COMMITTEE OF PUBLIC ACCOUNTS díospóireacht -
Thursday, 2 Jul 2015

2014 Account of the Revenue Commissioners

Mr. Niall Cody(Chairman, Revenue Commissioners) called and examined.

Chairman

Before we begin, I remind witnesses, members and those in the Gallery to turn off their mobile telephones, as they can affect the sound quality and transmission of the meeting. I advise witnesses that they are protected by absolute privilege in respect of the evidence they are to give to the committee. If they are directed by the committee to cease giving evidence in regard to a particular matter and they continue to do so, they are entitled thereafter to only a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against a Member of either House, a person outside the House or an official by name or in such a way as to make him or her identifiable. Members are reminded of the provisions within Standing Order 163 that the committee shall also refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies.

I welcome Mr. Niall Cody, chairman of the Revenue Commissioners, and ask him to introduce his officials.

Mr. Niall Cody

On my right hand side are Mr. Declan Rigney, assistant secretary in charge of our planning division, Mr. Michael Gladney, the Collector General, Mr. Liam Gallagher, the liaison with the Comptroller and Auditor General and the Committee of Public Accounts, and Mr. Tom Dowling, our administrative budget manager.

Mr. Terry Walsh

I am Terry Walsh from the Department of Public Expenditure and Reform.

Chairman

I invite the Comptroller and Auditor General to make his opening statement.

Mr. Seamus McCarthy

The 2014 account of the receipt of the revenues of the State collected by the Revenue Commissioners was certified by me on 13 April 2015 and received a clear audit opinion. The account includes receipts of taxes and duties remitted by Revenue to the Exchequer and receipts collected by Revenue on behalf of other agencies. In total, net receipts in 2014 amounted to €50.2 billion, up around 9% year on year. Net receipts of taxes and duties amounted to €41.4 billion in 2014. Receipts collected by Revenue on behalf of other agencies amounted to €8.9 billion. Approximately 92% of the receipts on behalf of other agencies was accounted for by PRSI and health levy contributions. These contributions were remitted directly to the Social Insurance Fund.

Chapter 15 examines the implementation of the local property tax, LPT, which was introduced as a self-assessment tax on residential property commencing with effect from 1 July 2013. It replaced an interim household charge on residential property at a flat rate of €100 per year and a similar flat-rate charge of €200 per year on non-principal private residences. The report presents the situation that pertained up to and including 30 June 2014. The Accounting Officer will be able to provide information about how matters have progressed since then.

A key challenge for Revenue in implementing the LPT was the creation of a comprehensive and accurate register of residential property and ownership. Overall, the examination found that Revenue had been effective, compiling a register of some 1.95 million residential properties by the end of June 2014. The register will be in a continuous state of change, reflecting changes in property ownership and as additional relevant information becomes available to Revenue.

The report recommended that Revenue should review its controls over the inputting and updating of information in order to ensure that information was recorded accurately. This was in response to findings that, while the register was generally comprehensive and accurate, there were some gaps and errors. For example, we found that the register showed that no owner had been identified for approximately 3.5%, or 68,000, of the properties on the register at June 2014. In respect of approximately 2,700 of those properties, we established that Revenue's tax collection systems showed that property tax had already been paid. We also found that 137,300 properties had been de-registered by the end of June 2014, but that there had been tax paid already in respect of approximately 3,300 of those. On that basis, we concluded that the operational controls over changes made to the property register should be reviewed.

The report also examined the process implemented by Revenue to assist property owners in valuing their properties. This included the publication of an Internet-based guide to the expected value of certain property types in specific locations or regions. In addition, it issued its own estimates of the valuation band for 1.57 million properties based on data it was able to compile from a variety of sources. As at the end of June 2014, approximately 42% of the valuation bands actually used by taxpayers were either those proposed by Revenue or valuations submitted by taxpayers in the absence of a Revenue estimate. A substantial proportion of taxpayers did not accept the Revenue estimates. In most of those cases, a lower valuation band was submitted, including more than 270,000 cases in which the valuation submitted was two or more bands below the Revenue estimate. Revenue had commenced analysis to identify properties with declared valuation bands that were substantially different from the generality of neighbouring properties.

The examination recommended that Revenue should consider how it could use up-to-date technologies to compare declared valuations with actual sale prices of properties and carry out in-depth, on-site reviews on a sample basis of properties in designated areas in order to validate valuations submitted. The Accounting Officer agreed with those recommendations and, I understand, has provided an update on progress in that regard.

The report also recommended that the Revenue Commissioners consider collecting from taxpayers some basic information on the relevant characteristics of properties as an aid in validating declared property valuations. As examples, we suggested objective or quantifiable property characteristics such as floor or site area, type of dwelling, age of property, number of rooms, etc. At least some of this is the kind of information that is routinely provided by householders in census returns every five years. However, the Accounting Officer did not agree with this recommendation, citing the valuation validation processes it had already implemented and the possibility of harvesting data about property characteristics from sources other than the property owners.

Based on the declared valuations, the level of payment compliance for the LPT has been high. As at the end of June 2014, the overall payment compliance rate for 2013 liabilities was estimated at approximately 97%. This included the impact of mandatory deduction-at-source arrangements put in place for some 40,000 properties as at that date. Compliance measures had also been taken to collect household charge arrears in respect of an estimated 477,000 properties, with potential arrears liability of up to €95 million. At the report date, some €25 million of those arrears had been collected, including €17 million received after Revenue issued compliance notification letters in April 2014.

Chapter 16 reviews the effectiveness of systems in place for identifying rental property owners and managing taxpayer compliance in respect of rental income. The chapter also reviews progress by Revenue in implementing the recommendations of this committee following a previous report by the Comptroller and Auditor General in 2006 regarding the potential for data sharing and record matching with third-party sources of information. Gross rental income declared in 2012 amounted to €4.4 billion, of which €4 billion related to rents on properties in Ireland. The balance of €400 million related to rental income on properties outside Ireland. We found that the number of foreign rental properties declared to Revenue increased by approximately one third between 2009 and 2012. In contrast, the amount of gross rental income declared in respect of such properties declined by approximately 7% during the same period.

The review found that there had been a significant improvement since 2006 in the extent to which Revenue matched information relevant to residential rental income from third party sources to its taxpayer accounts. The range of data sources used by Revenue has increased, as has the rate of matched records. In 2012, between 88% and 94% of records from four principal sources of third party information were matched to Revenue records.

The outcome of audits of rental income in 2012 and 2013 suggests that the audits were well targeted at higher-risk cases. Over 70% of the cases audited resulted in additional yield. However, we noted that not all of the audit yield arose from undeclared or under-declared property rental income; some of the yield related to undeclared income from other sources. The review recommended changes to the categorisation of audit yield to assist the Revenue Commissioners in analysing and planning its compliance activities.

Administration and operational expenses incurred by the Revenue Commissioners are charged to its Vote. No such expenses are charged to the accounts of the receipt of revenues of the State to which I referred earlier. The 2013 Revenue Commissioners appropriation account received a clear audit opinion.

It shows that the total spend by Revenue in 2013 amounted to €393 million, up just over 3% relative to 2012. Taking account of appropriations-in-aid of €78.6 million in 2013, net expenditure amounted to €314 million. This resulted in a surplus for the year of €8.3 million liable for surrender back to the Exchequer.

Audit of the 2014 appropriation account is under way. It will be reported on and published in September.

Chairman

I thank Mr. McCarthy and invite Mr. Cody to make his opening statement.

Mr. Niall Cody

I thank the committee for the opportunity to make this short opening statement. As time is limited, I will confine myself to a brief overview of the two relevant chapters from the Comptroller and Auditor General's report.

Since assuming responsibility for the administration of local property tax in early 2013, Revenue has collected in excess of €1 billion for the Exchequer, including €45 million in respect of the household charge, and achieved compliance rates of 97% for both 2013 and 2014. The compliance rate for 2015 currently stands at 96%.

The introduction of the local property tax was the largest extension of the self assessment system in the history of the State and was, as acknowledged in the report of the Comptroller and Auditor General, a huge undertaking for Revenue during a time when its resources were diminishing, both in terms of staff numbers and its administrative budget. Within a timeframe of less than nine months Revenue had to design, build and implement a fully functioning tax system. We had to assist in the drafting of legislation, build a property register, develop flexible payment options to suit different customer preferences and deploy resources to the provision of a customer support service.

The compilation of the first register of residential properties in the State required us to identify the properties and connect each property to a liable person using Revenue data and data from a range of other sources such as the Local Government Management Agency and the Private Residential Tenancies Board. Data from the various sources were cross-checked to ensure the register was as accurate as possible. However, given the scale of the data matching process, it was inevitable that there would be some errors and, from the outset, Revenue was very open with the public about this. We updated the register as issues were brought to our attention and the register continues to be updated as additional information becomes available to us. There are currently 1.95 million properties on the register.

We also developed an online interactive guide to provide average indicative property values to assist property owners in the self-assessment of the value of their property. Our main concern in developing the systems and processes necessary for the effective and efficient administration of this tax was to make it as easy as possible for individuals to pay and difficult to avoid. From March 2013, our focus was very much on ensuring that property owners understood the requirements of this new tax and their obligations. A comprehensive communications strategy was implemented. The various payment methods include a number of phased options. The various options are all working very well and are assisting customers to be compliant by giving them the option to pay that works best for them.

In respect of the minority of property owners who failed to meet their LPT obligations, there is a range of debt collection and enforcement options provided for in the LPT legislation. The collection method used necessarily depends on whether the individual is a PAYE worker or self-employed. These options include mandatory deduction from salary, pension or certain Government payments; referral of the outstanding debt to the sheriff or solicitor, a surcharge on income tax, corporation tax or capital gains tax returns, withholding tax clearance certification. Over the course of the 2013, 2014 and 2015 compliance programmes Revenue issued approximately 600,000 warning letters, deducted payments from salary or pension in more than 140,000 cases, some being repeat cases, refused tax clearance certification in approximately 29,000 cases and imposed surcharges in approximately 19,000 cases. We also referred in excess of 1,000 cases to the sheriff for collection. To date, no LPT liabilities have been referred for court action, nor have we used our attachment powers to secure payment, although we reserve the right to use both options if required.

Household charge arrears that remained unpaid at 1 July 2013 were converted to a €200 per property LPT debt and Revenue was given the responsibility for collecting the outstanding amounts. As a result of our household charge compliance campaign, almost 318,000 property owners have become compliant and paid almost €45 million in arrears. Compliance activity is ongoing in the 47,000 cases that have yet to pay the charge.

Moving on to the rental income chapter, I would like to first state that Revenue commits a significant proportion of its compliance resources to combat shadow economy activity and the rental sector is an area we have particularly focused on in recent years. We select cases for intervention based on the presence of various risk indicators and other information available to us. Third party information is a really important element in addressing non-compliance. Matching this data against returns filed by taxpayers and addressing outliers or cases that have failed to include this data in their returns has been a feature of our compliance strategy for many years. This approach is particularly relevant in the rental income sector, where significant amounts of third party information are made available to Revenue and matched to landlord records. Currently, this data includes Private Residential Tenancies Board data, rent subsidy payments from the Department of Social Protection, rental accommodation scheme payments from the Department of the Environment, Community and Local Government, student accommodation lists, letting agent returns, non-principal private residence data and, of course, Revenue's local property tax data.

The increase in the number of data sources used has been influenced by work carried out previously by the committee and following on from a previous report from the Comptroller and Auditor General. Our matching rates have also increased significantly to a position where we now have matching rates of around 90% for the biggest data sources. This compares with figures of around 50% when that report was originally published back in 2008. The Comptroller and Auditor General has commented favourably in the report on the significant improvement in the matching of this data to landlord records. The matched third party data is fed into our risk evaluation analysis and profiling system, REAP. REAP has over 50 risk rules that are related to property ownership or rental income. The Comptroller and Auditor General has commented favourably on the successful targeting of interventions in the rental sector. Our focus on compliance in the sector continued in 2014. In the past two calendar years, we have conducted over 1,100 audits and nearly 9,000 risk management interventions in the rental sector, with a total yield of €81 million.

I am happy to discuss any issues and answer any questions raised by the committee, subject of course, to taxpayer confidentiality.

Chairman

May we publish Mr. Cody's statement?

Mr. Niall Cody

Certainly.

Deputy Gabrielle McFadden

I welcome Mr. Cody and thank him for his opening statement. Based on everything we have read, the undertaking by Revenue was a huge task for it at a time of diminishing staff and budget resources. Revenue appears to have set up a very effective system in nine months. It is a pity other systems such as SUSI or Irish Water, in terms of set up, have not been as effective. I compliment Mr. Cody on that.

I note from the briefing that Revenue has a property register of approximately 1.95 million, which is a huge workload for any Department. Reference is made in the briefing to 3% or 55,988 properties in respect of which no owners have been identified. That is extraordinary. Perhaps Mr. Cody would elaborate on that issue.

Mr. Niall Cody

The Deputy is correct that the undertaking was a huge challenge. We had to prepare a register. The register was prepared from a number of data sources. One of the particular challenges was that of non-unique addresses, namely, addresses in country areas where there are different variations of address such that an address and a name could be slightly different. We will have picked up data from different sources. Some of the houses are not houses. At the time the report was being compiled there were 68,000 no-owner properties on the register. The current figure is 47,000, which is a reduction of 21,000. Of that 21,000 more than 60% were duplicate properties - there was not a property.

It is a really difficult part of the register to work on because each case must be looked at to see if the property is a real property, and then we must see if there is an ownership.

The census figure is the figure we have always used as our target for what the property register is. The last census figures had a figure of 1.99 million properties. Of the 1.9 million properties, approximately 236,000 were uninhabited, vacant and in various stages of vacancy. One of the key issues is that the property tax is payable on habitable properties. I have seen some of the cases, and some of the committee members have seen some of the cases when representations were made. If somebody dies in a property, it is habitable when they were living in it, but it very quickly falls into a state of disrepair. Some of the cases become uninhabitable and we knock them off the register. The figure of 47,000 sounds like a large figure, but it is just over 2% of the property register. I am fairly satisfied that there are not 47,000 liable properties. There are some. Some of them are building stock that were unfinished. As houses are finished and sell, we pick them up. As people buy the house, do it up and it becomes habitable we pick it up through our stamp duty.

However, if the committee had asked us in 2013 whether we would get to 1.95 million properties by 2015, we would have said we did not think so. My predecessor was before the committee talking about the property tax, and we are really surprised that we have got it so accurate. The problem with everything to do with property tax is that 1% is approximately 20,000 and when we talk about telephone calls and contacts afterwards, 3% is just massive numbers. It is so out of the scale of something such as corporation tax, where we have less than 200,000 cases, or VAT, where we have a register of approximately 250,000. This is massive. The Collector General has a team in Ennis and Limerick working through the register as we come across contacts. In fact, in the period from the start of March 2013, when we started issuing our letters, we have had 600,000 contacts that are related to register issues. Of the 600,000, half are about owners' names being added to the register.

One of the key bases of our register was the household charge and the Local Government Management Agency, LGMA, data. With regard to the LGMA data, I know people say it was not a success until the Revenue Commissioners took over, but we see it as a very credible start. We would be a great deal further behind if the LGMA had not been there first. One of the features, and this is in the report, is that the LGMA data registered the person who paid, not the owner of the property. In many cases one had adult children paying on behalf of parents. When we were having our various meetings about it we used to talk about particular parts of the country. As is known, I am from Kilkenny so we used to talk about Tipperary people. If one takes a name that is quite common in Tipperary such as Ryan, in any parish in rural Tipperary there are multiple numbers of Ryans. They will have similar names such as Patrick, Paddy and P.J. The names may be the same but they may actually be three people with three houses. If we are back before the committee next year and there is an item about the LPT register, I am quite satisfied the 47,000 will be down considerably, but I believe it will take us until properties are bought and sold and there is a reasonable amount of churn back in the market before we will get to the end of it fully.

One of the other features of the Central Statistics Office, CSO, register is that bedsits are captured by the CSO. They were liable to the household charge but they are not liable to property tax. If there is a house comprised of bedsits, and I know there are all sorts of rules about bedsits now, that is one property for LPT although it could be five addresses for the LGMA and for the CSO. We will continue to work on it.

Deputy Gabrielle McFadden

According to the briefing we were given, a sample of 50 was taken from the 5,000 properties that were awarded exemptions. The audit found that of the 50, some 40% of the exemptions which were claimed for houses that were in unfinished estates were not in designated estates. It was recommended by the Comptroller and Auditor General that the claims would be examined. What is the current position with that? What steps have the Revenue Commissioners taken to address the risk of incorrect claims being sent in respect of unfinished estates? What do the Revenue Commissioners do when they find this to be the case?

Mr. Niall Cody

We gave our response to the recommendations of the Comptroller and Auditor General at the time and we have given him an update in the material last week. We have done considerable work on the unfinished housing estates. In excess of 4,900 unfinished housing estate exemption claims have been received. Of that, at this stage, 1,800 cases have been reviewed and contact has been made where there was doubt over entitlement to the exemption. Approximately 600 cases have had the exemption claim refused. The findings of the exemption team indicate that in mixed estates, where the delineation between exempt and non-exempt properties is unclear, up to 40% of the claims submitted were invalid. However, apart from mixed estates, there is no evidence of the submission of invalid claims for the unfinished housing estate exemption.

It is important to outline some of the background regarding the unfinished estates. Obviously, it was a very emotional issue. The household charge provision had an exemption for unfinished estates. It covered just under 50,000 properties. By the time LPT was introduced the Minister for the Environment, Community and Local Government, who controls the prescription of the unfinished estate, had work done from 2011 to 2013. The unfinished housing estate for LPT covers approximately 5,100 houses as opposed to the almost 50,000 houses covered by the household charge exemption. What happened was that there were estates where partial work had been done in the meantime and one had an estate which, for the household charge, was unfinished in its entirety but by the time the 2013 regulations were made the element of the estate that was finished was taken out of the unfinished estate. That is where we talk about the mixed estates. Somebody who was in an estate that was exempt from household charge may not have been exempt for LPT. The errors we found were in that.

We are quite satisfied that they were mostly unintentional. I remember looking at this back in 2013. Some of them had filed their LPT return claiming the exemption before the revised regulations were enacted, so they thought they were exempt. It is also probably fair to say that a number of them felt that they should have been exempt, regardless of the regulations, and claimed it. It is a really sensitive area. If one is in an estate that is reclassified as finished while some of it is still unfinished, there is no doubt it has significant impact on the valuation band.

Generally what happens, particularly in rural towns, is that the property becomes liable in band 1. We have not written out what we would call enforcement letters. Often, we contact them by phone call to say that as far we can see, they are on the wrong side of the line and to ask them to have a look at it and resubmit. Those phone calls can be very difficult and there can be a number of contacts. We are working through the exemptions. The one thing we can safely say is that we do not see any evidence that people have set out to claim the exemption. Overall, the exemptions cover about 50,000 houses. It would not be where one would start. Regarding the amount of money that is at risk for many people, ignoring the local authority variation, most of them will be in band 1, for which the LPT liability is €90. We want to get it right and get them into a position going forward. Yesterday on the radio there was some commentary on the considerable work that is now being done on unfinished estates and one of the issues for the Thornhill review will be what comes out of that exemption.

Deputy Gabrielle McFadden

Anyone looking for an exemption in an unfinished estate is perfectly right to do so, because many people are quite miserable living in estates that are not finished properly and which might be dangerous. Did Mr. Cody say that 600 cases were refused?

Mr. Niall Cody

Yes.

Deputy Gabrielle McFadden

Does that mean that in those 600 cases, those people have paid and the money has been collected?

Mr. Niall Cody

We would have required them to refile their return.

Deputy Gabrielle McFadden

They have paid.

Mr. Niall Cody

Yes, or entered into a phased payment arrangement, or be liable for deferral, depending on their circumstances. We treat them like any other-----

Deputy Gabrielle McFadden

How many staff has the Revenue Commissioners looking after this?

Mr. Niall Cody

I am laughing because at various times, it has seemed that the whole organisation is looking after this.

Deputy Gabrielle McFadden

Yes, I can imagine.

Mr. Niall Cody

To summarise, in 2012, when we started doing the planning, we had 58, although some of these people were partially involved and doing other things and some were involved in computer development. In 2013, we were at 202, in 2014, we were at 294 and we are now back at 248. Of that, we have had temporary clerical officers in over 2013, 2014 and 2015. In 2014, which was the biggest year, we had 149 full-time and 144 temporary staff. We are now getting to a stage where it has been mainstreamed. The temporary involvement is dropping. Our main LPT branch is in Ennis and then part of the Collector General's main office in Limerick is involved in some of the phone calls and phone service. Those are the kind of figures.

Deputy Gabrielle McFadden

According to our briefing, by the end of June 2014, a total of 1.76 million property evaluations had been filled and recorded. It says here that 75,100 properties were identified for which owners had returned a value for their property that was lower than their neighbour's. It has been recommended that a review be done. Has that review been done? What evidence is needed to prove a valuation is right and to compare it with that of a neighbour?

Mr. Niall Cody

The LPT, like all taxes, is a self-assessment tax, so the individual assessed the value of the property back on 1 May 2013, which was the valuation date, and it is a banded system, apart from properties worth in excess of €1 million. Like every other self-assessment system, the returns are filed and then we review where we have risk indicators.

Deputy Gabrielle McFadden

This is not done house by house. How do the Revenue Commissioners know who is right if I submit one valuation and my neighbour submits another and they are completely different? Do they look at each individual case?

Mr. Niall Cody

Our LPT register has effectively been mapped on the map of the country. The properties are geo-coded. I hesitate to say what we have. We can essentially look at Google maps in our system. We can look at a housing estate and look down a street and say the houses are band 3.

Deputy Gabrielle McFadden

Do the Revenue Commissioners actually do that for each property?

Mr. Niall Cody

No. The IT system throws out outliers.

Deputy Gabrielle McFadden

It does it for them.

Mr. Niall Cody

We will have a system where one can say that in a particular area there is a property that is, for example, four bands lower than the average in the area. There can be absolutely valid reasons for that. I remember being shown the pilot of this project, where it was being mapped and we were looking at an area in south Dublin where there was one property that was, say, six bands below the value of the street. When we focused in on it, we found it was a mews house in the back garden of one of the houses, totally out of proportion with all the rest and the difference was perfectly reasonable.

We have been busy with the register, with payments and with collecting the money that people are declaring. Our work on valuations and reviewing valuations has three bases. The first is property sales. Where property sales arise, part of the clearance system is seeing whether it sold for a hell of a lot more than the person declared it. It was interesting in 2013, where people put properties on the market with an asking price that was double the band they declared on 1 May. They probably had not thought they were going to sell the house in a couple of months. There is a process for that. We also provided a facility in the LPT system to allow people to revalue their band. There are nearly 8,000 valuations up since it started. We are now looking at setting up a compliance valuation team to look at the outliers. We will do it like we do everything else. We will ask people whether they are happy with their valuation. There are all sorts of valid reasons, such as the state of the house and so on. However, there is no doubt that some of them have a problem. We would see it in the context of, leaving out the local authorities, housing bodies and so on, the 1.65 million ordinary residential properties.

The level of undervaluation is actually really low. People really tried. Overall, I think something like 85% of properties are in the first four bands. The average prices for rural Ireland were in the paper the other day. They are mostly in bands 1 and 2. It will take a fairly significant house to move it up by €50,000 or to the next band. The challenge in urban areas is clearly different. One of the other factors is that 1 May 2013 was probably very close to being the bottom of the market in Dublin.

Probably the first sign that property prices in parts of Dublin were starting at least to stop dropping was in July 2013. Another feature that I and everyone can see in parts of Dublin is that a house may sell for a price that is four bands higher than the value on 1 May 2013, and this is not a sign of non-compliance. When my predecessor appeared before the Committee of Public Accounts and was asked about the procedure when someone sells his or her house for a sum four bands above what he or she valued it, she said good luck to them. That is the reality.

We will continue to work at obvious under-declarations but we are fairly satisfied there is no significant evidence of it. The patterns of value tie in with the work that the original Thornhill group and the ESRI group had done. If one thinks one's house is in the band between €95,000 and €105,000 and declares it for the LPT at €95,000, I do not think anyone could argue with that.

Deputy Gabrielle McFadden

I think people have been very compliant.

Mr. Niall Cody

Absolutely.

Deputy Gabrielle McFadden

In respect of the household charge, it is stated that €95 million has not been paid or has been waived or exempted, and that €25 million in arrears has been collected. What is the position on the €70 million of arrears in the household charge? I presume those who did not pay the household charge paid their LPT as the compliance rate for LPT is 97%. What is the penally on those who did not pay their household charge?

Mr. Niall Cody

In my opening statement I stated the figure for the payment of the household charge at this stage is €45 million. The figure of €95 million was theoretically possible if the gap between the LPT register and the household charge related to a property. We have done a raft of matching. There is a difference in the number as some paid the household charge under a different name. We have been going through the gap in the registers. We had hoped to get to do this work earlier than we did because we were trying to get the LPT register right. The household charge was €100. In the legislation to bring in LPT, the unpaid household charge was capped at €130 if it was paid before April 2013 but rose to €200 if it remained unpaid at 1 July 2013. It doubled. We started a process.

The household charge has been the hardest property related tax to collect. The household charge was very unpopular. No one was asked in writing for the money. The local authorities did not write to everyone asking them to pay the household charge. When we asked people to pay the household charge and penalty, which amounted to €200, the usual response was that no one had asked them for this payment when it was set at €100. Their response was: "I am not paying anything." We started the process of collection, and we have collected €45 million. Some 100,000 people who are paying their household charge and penalties are on phased payment arrangements. The Collector General told me this morning that €23,800.83 was paid in household charges yesterday. Approximately €25,000 a day is being paid and those who owe the household charge go into the post office and pay it on the drip. There are approximately 45,000 properties that we have not yet checked out. We are going through the list and we will write letters once we work out who owes the money. There are about 10,000 people who are deferring the household charge. As the household charge becomes the LPT, all the provisions in respect of LPT apply to the €200 charge. This charge will stay on the record of those properties.

We knew that collecting the household charge would be difficult. We had hoped we would collect between €40 million to €60 million and we will collect between €50 million and €60 million. It is a finite piece of work to get it on record. Another issue in regard to the household charge is proof of payment. People who had paid online with the Local Government Management Agency were fine. Members may recall that there was provision to pay the local authority €130 before 31 March 2013 and people were issued with a paper receipt. I remember the LGMA referring to the bags of payments and receipts they had at the end of the day. Some of the records are challenging. If a person has paid their LPT for 2013, 2014 and 2015 and he or she says the local authority was paid the €100 household charge, we will treat each case on its merits.

Deputy Gabrielle McFadden

I have two brief questions on rental income. In his opening statement, Mr. Cody said "Revenue commits a significant proportion of its compliance resources to combat shadow economy activity" and "We select cases for intervention". How does Revenue select cases for intervention?

Revenue now prints a list of tax defaulters. Are landlords on that list and, if so, what is the percentage?

Mr. Niall Cody

All our interventions are based as much as possible on risk analysis, and I mentioned that our main risk profiling system ranks every business and every self-assessed taxpayer from 1 to 656,700. We tier our risk and it is based on matching third party data with tax returns. Each district will have a programme on selecting cases, profiling them and selecting them for risk interventions, including audit. That applies to rental income, medical consultants, contractors. This is a sophisticated risk system which is improving with every data source we get.

There is a tax defaulters list published quarterly. It includes a small proportion of cases where there are audit settlements. They must meet certain criteria before they are published, mostly related to the fact they do not make a disclosure, either prompted or unprompted. If one makes a disclosure and pays the settlement figure, one will not have one's name published. I cannot say how many landlords appear in the publication list but can safely say that every quarterly list includes a number of landlords. It is one of those sectors that continually appears in the publication list and in every settlement list.

I mentioned earlier a figure of €81 million in connection with the 1,100 audits we have conducted over the last two years in cases where there was rental income. As the Comptroller and Auditor General has said, some of our yield from these people cannot be attributed to their rental income. The reality is that most people who have rental income have other business income interests. Generally, our yield from them has far more to do with their understating their income from rentals or from other sources, including cash sources. If the Deputy wishes, we can look over the lists for the last while.

Deputy Gabrielle McFadden

No. I thank Mr. Cody for his time.

Deputy Joe Costello

I welcome Mr. Cody and his team. Deputy McFadden went quite thoroughly through the local property tax. Revenue seems to have done a good job in a short space of time. It has put an effective system in operation. It has achieved a high compliance rate of up to 97%. It will have to get rid of its 248 staff when it hits 100% compliance. I would like to ask a question about the local property tax. The baseline date was 1 May 2013. That baseline was to last for three years. I suggest that 1 May 2016 is coming up very quickly. What role does Revenue have in the valuation process? What will happen with the local property tax for the next period of time? Is Revenue in discussions with the Government on this matter? What advice is it offering in this area?

Mr. Niall Cody

The Finance (Local Property Tax) Act 2012 provides for what is to happen in November 2016. It provides that the first valuation period is three and a half years and that there will be a three-year valuation period thereafter. The local property tax legislation, as it currently stands, provides that a revaluation based on values at 1 November 2016 will be valid for three years. As Deputies will be aware, the Minister has asked Dr. Don Thornhill, who was involved in the original report on what type of property tax should be introduced, to carry out a review of the valuation process and a number of other features of this matter. His terms of reference are to review the operation of the local property tax and to make recommendations on issues that arise from the review. In particular, the review will have regard to recent residential property price developments, the overall yield from the local property tax and its contribution to total tax revenues on an ongoing basis, and the desirability of achieving relative stability in the local property tax payments of liable persons over the short and longer terms. Dr. Thornhill will also review a number of specific issues, such as the process around pyrite. My understanding is that the report of the Thornhill review is due to be submitted to the Minister between the end of June and the middle of July. I think that is the target that was set. I presume it will be submitted before the end of July. I understand that Dr. Thornhill will submit his report to the Minister. I do not think I am breaching the policy guidelines when I mention that the Minister has said he will consider Dr. Thornhill's report in the context of the budget. I am not privy to his plans. He will review the report and put forward his proposals. I will explain what our involvement has been. Obviously, we have all the data. We have provided reams of data on stamp duty, for example. If there is a revaluation, we will have to update our valuation guidelines. We have played a full part in supporting Dr. Thornhill and the Department of Finance. We consider that whatever decision the Government will make is very much a policy matter.

Deputy Joe Costello

Revenue's role has been to provide data analytics and give the current picture. Has it been looking into the future by giving an idea of valuations? Does it play any role in making an input into policy matters?

Mr. Niall Cody

The Department of Finance will look for our input across all aspects of taxation, particularly anything to do with the administration of the tax system. We are the experts when it comes to the tax administration and collection processes. Tax rates and the basis of taxation are policy issues. The Government and the Department of Finance will look for any input we have on such issues. That is the other side of the operation.

Deputy Joe Costello

I am interested in Revenue's engagement with Mr. Thornhill's committee. Does it have someone on the committee?

Mr. Niall Cody

We have two representatives working on and supporting the review. One of them is working primarily on data analytics and valuation data. The other person would have been chiefly responsible for the drafting of the legislative framework within the Act. I will explain how taxation legislation is drafted. Revenue does the drafting in conjunction with the Office of the Parliamentary Counsel. We look at how a tax hangs together. We are involved in support work. At the very start, we undertook to provide any data needed by Dr. Thornhill. We can give a view on the impact of property price changes on valuations. All of that type of support is provided. Any decision that is made will be made in the full knowledge of-----

Deputy Joe Costello

The raw material.

Mr. Niall Cody

-----the facts on the ground.

Deputy Joe Costello

I would like to ask a question about Revenue's accounts for 2014, the budgetary process and the gross receipts. I notice that in 2014, the estimate in the budget was €40.158 billion and the gross receipts were €47.147 billion. There was quite a divergence between the estimate and the actual receipts. What role does Revenue play in the estimates for the budget? What engagement does it have in that regard? It would seem that there was quite a divergence in this case, when one looks at what actually transpired.

Mr. Niall Cody

To clarify, is the Deputy talking about the difference between-----

Deputy Joe Costello

I refer to the net receipts.

Mr. Niall Cody

-----the gross and the net?

Deputy Joe Costello

Yes. I am talking about taxes and duties.

Mr. Niall Cody

The big difference between the gross and the net is repayments. It is not a question of the difference between the estimate and the actuality. The biggest tax where there are significant repayments is VAT. I think gross receipts for VAT were approximately €14 billion and net receipts were approximately €11.7 billion. The VAT system works-----

Deputy Joe Costello

Why is that the case?

Mr. Niall Cody

We repay in excess of €2.5 billion in VAT. That is the way VAT works. I will give a simple example. Exports are zero-rated for VAT. If one is an exporter, one is entitled to claim VAT back on all of the inputs on which one suffers VAT.

Deputy Joe Costello

Okay.

Mr. Niall Cody

VAT contains a significant in-built difference between gross and net. It is not a difference between the estimate and the outturn.

Deputy Joe Costello

It is not a difference between the two, but in fact-----

Mr. Niall Cody

A total of €5.7 billion was repaid in 2014.

Of this, €3 billion was VAT and €1.9 billion was income tax. For example, income tax arises----

Mr. Seamus McCarthy

It may be useful for the Deputy to look at note 5 of the account which gives the reconciliation between gross and net for 2014 by tax head.

Deputy Joe Costello

The variation appears out of kilter in the sense that the value added tax amount in the budget Estimate was €10.7 billion while gross receipts amounted to €14.2 billion.

Mr. Niall Cody

I was about to say that is just the way VAT is.

Deputy Joe Costello

It is not a miscalculation.

Mr. Niall Cody

No, the VAT system contains an in-built repayment system. Income tax repayments arise because people pay preliminary tax and their tax ends up less. We repay a certain amount - in this case €5.7 billion - every year and there is a process around it. One of the concerns we have with repayments is that while most of them are perfectly legitimate, they are always susceptible to having somebody-----

Deputy Joe Costello

That does not affect the planning process in that the Revenue Commissioners are aware of the position from the word "Go".

Mr. Niall Cody

Absolutely, and that is factored into the VAT from an Estimates point of view.

Deputy Joe Costello

I note in respect of overall debt that the debt available for collection was €907 million. While this figure was down from the previous period, it is still a considerable amount of debt. At the end of 2014, there were 8,908 taxpayers or businesses, covering €104 million in debt, in phased arrangements to pay for tax liabilities. What precisely is meant by the statement "debt available for collection" and how does this tie up with the amounts that have been paid off? The sum available for collection is much larger than the amount that is in phased arrangements for payment of tax liabilities. What happens in respect of the difference between the two amounts, namely, the €907 million available and the €104 million that is being progressed?

Mr. Niall Cody

The €104 million refers to people who are in instalment arrangements. These are individuals who have come to us because they are having temporary financing difficulties and enter into instalment arrangements. The annual report states that, for the first year since the downturn, this figure has gone down and reflects the recovering economy. This is a particular category of people who have come to us and we have entered into temporary arrangements with them.

Deputy Joe Costello

Are they people who have defaulted in some fashion?

Mr. Niall Cody

No, they are people who may possibly have difficulty with sourcing finance from the banks. We have always said to businesses that they should come to us and if they do so with full information, we will work with them provided they have a viable business and business plan. This is a particular category of people who are not included in the debt available for collection.

Deputy Joe Costello

All of that money is being or will be collected.

Mr. Niall Cody

Yes, it is in the process of being collected.

Deputy Joe Costello

The amount of debt available for collection is, therefore, a separate figure.

Mr. Niall Cody

To give you the updated figure on the debt available for collection, at the end of May this year the figure stood at €778 million. This debt available for collection represents 1.39% of the gross collection. The Collector General will tell me that this is probably the lowest this figure has ever been.

Deputy Joe Costello

Have the Revenue Commissioners been reducing it each year?

Mr. Niall Cody

We are reducing it at all times. However, there is always debt available for collection. Somebody will send in their returns and not send in the payment in full at a particular time. This occurs in an annual cycle, for example, at P35 time in February there will be amounts outstanding and it will happen again around income tax filing. There is always an amount of tax that is available for collection and we will go through a process of issuing a reminder. Some cases will be sent to enforcement, some will be sent to the sheriff and some will be sent for solicitor action. Some are just late payments. There is a cycle of tax due at any particular time and some of it, unfortunately, will end up not being collected because businesses will go into liquidation.

Deputy Joe Costello

Did the figure increase when the economy virtually collapsed some years ago? Is it declining?

Mr. Niall Cody

On the debt available for collection at various times, at 31 March 2006, which was before there was any problem, the figure stood at €792 million. The highest figure in recent years was at 31 March 2010 when it was €1.433 billion. This probably represents the collapse of the economy. I have a table setting out the figures from 2005 to 2015. It shows that the figure stood at €895 million in March 2008 and subsequently increased to €1.433 billion, before declining to €1.389 billion, €1.317 billion and €1.117 billion in different years. It stood at approximately €900 million in March 2015 and now stands at €770 million.

Deputy Joe Costello

I assume it is not a cumulative figure.

Mr. Niall Cody

No, it is a picture.

Deputy Joe Costello

It is declining all the time.

Mr. Niall Cody

Generally, we report on the debt at 31 March. The graph shows the depth of the decline in the level of debt available for collection following an initial increase in the amount. The difference between figures has not all been collected. I will put it that way because companies will go into liquidation and the tax will have to be written off, at which point it is lost.

Deputy Joe Costello

On the issue of non-compliance, clearly this was a significant issue with regard to offshore accounts in 2013-14. The total yield from the Revenue Commissioners investigation into offshore accounts exceeded €1 billion in that year and the various yield from audits and compliance interventions was €610 million. These are large sums of money. In addition, 437 settlements were published in Iris Oifigiúil and 483 cases of tax avoidance were identified. The amounts involved is significant and the Revenue Commissioners have done considerable work trying to resolve this issue. Is this the pinnacle of difficulty the Revenue has experienced?

Mr. Niall Cody

The Deputy mentioned a couple of issues. The first of these is special investigations. I appeared before the committee in March to discuss HSBC. We had a 15-year campaign of special investigations linked to offshore accounts, bogus non-resident accounts, Ansbacher accounts and offshore trusts. By the end of 2014, the total amount we had recovered from these special legacy investigations reached €2.74 billion. While the total yield from the investigation into the offshore assets exceeded €1 billion during the year, it was not the case that €1 billion was collected during the year but that €1 billion has been collected over the lifetime of the investigation. The €2.74 billion figure represents the outcome of the work since investigations commenced in 1998. This work was ongoing in 2014 and the figure for 2015 to date is already in excess of €50 million.

Deputy Joe Costello

Does that figure refer to offshore accounts?

Mr. Niall Cody

It is for that whole special investigation area. The other €610 million is the yield from our audit and risk management compliance intervention. It is the annual programme that we do. The €610 million is probably the highest figure outside some of those big special investigation years and represents the outcome of the 7,700 audits in the different-----

Deputy Joe Costello

A total of 7,636 audits yielded €338.8 million.

Mr. Niall Cody

Yes.

Deputy Joe Costello

Is tax evasion and tax avoidance rampant?

Mr. Niall Cody

I do not think so. One has to look at the 7,636 audits and the yield from them. The yield arises for a vast number of reasons. Some of it is due to innocent error or different technical interpretation. Tax law is complex and the body of tax law is fairly extensive. There is a raft of reasons one could end up owing Revenue money when we conduct an assessment. We would say there is a very strong compliance culture in Ireland. That is evidenced by all the work that-----

Deputy Joe Costello

It was not the case surely given all the offshore accounts and that activity.

Mr. Niall Cody

It certainly was not the case. I know this committee would have done much work historically on bogus non-resident accounts. There were certainly practices that were nearly run of the mill. It was probably seen as acceptable and as something that people were fairly proud to boast about. One of the areas where we receive strong representations is in respect of individual cases. They say they do not mind what the settlement is or what the penalty is but they ask not to be published in the defaulters' list. We have no authority not to publish if one meets the criteria. The publication list has remained fairly constant. There were 436 cases published in 2014, 450 in 2013, 483 in 2012, 366 in 2011 and 305 in 2010. There is little reason to find oneself published in the defaulters' list. The majority of people who are published have a very straightforward way of avoiding publication and that is to make a voluntary disclosure. One gets every opportunity to do so. Those cases, unless they are the result of an investigation or are part of an offshore account, and some are offshore, have failed to take the opportunity to comply.

Deputy Joe Costello

How much money was obtained from the 436 settlements published in Iris Oifigiúil in 2014?

Mr. Niall Cody

In respect of published settlements in 2014 the amount was just under €98 million.

Deputy Joe Costello

It was €98 million.

Mr. Niall Cody

And that includes taxes.

Deputy Joe Costello

Are these the hard cases that fought Revenue all the way?

Mr. Niall Cody

They certainly did not make complete voluntary disclosure. Some made a voluntary disclosure but when we looked at it we found they were not complete disclosures. Some of those cases will take a number of years to bring to finalisation. We will have to examine books and records. In some cases we will probably have details of bank information that may not have been disclosed. They are the type of cases that take up a significant part of our resources. Audit resources and investigation resources are scarce. The work is not easy. If one is in a publication list there is generally a lack of complete co-operation and people do not say: "Sorry, we will pay this."

Deputy Joe Costello

Would all these cases have gone to court?

Mr. Niall Cody

No.

Deputy Joe Costello

Would they all have gone to the steps of the court?

Mr. Niall Cody

No. We carry out audits and end up in settlements. We agree the liability, interest and penalties. Some of the cases would have ended up in court because we would have referred them for prosecution. The last time I appeared before the committee we talked about a number of the cases and HSBC Bank-----

Deputy Joe Costello

So the threat of prosecution-----

Mr. Niall Cody

-----were prosecuted.

Deputy Joe Costello

And some prosecuted.

Mr. Niall Cody

Some will agree the tax and the interest but will not agree the level of penalty. To be published the penalty must be in excess of 15%. In many cases the person will not agree the level of penalty. If they do not agree the level of penalty and we feel it is 30%, 40% or whatever the rate is, we have to go to court to get the penalty confirmed. In our publication list one will see some cases where the penalty notification has been imposed by the court. One can identity them in that quarterly list. They will have agreed everything but the penalty and we will have to go to court and prove the case in court. That is some of what is involved.

Deputy Joe Costello

Some will not settle and some will end up in prison. Can I have a rough idea of the number of people who end up in prison annually for non-compliance or tax evasion?

Mr. Niall Cody

In the year to date, the most recent figures show there were ten serious convictions so far, one as recently as this week, in which a person got an 18-month custodial sentence for serious VAT evasion. We have had a number of examples: three years suspended, ten months custodial, three and a half years with one year suspended, two years fully suspended, 18 months custodial, three years with one year suspended, three years with two years suspended, and 240 hours community service. Whether it is a custodial sentence-----

Deputy Joe Costello

On average, what amount of money would be involved in each case?

Mr. Niall Cody

Many of those would be six figure sums.

Deputy Joe Costello

Would they be in excess of €1 million?

Mr. Niall Cody

Some of them would be in excess of €1 million but I do not have those figures to hand. In recent years we have had significant prosecutions. My predecessor, whether last year or the previous year, spoke about there being more than 20 people serving custodial sentences for tax and duty offences at a particular point in time.

Chairman

The Deputy's time-----

Deputy Joe Costello

I have only started. I have one related question. I note there has been a considerable number of seizures of drugs - 6,000 plus - and a huge amount of illicit fuel - more than 200,000 litres. There have also been an enormous number of cigarettes - 55.4 million - and 9.8 kg of tobacco. Will Mr. Cody give the committee an idea of the overall impact of those seizures in terms of loss to the Exchequer? I cannot go into other damage but there appears to be a huge problem for the Exchequer in terms of loss of revenue.

Mr. Niall Cody

Absolutely. I would like to start with fuel laundering, which has been a massive problem. We are involved in significant activity in regard to fuel laundering. Since 2011 we have been involved in a major, linked strategy to tackle fuel fraud. We have closed down 134 filling stations, revoked licences and introduced new electronic record returns for oil trading. This significant development has been introduced with the support of the legitimate trade and everybody dealing in mineral oil must send in a monthly electronic return of their supply. What we are trying to do is to build up a supply chain view. What happens with marked diesel is that it eventually gets diverted and laundered and sold back as clean diesel and that is the challenge we must address. We have been trying to identify where suspicious quantities end up and to follow through on that. In the Finance Act, the Minister introduced a provision on reckless trading. Therefore, if a legitimate distributor sells what is clearly a load that does not make sense, we will tell him he should not be trading unless he has X, Y or Z and we can go to him, carry out an assessment and hit him.

The latest development is the new marker we have introduced, in conjunction with Her Majesty's Revenue and Customs. From 1 April, there is a new marker on both sides of the Border in addition to the marker already used, which was red in the North and green here. We now have a new marker in addition to the colour marker. We have done a fair degree of testing of diesel since April and of 277 diesel samples we took, we have the results of 78 of them back from the State Laboratory and of that 78, some 23 have tested positive for the new marker. In July we will have roadside analysers in place. On both sides of the Border, we have commissioned new testers who can do roadside testing and these will be in place by the end of this month. This will facilitate detection. Currently, we must send samples to the State Laboratory and that process takes time. The State Laboratory is a significant partner in this new process.

In the past year, we have carried out a study of the impact on the diesel market of laundering. This study was carried out by economists in Revenue and is based on the size of the legitimate market. Indications are that the work over the past few years has led to an increase in the yield from the legitimate trade of in the region of €200 million. It is very hard to say this is a result of what we have done, because there are various factors involved. However, we feel we have made a serious dent in the business of oil laundering, but we are not naive enough to think that this is the end of it, because people involved in fuel laundering and its distribution are very organised, determined and ruthless. We have certainly seen a difference in regard to people who would accept an occasional load over the years and sell it mixed up with legitimate fuel. These people have probably shied away from that.

However, there are forecourts around the country and pop-up stations that are fronts for the organised gangs involved in fuel laundering. Even where we think they are doing it, we must detect it and then go through the process of revocation of licences. Sometimes in parliamentary questions we deal with for the Department, we are asked why we did not close X, Y or Z if we had evidence there was once marked fuel sold. However, people use the cover of limited liability and people set up different companies. If we revoked licences, we would be subject to judicial review and in certain cases, the immediate response we would get would be a legal letter. It is a serious matter to revoke somebody's licence to trade.

We feel we are having a significant impact on the illicit fuel market. The difficulty is that it is an all-island issue. If we succeed in stopping any laundering south of the Border, and if it continues north of the Border, we will not know visually whether the laundered fuel was red or green laundered, although we will know from testing. That is the reason for the new fuel marker. The UK authorities are interested in our electronic monthly system, because they have a paper based system, which is about as useful as the paper it is on - it sits in a file and the risk analysis cannot be carried out.

Deputy Joe Costello

What Mr. Cody is saying is that Revenue is seriously seeking to address the issue through its new mechanisms.

Mr. Niall Cody

Absolutely.

Deputy Joe Costello

Can he give us an idea of the value of the illicit fuel laundering?

Mr. Niall Cody

I cannot because -----

Deputy Joe Costello

There are no estimates. What percentage of the licit fuel market would it be?

Mr. Niall Cody

What we can do is look at the increase in the road diesel market over the past number of years. Our analysis of that suggests that the work we have done has saved €200 million. We are not saying we have eliminated diesel laundering, because we know we have not.

Deputy Joe Costello

In what year did it save €200 million?

Mr. Niall Cody

This report is mostly about work done in 2014. We have published this report on our website and I understand the Comptroller and Auditor General may look at it. I have a copy of the report here, dated December 2014. The report attempts to look at the increase in the market and other issues. There are so many factors involved, such as the changing nature of the car fleet diesel-petrol, an increase in road transport as the economy recovers, fuel efficiency, etc. Therefore, to come up with an exact amount regarding the tax gap is very difficult. However, it is one of the areas where we feel we can do work, because the oil market here all starts off with a big container load coming into some port. It must start there. Part of the challenge relates to Northern Ireland.

That is more difficult because it is part of a much bigger market, so there is no Northern Ireland oil market as such, although the UK would be very much down the line of putting figures on what are these gaps.

Tobacco is the other area. We do a lot of work on tobacco and smuggling. Some of the figures have already been mentioned. We also attempt ourselves-----

Deputy Joe Costello

Somewhere over 50 million cigarettes.

Mr. Niall Cody

Yes. We work with the Office of Tobacco Control to try to estimate what is the amount of illicit and non-duty paid cigarettes. The estimate of the non-Irish duty paid market is somewhere in the region of €250 million but that is not all to do with smuggling. A person is perfectly entitled to buy cigarettes when going on holidays and bring them into Ireland for personal use. There is a component of-----

Deputy Joe Costello

Is Mr. Cody saying there is €250 million where duty is not paid in the Irish market per annum?

Mr. Niall Cody

There is an estimated figure. Research indicates that 11% of smokers surveyed were found to have smoked a packet of illicit cigarettes, wherever they sourced them. That is actually an improvement. In 2012, it was 13% and in 2013 it was 12%. Somewhere in the region of the early teens of the cigarette market is illicit. The problem with cigarettes is that there are multiple entry points. There are, as we call them, ant smugglers-----

Deputy Joe Costello

Just to be clear, and I will finish on this point, is Mr. Cody saying that €250 million is lost to the Irish market in duty not being paid on cigarettes and does that figure include tobacco?

Mr. Niall Cody

Yes, absolutely, it does.

Deputy Joe Costello

The totality of the tobacco product amounts to one quarter of a billion euros roughly in unpaid duty to the Irish Exchequer.

Mr. Niall Cody

That is if all the illegal ones were replaced by cigarettes that cost €10 as opposed to the figure at which they are sourced and also assuming each of those people would smoke the same amount of legitimate as they do illicit cigarettes. There are all sorts of issues.

Deputy Joe Costello

I cannot go through the full detail but that is a huge amount of illegal activity depriving the market of funding. Could we get a description of the activities that are being engaged in on both counts, fuel and tobacco, to reduce the quantity of defrauding of the Revenue and Exchequer?

Mr. Niall Cody

Yes, absolutely. We will give that information.

Deputy Robert Dowds

I thank Mr. Cody and his team for coming in. Deputy Costello has taken some of my thunder because my questions were going to be in the same direction. I will start with a couple of aspects of the property tax. Obviously I got complaints, as anyone being asked to pay a new tax does not really want to pay it, but, in general, it seems to have come into operation quite smoothly. One area on which I did get complaints, and where there might have been some legitimate complaint, related to non-principal private residences. Once the period elapsed, the penalties went up rapidly. One case which came to my attention concerned people who had been living abroad and had rented their house here. They were apparently unaware of the fact that they were clocking up these charges. Will Mr. Cody talk me through that issue and how the Revenue dealt with people in that situation?

Mr. Niall Cody

The non-principal private residence €200 per property charge was a matter for the local authorities. We had no involvement. The NPPR was not ours. We did not collect it, we were not responsible for it and we were not involved in it. Each of those properties is liable to LPT and so our only interest in the NPPR was in their database, but the non-principal private residence charge that ended up, where it was unpaid, being ratcheted up is not LPT and we were not involved.

Deputy Robert Dowds

Did that money or a proportion of it not go to the Revenue in the end or did it all go to local authorities?

Mr. Niall Cody

Absolutely. We had no involvement in the NPPR.

Deputy Robert Dowds

Okay. Will Mr. Cody talk me through the situation regarding local authority houses and property tax? I know it was the job of the county councils to collect it but presumably a proportion of it went to the Revenue after it was collected. Can Mr. Cody say anything about whether the councils actually collected the money or did they just pay it out of their own resources? It was a source of considerable resentment in local authority estates where some people who owned their houses were paying it and their neighbours apparently were not having to pay anything.

Mr. Niall Cody

The local property tax Act provides that LPT is payable on all residential properties including those owned by local authorities. The way LPT is structured, the liable person is the owner of the property. The local authority is liable to pay Revenue in respect of its properties. The local property tax amendment Act - the second Act - set all the LPT liability for local authority houses at the first band regardless of value, which would have been €45 for the first half year and €90 for the second year. The liable person is the local authority. Local authorities have the liability for 120,460 local authority houses but we only deal with the local authority. We do not deal with the tenant and we do not establish whether the local authority passes it on in the rent or otherwise. That is a matter for the local authority to decide.

Deputy Robert Dowds

Does Mr. Cody, therefore, not have any sense of whether some local authorities are putting in an extra charge in the rent?

Mr. Niall Cody

No sense whatsoever. The only sense we would get of any of that is if it featured in a local paper or wherever and it happened to catch our eye. We have engaged fairly extensively with the local authorities about the practicalities of them paying their LPT and we have revised the IT system to make it easier. One of the areas in which we had a lot of work with the local authorities was where some of the houses were uninhabitable and the local authority might have had a plan to do them up or whatever but there was no clear focus. The toing and froing about the register went on for a considerable period of time. We do not know if they passed the charge on to the tenants. A similar situation applies to approved housing bodies; they are liable. A similar thing also applies in all landlord-tenant situations. The landlord is liable for the LPT. Whether the landlord passes it on in the rent or asks the tenant to pay for the charge, we do not know.

Deputy Robert Dowds

It would be a considerable drain on their resources if they are not imposing any kind of charge although I appreciate, at €90 a year, it is not a huge amount, if one thinks of it on a weekly basis.

Deputy Costello raised issues about illicit fuel and tobacco and so on. I appreciate that it is primarily Government and political parties which make policy. The Revenue Commissioners must have intelligence in such areas that it might have ideas about how best a particular problem, such as illicit fuel, might be tackled. Do the Revenue Commissioners feed that into the system or do those involved simply keep their mouths shut? I appreciate the Revenue cannot dictate to a government that it must do X, but it might be in a position where it could provide evidence of why a particular course might be more likely to work than another.

Mr. Niall Cody

When it comes to tackling tax evasion, fuel laundering, abuse of licensing systems and so on, we make representations to the Department and the Minister in every finance Bill cycle. Every finance Act in the past, however long one wishes to go back, has had revised powers and systems. These are the result of representations we have made to the Department. The Minister and the Department have been most supportive in the legislative framework.

Let us consider the issue of fuel. We looked at provisions around tightening up the licensing. There have been decisions in the courts in cases where we had revoked licences and a decision was overturned in the courts because of the legislative framework. Some of it is not all that clear. Let us concentrate on the oil issue. Since the Finance Act 2010 provisions have been put in place every year as a result of representations we have made. The provisions relating to the return of the oil movements are based on recommendations we make. It is somewhat like the local property tax. We have to design an information technology system and framework to tackle all of that. The new marker came in as a result of an agreed process between the United Kingdom authorities and the Revenue Commissioners. Certainly, if there is any facility we can see that will improve the tackling of serious tax or duty evasion and which requires legislation, we will pursue it. Some of it does not require legislation while some of it requires an investment in information technology. I have had a fair degree of involvement at various times working with the Department on anti-evasion measures. I can only say that Ministers for Finance are very supportive.

There has to be a balance as well. We must have regard to legitimate business. If we impose oil movement returns, the vast majority of those oil movements do not involve any illegitimate activity and the process imposes administrative and compliance costs for legitimate traders. We have to work closely with the legitimate trade, and if we do not keep the legitimate trade supportive or if we impose costs on the legitimate trade, we lose what is an invaluable resource. We have to try to strike a balance.

While issues around tax rates or the revaluation for local property tax are clearly policy matters, we certainly look at the administration of tax and the legislative framework we need. We look at international practice and what other countries are doing and they look to see what we are doing. It is a constant battle. While the legitimate traders are very important, the illegitimate trader is also looking at what we are doing and is looking at countermeasures and so on.

Deputy Robert Dowds

I have a question about corporation tax. It is well known that the rate is 12.5% and so on. In terms of the collection of corporation tax, to what extent do companies pay at the full rate of 12.5%? To what extent do some companies manage to pay almost none? What average is paid by companies in terms of corporation tax?

Mr. Niall Cody

Obviously, the question of corporation tax and international taxation is a serious issue and it figures prominently. A range of figures are bandied about. From a corporation tax point of view, we can only tax profits attributable to Irish operations, Irish tax-resident operations. I know that the Joint Committee on Finance, Public Expenditure and Reform has a sub-committee on global taxation which we appeared before. We have published data. In 2012 the effective tax rate in respect of tax as a proportion of the profits attributable to Irish companies was 10.1%. That is the Revenue published data. That is the figure. I realise a raft of other figures are put about.

Deputy Robert Dowds

I wish to clarify that so that I understand it. On average, companies pay approximately 10.1%. Is that correct?

Mr. Niall Cody

For a particular year it was 10.1%. The reason it is not 12.5% is because of issues like-----

Deputy Robert Dowds

It is because of capital investment and so on.

Mr. Niall Cody

Research and development is one of the big areas and double tax relief is another. I have no wish to mislead the committee; there are other views. Figures are bandied about relating to effective rates of 2%, but they are comparing tax paid in Ireland in respect of profits attributable to Ireland plus other parts of a company's activities. However, we cannot tax on that basis.

There have been a raft of developments - and there will continue to be - on base erosion and profit shifting as well as developments at OECD level. The Minister published his roadmap on tax competitiveness in the budget last year. The international corporate tax debate has been significant in the past two years and this will continue to be the case in the coming period as the base erosion and profit shifting proposals start to see the light of day. We will see debates about what will be implemented or otherwise. We are very clear and the Minister has been very clear that Ireland has a broad base with a 12.5% rate. We do not do tax rulings. We have a transparent system. Other countries sometimes have a different perspective.

Deputy Robert Dowds

I do not know whether I am allowed mention an individual company, but there were one or two cases where it has been alleged that major multinational corporations are paying almost nothing in Ireland. Are there such cases?

Mr. Niall Cody

In 2012 the top 100 cases paid a little under €2.9 billion in corporation tax.

Deputy Robert Dowds

That amounts to approximately 60% of the total. Is that correct?

Mr. Niall Cody

It was 68% of the total corporation tax for 2012. They were paid by multinationals. This is a feature of the Irish tax system. Obviously, the country has significant foreign direct investment. There are operations of substance within the country with employees in the thousands. In addition to the €2.9 billion in corporation tax, they are significant payers of payroll taxes and a significant presence.

There are all sorts of developments going on that are in the public domain. I cannot talk about any cases. We have been very clear that we operate a system. Companies that operate here are taxed on the profits attributable to here and we administer that mostly through our large cases division, which has fairly regular oversight of what is happening in those companies. They are significant payers.

Deputy Robert Dowds

I accept that, but are there certain major corporations that have managed to pretty well avoid paying significant corporation tax?

Mr. Niall Cody

The general commentary is that some very large multinational corporations have worldwide profits and turnovers of billions, and when we compare what they pay in Ireland to their international turnover it looks like a small figure, but the products they sell are not all developed in Ireland. The research and the intellectual property are not owned here. It can look like a small figure in respect of their global worldwide turnover but we have no entitlement to tax them on their global worldwide turnover or profits.

Deputy Robert Dowds

If, for example, a company does its research elsewhere and does the production here, would it get an exemption on the investment in research and so on because the work is being done elsewhere?

Mr. Niall Cody

Generally, what happens - this happens a lot in modern technology companies - is that the Irish operation pays the parent for the right to use the intellectual property, so that is a cost for the Irish operation. That brings us into the area of transfer pricing-----

Deputy Robert Dowds

Does that reduce their liability to corporation tax?

Mr. Niall Cody

Absolutely, yes. That intellectual property was not developed in Ireland. This goes to the heart of the base erosion and profit shifting, BEPS, issue, and the international developments in this regard. We are being challenged on various issues and the solution to some of these requires international developments. There is a corporation tax system that is based on the trading of physical goods, but there is a new, modern digital economy. This is recognised in all countries. The challenge will be to get agreement when the OECD finishes with its 15 reports at the end of this year. Everybody might be against certain aspects and it will be a challenge to get international agreement because national interests will sometimes diverge, and there is a political impact on the United States. I think I said when I was here in March that we are devoting fairly significant resources to our international tax and to working with the Department of Finance at OECD and EU level on all aspects of the international debate on corporation tax. It is significantly complex but it is of huge importance to this country.

Deputy Robert Dowds

There are obviously international discussions on how best to nail some of these new technology companies so that they will at least pay reasonable levels of tax in some jurisdiction. Is that a reasonable summary of what Mr. Cody is saying?

Mr. Niall Cody

I would probably baulk at the word "nail". The international tax aims to prevent double non-taxation. There is double taxation where a company is taxed in two countries on the same money. Many of the double tax agreements aim to prevent that, and the company gets credit in one country for paying tax in the other country. The other side of the coin, which tax administrations do not like, is double non-taxation, where the company is not taxable in either country in respect of the same money. We are taking part fully in the exercise at OECD and EU level because there is no tax administration anywhere that likes double non-taxation. We are working very closely at OECD level. There are 15 action points and at the start of the process Ireland decided to be involved in each of them. That is a huge commitment for a small administration and country. It is really important that we are in there because it is very easy for certain large countries to say we have a 12.5% tax or a low rate, that we are a tax haven and so on, and mix up a whole lot of words. The Minister for Finance talks about Ireland’s reputation and changes were made to protect that reputation. A large part of the work of very serious, highly qualified but very scarce resources is tied up in our work on international developments.

Deputy Robert Dowds

Have the changes made in recent budgets satisfied some of the countries making those complaints? They have probably led to the payment of tax in those countries rather than in ours.

Mr. Niall Cody

Certainly the changes made over recent years have been more to remove features that we would not have seen as part of the Irish tax system. The infamous "double Irish" tax arrangement, which was not in our tax code, was an exploitation of mismatches between different taxes, but that was how it was labelled. The Minister has removed that label. That has had no impact yet on the tax payable in any country. It removes a cause of finger-pointing at us. One of the features of the international tax debate is that countries which have many common interests will fight fair but fight to win, as the Minister has said. Foreign direct investment is a very competitive area and tax is part of that process.

Deputy Robert Dowds

Does Mr. Cody expect those discussions at OECD and EU level to yield beneficial results for us and for other countries and how long is that likely to take?

Mr. Niall Cody

Traditionally, international tax developments moved at a glacial pace, because at EU level, tax is one of the areas that requires unanimity. A country, or a few countries, can stop progress. The European Commission and some countries would like to see moves, but it is a national competence. What is surprising is that the OECD process has been very quick. It is a two-year process involving international tax across a vast array of processes. The speed and pace have been unprecedented but nothing is finished.

When all the reports are there, there will be certain aspects because it has a huge political dimension. The G20 and G7 have pinned their collars to some aspects of it. I am absolutely certain there will be change, but I am also certain it will not cover everything that is being discussed. At the end of it all, I would be hopeful that Ireland's position will be strengthened. All aspects of the tax community in Ireland have been fairly positively put forward in this area.

Deputy Robert Dowds

I thank Mr. Cody.

Deputy John Perry

I welcome Mr. Cody and compliment him on the great work of his team. The amount of revenue collected by the State is quite impressive. Revenue is a superb organisation. The property tax issue has been well covered. On the illicit end of things, Mr. Cody might advise me on the new marker for diesel laundering. Has that been agreed with Northern Ireland?

Mr. Niall Cody

Both sides of the Border started adding the new marker to marked fuel on 1 April. Obviously, there is a changeover from the end of March to April. The fuel marker gets added at the very top of the fuel chain and it takes time for the system to wash through stock. In May, we started fuel sampling covering all aspects, including at the top end, to make sure the marker was being added at the legitimate level. It will be, but we just want to make sure.

Deputy John Perry

Would Mr. Cody just explain that? This new marker has been tested scientifically. Fuel laundering is causing huge damage to vehicles. Is this new marker being used throughout the UK and in the fuel that is imported into Northern Ireland?

Mr. Niall Cody

Yes. This was the two countries together engaged in-----

Deputy John Perry

Is there an agreement signed on this?

Mr. Niall Cody

Absolutely. There was a joint evaluation team and a decision. The Minister, although I forget which one, was the signing authority for the UK and the Revenue Commissioners were the signing authority for the State. We have agreed the new marker. We are in the process of tendering for the roadside analyser.

Deputy John Perry

On the new marker, has a company been appointed?

Mr. Niall Cody

Yes.

Deputy John Perry

Were there scientific tests on this marker? Can it be removed? That is the question.

Mr. Niall Cody

Every marker can be removed. The nature of a marker is that a mark can be removed. The issue is the economics of removing it. The problem with the green and red dye is that it can be removed by low-tech means. Running the diesel through cat litter is one of the ways launderers take out the marker. The new marker cannot be removed by low-tech solutions.

Deputy John Perry

It is very important to explain the new marker and the impact it will have on the laundering system. I have no doubt that this is a significant investment on behalf of Revenue. The scientific tests have been taking place in Northern Ireland, the UK and in the South. Is Mr. Cody happy enough with this investment and joint collaboration?

Mr. Niall Cody

The co-operation and collaboration between Her Majesty's Revenue and Customs, HMRC, and Revenue in tackling fuel laundering is hugely significant, from policy development to enforcement. There are cross-Border working groups from both agencies. The reality is that HMRC faces challenges that we do not face to the same extent in certain areas. There is no question about that. There is huge support from the Garda Síochána south of the Border and the PSNI north of the Border.

It is important to recognise that some of the people involved in fuel laundering are very serious organised criminals. We have had officials who have been assaulted and whose cars and houses have been petrol bombed over the last number of years. Tackling fuel laundering is a serious business and we are serious about it. While there is certainly huge co-operation on both sides, fuel launderers are not going to just stop because we say we have a new marker.

Deputy John Perry

We all know the names in the main fuel distribution network. There are very few unbranded stations at the moment. What level of collaboration has Revenue got with the main distributors in implementing the new regulation? It is easy enough for them to identify non-trading entities without a brand. Most agents have a franchise.

Mr. Niall Cody

There has been huge co-operation with the legitimate trade. We cannot introduce things like new markers without co-operation from the legitimate trade because testing must be done. In the development of the new marker and before it was rolled out, it had to be tested in vehicles to see what the impacts were. We have a view that there are forecourts around the country, and we all know where they are. There is no doubt that container loads of laundered fuel is being sold in back yards and back fields. It is a complex area and we are multifaceted in our response.

Deputy John Perry

I appreciate that. I welcome the new marker. It is going to cost a lot more for the illegals to operate as they would have to invest in greater technology to remove the dye. Is that correct?

Mr. Niall Cody

All this comes down to the economics. If it costs them more to remove the marker they are not going to do it. This is business. However, people involved in these trades are not going to just stop if the oil laundering is closed off. There are other aspects to their business, which may not affect tax issues, but----

Deputy John Perry

I am conscious of the time. Of the 54 million cigarettes, valued at €25.4 million, which were detected by Revenue, what percentage of undetected illicit cigarettes does Mr. Cody feel they might represent?

Mr. Niall Cody

I spoke earlier with Deputy Costello about the level of illicit non-duty-paid cigarettes. The interesting thing about the statistics is the trend over time, which suggests that illicit cigarettes make up somewhere around 10% to 11% of the tobacco market.

Deputy John Perry

All cigarettes are detrimental to health. Even the cigarettes legitimately on sale are a public health concern. but I believe that these illicit cigarettes pose a greater health concern because the quality is suspect and there could even be rat poison in them. Does the Revenue test illicit cigarettes?

Mr. Niall Cody

That is a matter for the National Tobacco Control Office and the Department of Health. The Revenue Commissioners do not get involved in testing to see if a packet of illicit cigarettes is worse for one's health than a packet of licit cigarettes. That is not an issue for ourselves.

Deputy John Perry

I refer to concerns about the danger to public health. Cigarettes are detrimental to health and they are linked to cancer. Will the proposal to sell cigarettes in plain packaging of cigarettes make it easier for smugglers as the packets will not be branded?

Mr. Niall Cody

My colleagues have appeared before various committees about the issue of plain packaging. We rely on our tobacco stamp to detect whether packets are legal or illegal. We do not see that plain packaging will impact on the systems we use to control smuggling of cigarettes.

Deputy John Perry

The official State seal has been a help. Can that seal be duplicated?

Mr. Niall Cody

It is like the oil marker; anything can be reproduced but it will not be possible to reproduce all the security features. In the past couple of months we have a new tobacco stamp. Every number of years we have a new tobacco stamp with the most up-to-date security features. The tobacco stamp is our control mechanism. We keep a close eye to see if fraudulent tobacco stamps are being produced. Generally, this is not happening because where some of these cigarettes are being sold people are not particularly interested whether there is a tobacco stamp on the package.

Deputy John Perry

I note that counterfeit goods amounted to 90,753 items with an estimated value of €4 million. How are these goods rendered by the Revenue? What happens all this counterfeit?

Mr. Niall Cody

It depends on the type of products.

Deputy John Perry

Where do they go?

Mr. Niall Cody

It depends. Ultimately we do a lot of work for the medical board in seizing counterfeit medicines at the postal centres and we pass them on to the medicines board. Counterfeit products will ultimately be destroyed but they have to be kept if they are subject to court action. Sometimes we have to talk to the owner of the property rights as to where they will go. We are working with all our partners such as the Garda Síochána, the medical board, the owners of intellectual rights and-----

Deputy John Perry

What happens to counterfeit clothing? Is it burned?

Mr. Niall Cody

Off the top of my head I cannot say what happens to counterfeit clothing but I can find out for the Deputy.

Deputy John Perry

It must be a logistical issue to go around the country collecting the counterfeit goods.

Mr. Niall Cody

Generally they are destroyed. I know that sometimes people wonder why we could not give these items to charities but we cannot be distributing counterfeit goods. It would not really work.

Deputy John Perry

What happens the counterfeit cigarettes?

Mr. Niall Cody

They are destroyed.

Deputy John Perry

On international tax matters, I note that 72 double taxation agreements and 23 tax information exchange agreements are in place. What is the difference between the two?

Mr. Niall Cody

The tax information exchange is an agreement to exchange information on specific transactions. It is not a full tax treaty.

Deputy John Perry

While respecting the One China policy there has been a debate about a double taxation agreement with Taiwan. The majority of European countries have a tax agreement with Taiwan. Why is there such reluctance on the part of Ireland in this regard?

Mr. Niall Cody

I cannot become involved in discussing the level of engagement with regard to double taxation agreements or whether we have one with a particular country. It is under review. We look to the guidance of the Department of Foreign Affairs and Trade on international agreements. I prefer not to discuss the issue around Taiwan.

Deputy John Perry

I ask if Mr. Cody could come back to me on that point. It is a trading and foreign direct investment opportunity.

I refer to note No. 7 in the Revenue accounts that a transfer thereto was made to the Department of Finance in respect of nursing home support scheme receipts. I ask Mr. Cody to explain the nature of that business.

Mr. Niall Cody

We collect money on behalf of the HSE for the fair deal scheme. At the end of the process-----

Deputy John Perry

After probate?

Mr. Niall Cody

Yes, after probate the HSE will agree the amount with the person who has to pay it.

Deputy John Perry

This is €9 million.

Mr. Niall Cody

I do not know whether the €9 million is fully - but, absolutely, what happens at the end of it is that-----

Deputy John Perry

Is that €9 million for the year of audit by the Comptroller and Auditor General?

Mr. Niall Cody

It would be the receipts in 2014. We collect it on behalf of the HSE. The person agrees the liability. We are not involved in establishing the amounts due but we become the facility whereby the person pays it to us and we pass it on.

Deputy John Perry

This is something that always intrigues me. I refer to the 5% of the capital assets for a three-year period. We all know how complicated is the fair deal scheme, the charges that prevail on nursing homes, the relevance of property devaluations and the sale of property and the next-of-kin. What is Mr. Cody's opinion on the return and the outturn on the expense?

Mr. Niall Cody

I do not have an opinion on it. The scheme is laid down by the Department of Health and the HSE. All we do is collect the amount that is due at the end.

Deputy John Perry

At the point of collection after probate who is duty bound to make the payment? Does Revenue raise the estimate or is the obligation on the solicitor to make the payment?

Mr. Niall Cody

We get the details from the HSE, as agreed.

Mr. Michael Gladney

It is with the HSE. We are purely the collection agent.

Deputy John Perry

I am glad to have an answer about the role of the HSE. How is the figure arrived at?

Mr. Michael Gladney

It works as the chairman described. We get a full figure from the HSE.

Deputy John Perry

Is Mr. Gladney referring to a figure for the value of the property?

Mr. Michael Gladney

The figure we are given is the sum the HSE says is due. We have no input whatsoever into the calculation of that figure. When it is given to us, we, on behalf of the HSE, use our collection mechanisms to collect that amount and nothing more.

Deputy John Perry

Does the estimate go from Revenue to the next of kin?

Mr. Michael Gladney

No, the amount comes from the HSE to us. Our job is purely to collect the €5,000 or whatever the sum is and pay it back to the HSE.

Deputy John Perry

What happens in the event of non-payment?

Mr. Michael Gladney

We use whatever statutory powers we have, as with any other tax, to collect the money owed. In cases where there are difficult or mitigating circumstances, if the person who owes the money outlines the scenario, we will refer it back to the HSE. The ultimate decision is with the executive as to whether or not the amount is collectible.

Deputy John Perry

As we know, difficulties can arise for family members in probate situations. In some cases, for example, the family home was assigned as 5% of the payment towards nursing home care. Where people are experiencing problems in such cases, would that qualify as difficult circumstances?

Mr. Michael Gladney

In such cases, we are dealing with people in an emotional situation. It goes back to my point that our role is purely to collect the sum. If there are family or financial difficulties, we refer the matter back to the HSE to make a decision.

Deputy John Perry

Will the Comptroller and Auditor General indicate the percentage of the moneys involved that relates to the fair deal scheme?

Mr. Seamus McCarthy

I do not have that information but I will try to get it for the Deputy.

Chairman

Taking up the point about the shadow economy, at last week's meeting one of the members pointed out that a delegation from the British-Irish Parliamentary Assembly had visited some of these fuel laundering plants. It seems their location is well known to people and there was a general awareness of cross-Border activity in this regard. If what is going on is so well known that the delegation mentioned could visit the plants in question, what is the problem with Revenue doing the same?

Mr. Niall Cody

My understanding is that the two plants in question are located on the other side of the Border. I have talked about the difficulty the authorities have in certain areas. If we have local intelligence that there is a suspected laundering plant in Monaghan or north Louth, say or, as happened some years ago, in Waterford, we will visit that plant. There is no area we cannot go into quickly.

Chairman

Do the UK authorities not do the same north of the Border?

Mr. Niall Cody

Certainly. The UK authorities have had considerable levels of detection of fuel laundering in the North. However, in some cases they probably have to do fairly significant security preparation, clearances and so on, and they would not have as much flexibility as we do in terms of being able to undertake a speedy operation in all parts of the North.

Chairman

The issue is to do with security.

Mr. Niall Cody

Yes, there are security factors. That is not to say there is any area into which the authorities in the North will not go, but to mobilise the necessary security support might take longer in some instances than would be the case for us. We do not have any evidence that laundries are being left in operation for long periods of time in the North-----

Chairman

Are these operators bringing fuel across the Border?

Mr. Niall Cody

Operators in the illicit fuel chain would not feel restricted by the Border.

Chairman

The point I am making is that what is happening is apparently very obvious. It seems we are talking about truck loads of fuel and any observer could see the movement of the tanker trucks. I am asking whether Revenue is able to stop these vehicles.

Mr. Niall Cody

Stopping a vehicle is always difficult. What we try to do is go back to the supply chain. If an operator is selling fuel that is not sourced from legitimate sources, we will target that supplier. We undertake covert sampling of stations to try to-----

Chairman

Can Revenue not stop a truck that is supplying illicit fuel?

Mr. Niall Cody

In terms of the discussion that took place at the committee last week, it is not as simple as delegation from the parliamentary committee being brought into a yard and told it is a fuel laundering plant from which 15 trucks go out every week. That does not happen. If fuel is being moved around the country roads in the Border area, or any part of the country, monitoring that is not a straightforward process. Keeping trucks under surveillance would require significant resources, skills and manpower. I do not want to get into all the stuff we do, but we are serious about combating this. It is, however, a difficult challenge.

Chairman

The reason I am pursuing the matter is that we are constantly lobbied about it by the Small Firms Association, the Irish Road Haulage Association and concerned individuals. The point they all make is that while legitimate businesses throughout the country are targeted for VAT, income tax, corporation tax or whatever, in the case of those actors in the shadow economy who are operating at a level that is causing difficulty for some of the largest businesses in the country, there is not the same application of resources. I am asking Mr. Cody about diesel laundering but I have heard the same thing said in respect, for instance, of illegal cigarettes. Although the numbers we have seen today are quite impressive in terms of what Revenue has already done, the organisations and individuals who lobby us on these matters are saying it is not enough. How would Mr. Cody answer that criticism?

Mr. Niall Cody

I have a report with me concerning a vehicle transporting fuel that was stopped early on 28 May in the area we are talking about. Some 13,500 litres of fuel samples were taken from the vehicle and the results showed there were 85% traces of the new marker. In this case, what was purported to be road diesel was clearly laundered. The vehicle was detained, the yard from which we knew the fuel was sourced was raided and further quantities of fuel were seized.

The fuel involved was originally red diesel and it emanated from the North.

Our officials are active in terms of seizing, stopping and detecting. We have devoted huge resources to tackling the illicit fuel market. We devote significant resources to tackling cigarette smuggling. We are very conscious of the competitive advantage involved. In the context of illicit fuel, part of the problem is that some of it is being used by people who see themselves as legitimate traders. We recently published a list of detections and prosecutions relating to laundered fuel. Among those involved in using such fuel were hauliers. All of this illicit fuel is not sold to motorists. We sample the fuel used by hauliers in their trucks. Standard haulage trucks incorporate two 1,000 litre fuel tanks. There is a significant financial advantage for the owners of such trucks who use laundered fuel and they can undercut legitimate hauliers as a result.

Chairman

That is the point. Revenue set out to trace the activities of people in this area of the shadow economy, namely, those who trade in laundered diesel. I am concerned about hauliers who are conducting their legitimate businesses and paying tax to the Revenue. I must confess that my background is in haulage and I still have an interest in it. What annoys many hauliers and those retailers who sell cigarettes and other goods is that as they fight to comply and pay their taxes, which has been a battle during a difficult period for the economy, it would seem that while those involved in illicit activity are being caught - Revenue has a good record in this regard in terms of the figures - there is a great deal more of this type of activity taking place. It is easy to ensure that the owner of the local convenience store on the corner pays his taxes. However, people who own such stores and others would say that the same emphasis is not applied to those involved in illicit trading. The shadow economy is growing and represents a dangerous challenge to those who are operating on the basis of a lower mark-up or percentage. Mr. Cody knows - probably better than me - that most hauliers operate on the basis of a mark-up of between 4% to 6%. I do not know why some of them are still trading because they are not making a profit.

I am not defending them - I am merely acknowledging the fact - but there are some legitimate operators who are turning to the black economy because they feel they are being cheated. A concentrated effort must made to deal with the issues they raised last week in the context of the British-Irish Parliamentary Assembly, even if it is only by means of providing an explanation. Our meeting today provides an opportunity to get the message out in this regard, namely, that Revenue is doing its best. If there is a lack of resources, then that matter should continue to be highlighted. Earlier, Mr. Cody said something that is very true. This is not something that happened in the past year, it has been going on for a long period. I refer to the fact that as soon as Revenue puts a tag or a trace in place, those involved in the illicit trade will spend money to ensure they find ways to circumvent it. As a result, Revenue is involved in a constant battle. Those involved on the side of right must continue to up their game. I reiterate, however, that people involved in the legitimate economy are of the view that they are being short-changed. That is a fact. I have listened to their concerns and I am sure Deputy Perry, who previously served as Minister of State with responsibility in this area, will agree with what I am saying. I do not know whether what is required is for Revenue to provide an explanation in respect of its activities on a regular basis. All I will say is that those involved in legitimate trading are not convinced.

Mr. Niall Cody

I assure the Chairman that we dedicate significant resources to tackling these sectors. We are very serious about what we do. I referred earlier to our report on the oil market. We are sometimes reluctant to become involved in measuring the level of the shadow economy because one can never say what is that level. If one could do so, obviously one would be aware of the areas in which illicit activity was taking place. In the context of the study we conducted in respect of the oil market, we are continuing to invest significant resources and to develop new technologies. The Chairman is correct: as the process moves on, countermeasures are being taken. A significant proportion of the 2,000 staff involved in compliance activity are involved in tackling the shadow economy. The Chairman is also correct to state that sometimes we do not offer a sufficient explanation with regard to what we are doing.

Margins are very tight. The margins on petrol and diesel are 3% to 4%. As a result, the temptation is very strong. We refer to risk. We see that to which I refer as being at the very top of our risk tree and we devote significant resources into tackling the hard end of it. We work closely with the Garda because a great deal of what we are discussing here is mere criminality - it just happens to be the vehicle by means of which those involved in these activities make money. We also work closely with our international colleagues, including those at OLAF, regarding the smuggling of cigarettes. We will, however, continue to face a significant challenge because it is done-----

Chairman

What about the national bodies that represent retailers of one kind or another which continue to highlight this matter to us? Does the Revenue engage with them-----

Mr. Niall Cody

Absolutely.

Chairman

-----in the same way that Mr. Cody has this morning in terms of passing on information as to how the organisation does its work?

Mr. Niall Cody

Absolutely. We chair the hidden economy monitoring group, which has been in place for 20 years and which includes representation from trade bodies, the unions, the Department of Social Protection and the National Employment Rights Association. We have developed a reporting system by means of which trade bodies can supply us with information. Owners of local businesses are hugely aware of what is taking place in their areas. We have stated that if we receive information, we will treat it confidentially and follow up on it. However, we will not report back on the results of our investigations because that would bring us into the realm of taxpayer confidentiality. I have been involved in the hidden economy monitoring group and I was previously involved in a group, chaired by Deputy Perry, which dealt with better regulation. The latter group discussed matters with business interests. We will meet anyone to discuss problems relating to tax evasion but there is often a big gap between holding general discussions and talking about matters in particular detail. Mr. Rigney currently chairs the hidden economy monitoring group. The challenge is to turn generalities into specifics.

Chairman

Is it not the case that in towns throughout the country there are, for want of a better term, "franchise operators" selling illegal cigarettes - on an organised basis - on behalf of the big suppliers?

Mr. Niall Cody

We regularly-----

Chairman

People can buy cigarettes from these individuals on the main street.

Then they move on to the next main street. Revenue can put its dogs into An Post, into any warehouse in the country or into my warehouse and they are welcome to sniff around, because that is the job they do, but many traders cannot understand why some of these known individuals, who can be seen on the street, cannot be picked up for selling cigarettes illegally.

Mr. Niall Cody

In the last couple of weeks, I have been reading about custodial sentences for known sellers. We have prosecuted these people multiple times but when one prosecutes people for selling cigarettes in small quantities, people complain about the sentencing. On the third occasion we prosecute someone for selling cigarettes, the judge starts to see it differently and begins to impose custodial sentences. This work will continue as we are serious about it and we devote a huge level of resources to it. We devote far more resources to tackling this sector than to the vast majority of our other audits. We closed off 7,600 last year, on a business tax base of multiples of that, and in 2014, we had 49 convictions for people selling cigarettes illegally. My colleague, Mr. Liam Irwin, along with officers from the Dublin region looked at the selling of cigarettes on Moore Street. We carry out raids on markets in other places, such as in the midlands, but we are usually accompanied by the emergency unit so it is hugely labour intensive and time intensive.

Chairman

Deputy Perry asked how Revenue disposed of all this stuff but what about cash? It seized €906,000.

Mr. Niall Cody

We do not destroy that. Eventually we go to court and the judge assigns it to the State, if appropriate.

Chairman

Where is it from? How do you get to the point of seizing someone's cash?

Mr. Niall Cody

It generally happens at airports or ports.

Chairman

People bring in money.

Mr. Niall Cody

It is more the case that people are bringing out money. We have a dog whose job is cash detection. Maybe we should send him out to some businesses. We quite regularly come across people with cash because this comes under the Proceeds of Crime (Amendment) Act.

Chairman

That comes to the State after the court has dealt with the issue.

Mr. Niall Cody

Yes. If the dog finds €15,000 in the bottom of somebody's shoe, there is a fair chance it is the proceeds of some kind of activity.

Chairman

On aged debt, the money owed to Revenue, what money is owed the longest? When does Revenue decide it is not economically viable to pursue it and it should be written off? It was said the figure was €778 million.

Mr. Niall Cody

Yes, I have the table here. The age analysis of debt at 31 March 2015 covers not just debt available for collection but the amount subject to appeal. The total debt at 31 December was €1.695 billion. Of that almost €1 billion is not available for collection as it is subject to appeals and various stops and other arrangements. Some €189 million of it relates to all years up to 2003.

Chairman

That is not likely to be collected.

Mr. Niall Cody

Apart from some that is subject to appeals.

Chairman

Does it take that long to go through the appeals?

Mr. Niall Cody

Yes, if a case goes to the Supreme Court. We have spoken at another forum about the reform of the appeals system.

Chairman

Does Mr. Cody have an average figure for write-offs every year?

Mr. Niall Cody

We have the actual write-off figures. In 2014 the figure was €228 million, compared to 2011, which was the highest year and ties in with the earlier discussion, when the figure was €320 million. We also have the breakdown by tax head.

Chairman

Can we have some of those charts?

Mr. Niall Cody

Yes, we can give the committee these.

Chairman

The last time Revenue was here there was an issue relating to information members had received from one individual about the Ansbacher accounts. I will not get into the issue now but a commitment was given that an official would speak to the individual concerned to make sure all bases had been covered. I want to determine, simply, that happened.

Mr. Niall Cody

My predecessor was here in December about Ansbacher. Afterwards we asked the authorised officer to meet us because he felt constrained by the fact that he was in discussions with the committee. In February, when it became apparent to us that the committee was not going to be able to deal with it, we asked him again to meet our principal officer leading the investigation but he declined. I do not want to give the wrong impression of him. He said that, as far as he was concerned, he was still engaged with the committee and that, when he was finished, he would meet us. Arising out of this meeting, we will ask him again to meet us.

Chairman

Some random questions arise from Mr. Cody's answers. When the valuations of property for the local property tax were made, the economy was not good and property prices were lower whereas now, from what we hear, they are going up.

There is no difficulty for individuals who gave in their valuation at the time. We are now reaching a point where some of those valuations are now quite different in the real market because things have changed, in particular in the main cities, not so much around the country. Is it the case that Revenue will ask again for valuations in 2016, and check on the comparisons, as Mr. Cody said, between houses on a street and how each one is valued? What will happen where there is a huge difference within a row of houses on a street or road when the next valuation takes place in 2016? Will there be an investigation and will penalties be applied or will it be a proper assessment?

Mr. Niall Cody

The value bands were right at the bottom of the market. If I have to revalue on 1 November 2016 and if property prices stay as they are or go up again, I would have a significant increase in the value band because that just reflects what happens in the market. That will happen to all my neighbours as well. If I fail to put my valuation up, when all my neighbours go up, then Revenue will be looking at me.

Chairman

That is okay. I just wanted to get a general view. Some people have asked if, when a house in the area has been sold, they should use that as the valuation. The situation changes and Revenue acknowledges that.

Mr. Niall Cody

Completely. When it comes to the revaluation, what we will do is provide the guidance based on property prices in the period in between the original valuation and the value in 2016. It will be very clear that there is no issue.

Chairman

Mr. Cody gave the tax take from the 100 top companies in the country at €2.9 billion for 2012. Does he have figures for 2011 to 2012?

Mr. Niall Cody

Not on me. The reason I knew the figure is that last month the European Parliament tax committee visited Ireland and I appeared before it in the context of the multinational tax. That was one of the issues.

Chairman

Does Mr. Cody have a table?

Mr. Niall Cody

We have given that information in response to parliamentary questions but we do not go further than the top 100.

Chairman

That is fine. I just want to get it for the other years. Is a similar table available for the average tax paid by the top 100 companies? Mr. Cody referred to 10.1%.

Mr. Niall Cody

We have published that effective tax rate. The figure has been published even in the Department. All of the figures were provided to the global tax sub-committee of the Joint Oireachtas Committee on Finance, Public Expenditure and Reform. I can provide the information to the committee.

Chairman

In terms of the local authority, in reply Mr. Cody said 120,460 houses were liable for the local property tax by local authorities. Have they all paid?

Mr. Niall Cody

Yes. That is all paid.

Chairman

It is up to them then if they want to levy it on the householders.

Mr. Niall Cody

Absolutely, yes.

Chairman

I wish to ask some questions in relation to the Vote itself. A total of €4 billion is being carried forward in capital allowances. How long is it possible to carry them forward? Is there a cut-off period or year?

Mr. Niall Cody

There were changes in relation to capital allowances in respect of property. A sunset clause was introduced depending on the tax life of the property. The returns this year will be the first sign of where the tax life has expired on certain properties. It depends on the nature of the property.

Chairman

Is it the original tax incentive or sheltering?

Mr. Niall Cody

Yes.

Chairman

Does that determine the date?

Mr. Niall Cody

Yes, that determines the date. Some properties have a ten-year life from the start, so if they are unused they die.

Chairman

That is it. They die. To return to the accounts and to the figure for training and development and incidental expenses, in 2012 it was €12.357 billion but the outturn was €17.368 million. Is that correct?

Mr. Niall Cody

The biggest difference was additional LPT costs in relation to the outsourced telephony service. There was €3.6 million of a difference. It was in respect of-----

Chairman

What do the incidental expenses cover? Is it like a miscellaneous heading? I am sure Revenue asks clients about such categories when it audits them.

Mr. Niall Cody

It is a category that did not have a normal home because that was the first year we had the outsourced telephony service.

Chairman

Was that Abtran?

Mr. Niall Cody

Yes.

Chairman

Deputy Costello asked about that earlier. In 2012 there was a cost for consultancy services and value for money policy reviews. To what do they refer?

While the officials are searching for the figures, I will inquire about compensation and losses. In 2012 the amount was €431,000 while in 2013, it was €437,000. The provision was similar for 2014.

Mr. Tom Dowling

The consultancy fees were for HR advice, €13,000; energy management project, €7,000; and critical environment testing, €4,000. The amounts are very small.

Chairman

Does that relate to Revenue getting value for money?

Mr. Tom Dowling

No, this is the consultancy. They are very small cases, for example, environment testing, valuation assistance, critical incident support, energy management project support and HR advice. That came to a total of €25,000 in 2013.

Mr. Seamus McCarthy

The headings that are included in the analysis of administrative expenditure are more or less dictated by the Department of Public Expenditure and Reform. If one likes, the heading does not necessarily describe an individual expenditure-----

Chairman

I see.

Mr. Seamus McCarthy

-----but spending on that area.

Chairman

What about compensation and losses?

Mr. Seamus McCarthy

There is more detail of that in note 6.4 of the appropriation account. It is just at the end of the account.

Chairman

Compensation of €255,317 was paid in respect of legal action taken by members of the public. What did the Revenue do to them? In 2012, it was €392,000.

Mr. Niall Cody

A total of €122,651 was paid in settlements relating to personal injury and property damage pursued by members of the public via the State Claims Agency, and €132,666 was paid in legal fees. I was looking at some of these recently and one of them involved somebody who tripped and fell in a car park in one of the tax offices in the country. There is a level of compensation cases.

Chairman

Does Revenue pick up on the legal fees?

Mr. Niall Cody

Yes.

Chairman

Is that quite expensive?

Mr. Niall Cody

The State Claims Agency handles it all.

Chairman

It pays back Revenue.

Mr. Niall Cody

Yes. Regarding the other one, €179,715 was paid in compensation claims by members of staff, again pursued via the State Claims Agency. There are a few of those cases going on. A few are settled every year, but the State Claims Agency handles them for all of the service.

Chairman

What does this mean? It is under net allied services expenditure, which states: "In addition to services rendered without charge to other Votes (2.85 million), services to the value of approximately €483,000 were also provided without charge to other bodies."

Mr. Tom Dowling

Revenue hosts for about 20 or 30 different departments, particularly in the computer area, because of our extensive computerisation data centre in St. John's Road. It is not worth smaller departments while having-----

Chairman

So they use your system?

Mr. Tom Dowling

Exactly, and that is just a rough calculation. They do not actually do it. It comes out of our Vote. Net allied service is just a way of calculating a rough value. It is less than commercial. If they had to pay commercial, they would pay a lot more. This is part of the Government's-----

Mr. Seamus McCarthy

It is significant in terms of IT infrastructure for yourselves. They are just assisting us. As of recently, we have agreed support.

Mr. Niall Cody

As part of Civil Service reform, we are a big supplier of services to-----

Chairman

We will move on to performance awards, note 5.2. A total of €96,600 was spent on exceptional performance awards for 1,290 individuals ranging from €19 to €750.

Mr. Niall Cody

The €750 generally is linked to the World Customs Organisation, WCO, awards ceremony that takes place every year in relation to activity dealing with the WCO, mostly its team awards. It is part of the WCO international awards day. Exceptional performance awards used to be a feature in the Civil Service but they died in 2008. We have a small maximum amount of €50, which is delegated to district and branch managers, to acknowledge a significant job of work done generally by very junior staff to a maximum of €50.

Chairman

Regarding the external solicitors, does Revenue have a panel of solicitors that it uses? I see that in 2012, external solicitors cost it €4.9 million and in 2013, it was €5.3 million. Is that a tender process or is it a list-----

Mr. Tom Dowling

That is a fully tendered process. It is only recently, in 2015. There are 16, and they bring in tens of millions of euro. They are a central part of our compliance process. We have the sheriffs and the external solicitors, in conjunction with our own Revenue solicitors.

Chairman

Is that the same with the counsel fees?

Mr. Tom Dowling

The Revenue solicitor would have a panel, and it is all transparent. Depending on the expertise and the complexity of the case, they would deal with that.

Chairman

Is there any other issue?

Deputy John Deasy

I have a question which is a follow-on from what Mr. Cody said. I refer to the World Bank grading system as far as ease of paying taxes is concerned. This has come up previously, and it is something I know is taken very seriously by companies located here. If we are the best in the European Union and the sixth best in the world when it comes to ease of paying taxes, are there any measures we still need to introduce that would increase that number? It has come up, and if one reads surveys of companies that are here, American companies in particular, it is certainly a big issue, more so than some people would think.

Mr. Niall Cody

The Deputy is right. We take it very seriously. We talked earlier about proposals that we will make to the Department for changes in systems, but technology is critical. Our Revenue online system is the vehicle through which it is easy to pay and easy to administer, but we are not complacent about it. We have processes in place. We are introducing shortly an electronic tax clearance system which will be available online, for which one will not have to apply. One will be able to look at it. Every year-----

Deputy John Deasy

Will that reduce time?

Mr. Niall Cody

One will be able to see one's tax clearance virtually there and then.

Deputy John Deasy

Right.

Mr. Niall Cody

In 2012, we fundamentally reorganised relevant contract tax to an electronic platform, which took over 1 million pieces of paper out of the system. We have a schedule of developments to make it easier to pay. To move up from best in Europe will present particular challenges because a number of the countries ahead of us do not have-----

Deputy John Deasy

I know where Mr. Cody is going with this. It might be impossible to get beyond five or six.

Mr. Niall Cody

It is really difficult. Some of it is the Gulf states, and short of abolishing certain taxes-----

Deputy John Deasy

So the World Bank probably should have a different scale for-----

Mr. Niall Cody

I think it is comparable. People understand perfectly the ease of paying tax in the European Union. That is the kind of standard. Similarly, a provision that is overlooked in some of the comparisons is the ease of carrying out customs transactions. We are up there on that one, which is really important. We have spent a lot of money on an electronic manifest system which allows the electronic reporting of the manifest to facilitate the movement of goods. The Chairman talked about speaking with the trade. We engage heavily with the trade, advisers and business interests on improving the system of doing it. We are quite proud of our record. We were an early mover in electronic filing, and we are constantly looking at enhancing the system.

Deputy John Deasy

I thank Mr. Cody.

Chairman

I have two brief questions. In regard to tracking people through ports and airports, is there a way for Revenue to be able to trace people it wants to trace through these security arrangements at the airports? Is that part of the technology it would use?

Mr. Niall Cody

Generally, we are not hugely interested in tracking people. We are usually interested in movement of goods.

We have legislation that allows us to access movements of passengers and, in particular, goods. Moreover, we have technology, and we constantly upgrade our intelligence systems to facilitate that.

Chairman

What of an individual who might be travelling a lot and of whom the Revenue Commissioners were suspicious or-----

Mr. Niall Cody

We have-----

Chairman

The Revenue Commissioners have ways and means of getting these-----

Mr. Niall Cody

-----facilities to have access. Again, with all these things, the issue is how one maps and matches, because obviously the type of people about whom I think the Chairman is talking also will go to some lengths to try to make sure things are not straightforward.

Chairman

Finally, I asked a few questions about the branding of the Revenue Commissioners versus Customs and Excise.

Mr. Niall Cody

And we answered.

Chairman

Yes, in the usual parliamentary questions-and-answers way.

Mr. Niall Cody

I thought we gave a clear answer.

Chairman

Yes. While the Revenue Commissioners carried out consultations on it, it is just that a number of people have expressed a desire that a strong Customs element be retained in the branding, because when they are stopping people on roadways, they are quite different from the Revenue Commissioners and it is clear to whomever they stop that this is a Customs issue. Was this dealt with as part of the rebranding?

Mr. Niall Cody

Absolutely. This process has been going on for quite some time. Our logo is "Revenue/Cáin agus Custaim na hÉireann/Irish Tax and Customs". Obviously, there are historical reasons for some people's concern about this, because we had all sorts of departmental grades within Revenue. When the Chairman talks about stopping people on the road, generally, when one is being stopped on the road, one is not dealing with Customs issues at all but with excise and VAT, which represent two of the different wings of the organisation. When the first question came in, one thing we wished to make clear was we had not spent money on the rebranding. This rebranding has been ongoing and I believe Frank Daly was Chairman of the Revenue Commissioners when the process started.

Chairman

Yes, some time ago.

Mr. Niall Cody

We have engaged fully with staff on this issue. In an organisation of 6,000 people, sometimes not everybody is happy with everything that is decided. We strongly brand our airport operations, which are very clear because it is an international language - the red, blue and green customs channels. We have a particularly balanced approach in this regard and have spoken to our staff unions and associations, as well as discussing it at Department council. We-----

Chairman

The concern was that when people were doing their duty on the roads or wherever, the simple word "Customs" was what was on their high-visibility jacket or their uniform. It was a question of having it as clear as that, without mixing it up. That was the cause for concern, and I simply wished to bring the matter to the chairman's attention.

Mr. Niall Cody

Yes; that is fine.

Chairman

I did so by way of parliamentary question, but-----

Mr. Niall Cody

Certainly, we are proud of our Revenue brand. We also are very proud of the various traditions of customs and taxes that are there-----

Chairman

I believe the concern arose from such pride. It was not out of arrogance. Had I or had any employee who expressed the same support and pride in what they were doing as did those individuals that I met-----

Mr. Niall Cody

No, absolutely.

Chairman

It was out of absolute concern that they wished that the arm of the State one was dealing with be clearly identified if one was stopped. It was for that reason that I listened to the case and have raised it today.

Mr. Niall Cody

Certainly, we have listened to the case and are clear that we are a unified organisation. Increasingly, one is dealing with all aspects of revenue and tax matters because border controls are now largely dealt with in a very different way. This is going back to the discussion on the ease of doing business.

Deputy John Deasy

The Chairman should stop me if I am repeating what he or anyone else has said, but I wish to ask a question about what members have been dealing with in recent weeks, which is Ansbacher.

Chairman

We dealt with that.

Deputy John Deasy

The only question I was going to ask was whether the chairman of the Revenue Commissioners has received any information since his last appearance that would lead him to believe that Revenue missed anything in its initial or historical investigations?

Mr. Niall Cody

No. I outlined this to the Chair earlier-----

Deputy John Deasy

That is fine,

Mr. Niall Cody

-----but certainly, while I obviously knew we would not be going into it in any detail, in the past week I reviewed the transcript of Josephine Feehily's attendance in December. In her preparation for that, because obviously she was retiring, I attended the various briefing sessions on that subject and, just as she was satisfied, I am satisfied that we followed through just as we would follow through on any other information we get. Moreover, as I noted in respect of the HSBC stuff, with regard to the principal officer who has led our investigation of that portfolio, and his predecessor, I certainly would not like to tell him he should not follow through on that. Were I to do so, he probably would be writing to members himself. It is really important to state that the professionalism of the people who are dealing with this has been lost a little bit in some of the discussions. I note that Ms Feehily did state she had never experienced any interference in doing the job, and I believe her.

Chairman

Yes, but arising from that, some of the questions that are asked here are asked of the Chairman out of a desire to be reassured or to reassure the taxpayer.

Mr. Niall Cody

Absolutely.

Chairman

That is an important part of it as well.

Mr. Niall Cody

I agree completely.

Deputy John Deasy

Neither Mr. Cody nor his organisation appears before the committee very often, but this is talked about on a constant rolling level both in the media and in here. Once the chairman appears before the committee, it is important to have clarity, a real definite view and a standpoint when it comes to the investigation about which members seemingly are talking constantly.

Mr. Niall Cody

Earlier, I outlined the legacy special investigation and the €2.74 billion that we followed through on. All those leads and pieces of paper were examined with the same rigour and have been followed through.

Deputy John Deasy

Okay, thanks.

Chairman

Does the committee now agree to dispose of Chapters 15 and 16 and the accounts of the Revenue Commissioners for 2014? Agreed. I thank the witnesses for their attendance.

The witnesses withdrew.

The committee adjourned at 2.p.m. until 10 a.m. on Thursday, 9 July 2015.