Written Answers. - Tax Returns.
Eamon Gilmore
Question:
48
Mr. Gilmore
asked the
Minister for Finance
the action, if any, he will take having regard to the finding of the Comptroller and Auditor General in his recent report that many self-employed and professional people have never made a tax return and that, of the 1,249 mainly professional and self-employed people against whom judgments were registered between 1990 and 1997, only ten per cent had paid a satisfactory level of arrears; and if he will make a statement on the matter.
[22708/99]
Before answering this question, I will draw the Deputy's attention to what the Comptroller and Auditor General actually stated in his recent report and the context in which the statement was made.
The C&AG did not report that many self-employed and professionals have never made a tax return. The C&AG's report states:
The profile of many tax defaulters was of individuals with their own business or classified as professionals who had been assessed to income tax. These individuals had accumulated unpaid arrears for considerably long periods (up to 10-20 years). Some, in fact, had never paid tax or never made an annual tax return.
This statement was made, not in the context of the self-employed and professionals generally, but in the context of a review of a specific small group of cases. These were cases where Revenue had obtained a judgment mortgage. That said, I am sure that Deputy Gilmore would like to know what Revenue is doing about those cases referred to by the C&AG and about non-filers in general.
As regards the tax returns side of the question, Revenue has advised me that all non-filers are tackled as part of its ongoing compliance campaigns via letters, telephone calls and personal visits. As the Deputy may be aware, Revenue has, since the introduction of self assessment, vigorously pursued the tax return issue with the self-employed, professionals and companies. As a result, the bulk of taxpayers file their returns on time. For example, over 75 per cent of income taxpayers file each year by the end of January filing date. The eventual filing rate is close to 98 per cent. Of the non-filers, many respond to Revenue's urging and submit their tax returns before prosecutions are instituted against them. However, these late filers incur additional tax by way of the surcharge for late submission of the tax return.
Despite Revenue's best efforts to get people to submit their tax returns. there is a group who persist in their failure. Those whom Revenue refer to as habitual or persistent non-filers are being tackled through prosecution for failure to submit a tax return.
Prosecution is now a regular feature of Revenue's campaign against non-filers. In 1997, Revenue obtained 311 convictions in respect of non-filing offences, last year 857 convictions were obtained and in the first half of this year, 665 convictions were obtained. This continual increase in non-filer convictions clearly indicates Revenue's intentions on the non-filing issue.
To further assist Revenue in tackling non-filers, when I became aware that even after a conviction for failing to submit their tax returns, some people still did not submit those returns, I brought in an amendment in the last Finance Bill – this became section 211 (c), Finance Act, 1999, – which allows the prosecuting solicitor in non-filer cases to apply to the court for an order requiring convicted persons to submit the outstanding tax returns and this new procedure will be put into operation in the near future.
I understand from the Revenue Commissioners that the 1,249 judgments referred to in the Deputy's question are in fact judgment mortgages. Judgment mortgages are used as a means of securing tax debts on the property of the taxpayer where the sheriff has been unable to seize assets, and the taxpayer has allowed a judgment to be registered against him/her without making any effort to pay the debt. Only a small number of cases require this approach.
The sample examined by the Comptroller and Auditor General was derived from mortgages registered in the 1980s and early 1990s. In more recent years, a more focused approach to enforcement has enabled a more selective use of judgment mortgages. In the majority of cases reviewed by the C&AG, the mortgage was taken on the family home as no other asset could be identified. In some cases, the possibility of a forced sale and the encumbrance of the mortgage were effective in forcing payment. However, in the majority of cases the taxpayer was unable to pay the debt and the mortgage was put in place in an attempt to secure the debt in the expectation that the taxpayer's ability to pay would improve in time. Naturally, there is a high proportion of such cases where there is an ongoing inability to pay, and forced sale of a family home is not always feasible or desirable.
It is not the case that judgment mortgage cases are exempt from further and other types of enforcement. Revenue has assigned staff to sys tematically examine these and other cases where enforcement initially failed to establish the present level of indebtedness and what further action can be taken in the light of present circumstances. This work is slow and time consuming, but is vital in order to ensure that unpaid tax is not overlooked.
Revenue have acknowledged that there were deficiencies in the collection and enforcement system in operation in the past. Since the early 1990s, Revenue has progressively changed its procedures and systems for debt management. New technology has provided faster and more accurate means of identifying cases which require attention. This facilitates an earlier intervention by Revenue in cases of tax default and more focused and effective enforcement action where the intervention proves fruitless. Increased efficiency in targeting now enables Revenue to employ a wider range of enforcement measures than has been practicable in the past. This includes, but is not limited to, the use of judgment mortgages, and if necessary the forced sale of properties subject to judgment mortgages.
Revenue is currently in the final stages of appointing a number of firms of solicitors to process overdue taxes through the courts. This will increase the number of solicitors employed by Revenue for this work. In keeping with Revenue's determination to pursue default to a definite conclusion, the contracts with the new solicitors will be specifically oriented towards results. The significant improvements in Revenue's internal systems, together with a very effective sheriff system, where new arrangements have applied since 1998, and the new solicitors are confidently expected to provide a swift and effective use of all legal avenues for the pursuit of default.
