Michael McGrath
Question:210. Deputy Michael McGrath asked the Minister for Finance the representations his Department has received regarding ways to curtail the black economy; and if he will make a statement on the matter. [15094/13]
View answerTuesday, 26 March 2013
Questions (210, 211)
Michael McGrath
Question:211. Deputy Michael McGrath asked the Minister for Finance the estimated cost to the Exchequer each year of black economy activity by sector; and if he will make a statement on the matter. [15095/13]
View answerWritten answers
I propose to take Questions Nos. 210 and 211 together.
I receive regular representations from individuals and representative groups in relation to various aspects of the shadow economy and it is a topic which was mentioned frequently in the Pre-Budget Submissions sent in to my Department. Most correspondents would suggest measures which could be taken and all suggestions are reviewed by officials. Additional measures to curtail the shadow economy are included annually in the Finance Bill, this is an area of great concern to my Department.
Also, I am advised by the Revenue Commissioners that it is not possible to estimate the cost to the Irish economy of tax evasion. The measurement of the scale of tax evasion, often referred to as the shadow economy, is inherently difficult given the nature of the problem. There is no one internationally recognised and agreed measure. There is no doubt that shadow economy activity creates distortions in the economy and competitive disadvantages for compliant businesses. For these reasons, Revenue focuses on deterring shadow economy activity and non-compliance through its audit and investigation programmes based on risk analysis, use of Revenue powers and their intelligence and information systems.
Revenue’s tax and duty compliance programmes are under constant review to ensure that they are focussed on the areas of greatest risk, including risks from the shadow economy. A variety of methodologies are used by Revenue to identify those who are operating in the shadow economy including covert surveillance, cold calls to businesses and venues as well as pre-arranged aspect queries on specific items. In addition, joint operations are conducted with the Department of Social Protection using Joint Investigation Units and there is a strong focus on cash businesses, given its potential high-risk nature.
In 2012, Revenue carried out more than 537,000 compliance interventions, yielding more than €492 million. There were fifty convictions for serious evasion during 2012, and the end of 2012, there were eighty-nine ongoing investigations with a view to prosecution.
Revenue investigations have detected the use of computer programmes or electronic devices to alter or conceal sales records. To counteract these risks, legislation was enacted in 2011 providing penalties for the possession, use or supply of automated sales suppression devices known as "zappers" for the purpose of evading tax.
Streetscape programmes, in which every cash business in an area is visited, without prior announcement, have been carried out. The main focus of real time activity is on businesses that have the potential to operate with cash. This includes professionals such as doctors, veterinary surgeons, etc.
Considerable success has been achieved in combating the illegal trade in tobacco products. In 2012, Revenue’s Customs Service seized a total of 95.6 million cigarettes from 8,108 seizures. A further 5,276 kilograms of other tobacco products were taken in 2012 from 1,395 seizures. There were 22 convictions on indictment, and 110 summary convictions, during the year for offences related to the smuggling or sale of illicit cigarettes and tobacco. In addition there were over 2,400 convictions in relation to laundered oil (2), Marked Mineral Oil (207), VRT (21), Excise Licences (152), Ant-Fraud measures (143), Return Non-Filing (1,880).
In addition to the on-going enforcement action against the illegal fuel trade, steps are being taken to ensure enhanced control and supervision at all stages of the fuel supply chain. Key actions include a strengthening of the licensing arrangements for businesses selling auto-fuel, and of the enforcement of licensing requirements. In addition, new licensing requirements have been applied to persons dealing in marked fuels, with effect from 1 October 2012. As well as these important licensing changes, a requirement operates from 1 January 2013 for all fuel traders to make electronic monthly returns to Revenue on their fuel transactions. This will facilitate Revenue in detecting unusual or anomalous patterns of activity.
Given the links of organised criminality with the illegal fuel trade, Revenue works closely with An Garda Síochána in combating it. Searches undertaken as part of intelligence-led operations have resulted in a considerable number of seizures of diesel and the closure of laundering plants, particularly in border counties. In 2012, 11 oil laundries were detected and shut down and 199,000 litres of oil were seized along with 27 vehicles, 2 forklifts and 5 trailers. There were 10 arrests in the course of these operations. 57 premises were closed in 2012. In addition to the fuel seized at laundries, a further 902,087 litre of fuel were seized during the year, the greater part from retail outlets or in the course of delivery to them.
Much of the focus of the Joint Investigation Units (JIUs) is on shadow economy activity and their operations include targeting illegal traders at markets and at seasonal events (Christmas fairs, outdoor concerts etc.). During 2012, over 3,000 outdoor checks/visits/inspections were carried out by the JIU teams including 168 multi-agency operations.
Our approach to the shadow economy is underpinned by close consultation and cooperation with other regulatory authorities such as the Department of Social Protection (DSP) and the National Employment Regulatory Authority (NERA). The primary objective of these activities is to uncover either non-declaration or under declaration of income, fraudulent DSP claims and/or non-compliance with employment regulations.
Automatic access to third party information is of enormous value to Revenue enabling us to target compliance interventions, to profile sectors and to identify gaps in tax returns. Government Departments, bodies established under statute and any other body involved in the disbursement of public funds are now required to submit returns of payment information to Revenue on an annual basis.
I am further advised by the Revenue Commissioners that they hold regular meetings with trade and representative bodies through The Hidden Economy Monitoring Group where the risks posed by shadow economy activities are discussed. Furthermore, Revenue encourages anyone who has specific information regarding any business that is engaged in tax evasion, to submit the details to their local Revenue office. The Hidden Economy Monitoring Group provides a forum for the exchange of views on the effectiveness of measures introduced in combating the hidden economy. This group, which is chaired by Revenue, includes representatives from employer and business organisations, trade unions and other Government Departments and agencies. Regional hidden economy liaison groups have been established to facilitate greater local interaction and more immediate responses to insights and issues that may be highlighted. The most recent meeting of the Hidden Economy Monitoring Group took place on January 30th.
Changes are frequently made in tax legislation aimed at counteracting shadow economy activity. Two examples from 2012 include the introduction of the electronic Relevant Contracts Tax regime and an enhanced penalty regime for employers who fail to operate PAYE regulations fully.
I am satisfied that the Revenue Commissioners are pursuing a programme that is dealing in a very determined way with tax evasion in all its forms through a range of compliance and audit interventions including targeted special projects.