Written Answers. - Income Tax.
Kathleen Lynch
Question:
17
Kathleen Lynch
asked the
Minister for Finance
the proportion of the total tax take paid by farmers, other self-employed persons and the PAYE sector; the average individual tax take in each group; the number of random audits carried out in each of the years from 1991 to 1996; the proposals, if any, he has to increase tax compliance among non-PAYE taxpayers; and if he will make a statement on the matter.
[4012/97]
The latest relevant information available on income tax receipts is in respect of the calendar year 1996. The percentage of the combined income tax receipt in 1996 from the PAYE, farming and other self-employed sectors as contributed by each sector was 86.5 per cent from PAYE, 1.7 per cent from farmers and 11.8 per cent from other self-employed. These figures do not take account of receipts of deposit interest retention tax for which a breakdown between particular classes of taxpayers cannot be ascertained.
The figure for PAYE covers more than tax on wages and salaries. For example, tax paid by directors of close companies is included, as is the tax on other income of employees such as rent and other investment income. After adjusting for these factors, tax on wages and salaries normally represents about 68 per cent of the take from income tax, excluding deposit interest retention tax. The figure for PAYE also includes the tax paid on the income from employment of farmers and other self-employed individuals.
The figure for other self-employed includes tax paid on income from trades and professions other than farming, together with tax paid on other income such as rent and other investment income. It also includes withholding tax on professional fees. The yield in 1996 from this sector was reduced by approximately £35 million as a result of implementing a High Court ruling to the effect that withholding tax on professional fees should be allowable as a credit against income tax liability on a current year basis.
The percentage figures given must be seen in the context of the relative numbers of taxpayers in each of the sectors mentioned, which are estimated for the income tax year 1996-97 to be 886,300 in PAYE, 32,000 farmers and 99,500 other self-employed.
The average individual tax payment from each of these sectors in 1996 is estimated at £4,408 for PAYE, £1,104 for farmers and £4,067 for other self-employed.
The relevant information available on completed random audits relates to the position at 10 February 1997. The random audit programme began in 1992. No new random cases were selected in 1993 for audit due to concentration of resources on work related to the tax amnesty and major restructuring of the audit programme. The total number of random audits of tax returns from all self-employed persons and companies which were initiated in the years 1992, 1994, 1995 and 1996 was 448. Some 371 of these have been completed up to 10 February 1997 of which 294 are in respect of all self-employed persons, including farmers.
I should emphasise that the random audit is only one element in the overall audit programme. The vast majority of cases selected for audit are selected on the basis of perceived defects in their tax returns or supporting accounts and not on a random basis. The total number of these comprehensive self-assessment audits initiated since inception in 1990 to the end of 1996 — excluding companies — was 14,899. These are in addition to normal PAYE — employers and VAT audits. The purpose of the random element of the audit programme is to demonstrate to taxpayers that there is a risk of audit for every self-assessing taxpayer even where incorrect returns have the appearance of being correct. However, experience suggests that taxpayers' behaviour is influenced more by the perception of Revenue's ability to detect suspect tax returns in a systematic way, rather than by the risk of random selection of a return. The Revenue Commissioners have advised me that all their audit programmes, including the random programme, will be kept under review.
The Revenue Commissioners are continuing with their overall approach to compliance which has worked so well in recent years — to make procedures easier for those who are trying to meet their tax obligations and to pursue people who do not pay on time or at all — using the various powers available to them.
