another question put down for today — we may not reach it — it is worth noting that one big fish was caught. Therefore Revenue should not give in without following up the arrears to a reasonable extent, and that is what it is proposed to do.
