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COMMITTEE OF PUBLIC ACCOUNTS díospóireacht -
Thursday, 13 Oct 2016

2015 Revenue Accounts

Mr. Seamus McCarthy (An tArd Reachtaire Cuntas agus Ciste)
Mr. Niall Cody (Chairman, Office of the Revenue Commissioners) called and examined.

We are joined by the Comptroller and Auditor General, Mr. Seamus McCarthy, who is a permanent witness at the committee. He is accompanied by Ms Georgina O'Mahoney, a deputy director in the Office of the Comptroller and Auditor General. Apologies have been received from Deputies Marc MacSharry and Josepha Madigan.

I suggest we deal with all correspondence and other matters at the end of our first session or this afternoon in order that we can proceed directly to our engagement on the accounts and statements for 2015 of the Revenue Commissioners. Is that agreed? Agreed. I welcome the chairman of the Revenue Commissioners, Mr. Niall Cody. He is accompanied by Mr. Declan Rigney, an assistant secretary in the planning division; Mr. Tom Dowling, an administrative budget manager; and Mr. Liam Gallagher, principal officer. I also welcome Ms Vicki Cahill from the Department of Public Expenditure and Reform.

I remind members, witnesses and those in the Visitors Gallery to turn off their mobile phones entirely or leave them in airplane mode. It is not enough merely to leave them in silent mode as they still cause interference with the broadcasting and recording of the proceedings.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence they are to give to the committee. If, however, they are directed by it to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to 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 asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an entity, either by name or in such a way as to make him or her identifiable.

Members are reminded of the provisions of Standing Order 186 that the committee shall 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 policy or policies. They are reminded of the long-standing ruling of the Chair to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable.

We are to examine the 2014 annual report of the Comptroller and Auditor General and Appropriation Accounts, Vote 9 - Office of the Revenue Commissioners; the 2015 annual report of the Comptroller and Auditor General and Appropriation Accounts, Vote 9 - Office of the Revenue Commissioners; chapter 12 - tackling fuel laundering, and chapter 15 - taxpayer compliance; and the 2015 Revenue accounts. I call on the Comptroller and Auditor General to make his opening statement.

Mr. Seamus McCarthy

The 2015 account of the receipt of revenue for the State collected by the Revenue Commissioners was certified by me on 15 April 2016 and received a clear audit opinion. The account includes receipts of taxes and duties which are remitted by Revenue to the Exchequer and receipts collected by Revenue on behalf of other agencies. The account shows that total receipts of taxes and duties amounted to a net €45.8 billion in 2015. This represents an increase of €4.4 billion, or 10.6%, when compared to 2014. Within this figure, the most significant change related to corporation tax receipts, which increased by €2.3 billion, or 49%, year on year. As a result, corporation tax receipts accounted for 15% of the tax take in 2015, compared to 11% in 2014. Receipts collected by Revenue on behalf of other agencies also increased year on year by approximately 11%. Pay-related social insurance and health levy contributions accounted for over 89% of that category of receipts in 2015. These contributions are remitted directly to the Social Insurance Fund. Revenue’s administration and operational expenses are charged to Vote 9 - Revenue Commissioners, rather than the Revenue account. The appropriation account shows that the total spend by Revenue in 2015 amounted to €401 million, which represented an increase of 4% on the figure for 2014. Taking account of appropriations-in-aid of €82 million in 2015, net expenditure under the Vote amounted to €319 million.

Chapter 12 examines the actions taken by Revenue in recent years to tackle the issue of fuel laundering. Excise duty on mineral oils represents a significant proportion of the total excise duty collected each year. In 2015 it made up almost half of the total excise duty receipts of €5.5 billion collected by Revenue that year. Marked gas oil for agricultural and other off-road use is subject to significantly lower rates of tax than diesel intended for use in transport and passenger vehicles. Fuel laundering is an illegal process, whereby the markers are removed from the marked gas oil which is then sold on for use in road vehicles. The associated cost to the State includes the taxes forgone and the cost of removing and disposing of the waste dumped by fuel launderers. There were almost 1,000 cases of waste dumping between 2008 and 2015, with the clean-up costing the State almost €7 million. While Revenue carries out certain targeted analysis projects in the area of mineral oils, it does not have an estimate of the loss to the Exchequer as a result of fuel laundering.

From 2011, the detection of laundered fuel became more difficult because the sulphur content of marked gas oil was reduced to the same level as road diesel. To address the increased risk, Revenue developed a mineral oils strategy to combat the illegal trade. The strategy introduced a number of key measures to address the risk, including improved licensing arrangements for the sale of fuel, a supply chain reporting system to give Revenue details of the movement of fuel stocks, reckless trading provisions, a national risk-based sampling programme using portable analysers to detect the presence of the marker and a new fuel marker in a joint project with the UK revenue and customs services. In combination, these measures act as a deterrent to fuel launderers. A random sampling exercise carried out by the Revenue Commissioners in January 2016 found no evidence of the new marker in the samples tested. I have made a number of recommendations to Revenue to tighten controls in the supply chain reporting system. I am glad to note that Revenue has accepted these proposals.

Chapter 15 outlines Revenue’s approach to monitoring and managing taxpayer compliance. Revenue undertakes a range of compliance interventions, including tax audits. Under its random audit programme, it carries out approximately 400 audits of randomly selected individual taxpayers and businesses each year. The results of the completed audits for the period between 2013 and 2015 consistently showed that approximately 60% of taxpayers selected for audit had paid the correct amounts of tax due, but approximately 40% of taxpayers selected for audit were found to have under-declared their tax liabilities. The results of comprehensive random audits can be used to provide an estimate of the audit gap; that is, losses as a result of non-compliance by registered taxpayers. The 2014 random audits suggested that, on average, registered taxpayers had underpaid their liabilities by an estimated 2% in the reference year. Revenue's main compliance work is its programme of risk-based tax audit. The results of the programme indicate that Revenue's detection work is generally well targeted. In 2015 some 68% of the risk-based audits resulted in identification of additional tax due. This is significantly higher than the non-compliance rate for the random sample. Although the number of compliance interventions undertaken by Revenue decreased between 2012 and 2015, the overall yield from its compliance activity has increased. It should be noted that there are likely to be losses of revenue from activity by economic agents that are completely outside the tax system, operating in the shadow economy. Revenue does not generate estimates of such losses which are referred to as the tax gap. By comparison, the UK revenue and customs service estimated the tax gap there to be 6.4% in 2013-14.

I thank Mr. McCarthy. I ask Mr. Cody to deliver his opening statement.

Mr. Niall Cody

I thank the Chairman for giving me the opportunity to make a short opening statement. As time is limited, I will concentrate on giving a brief overview of the two relevant chapters in the Comptroller and Auditor General's report.

Large-scale laundering of marked fuel escalated in 2011 when ultra low sulphur marked gas oil became widely available on the market because of changes in EU environmental standards for fuels. This fuel is the same as road diesel, apart from the markers and dye.

Revenue responded to this increased risk and, since 2011, has implemented a comprehensive and successful strategy to tackle the problem. The strategy is designed to make it much more difficult to source marked diesel for laundering and to get laundered diesel onto the market.

Our strategy includes the following elements. The licensing regime for auto fuel traders was strengthened with effect from September 2011 to limit the ability to get laundered fuel onto the market. A new licensing regime was introduced for traders in marked fuel in October 2012, designed to limit the ability to source marked fuel for laundering. There was identification and implementation of a new fiscal marker jointly with Her Majesty's Revenue and Customs for implementation in Ireland and the UK. A new supply chain reporting regime was introduced from January 2013, which requires all fuel traders to make monthly electronic returns to Revenue of their fuel transactions. We use these datasets to identify suspicious or anomalous transactions and patterns of distribution for investigation. Revenue, in co-operation with other law enforcement agencies on both sides of the Border, has intensified the targeting of enforcement action against suspected fuel-laundering operations. This process is facilitated by the cross-Border fuel group, which is representative of all relevant agencies North and South. In addition, a reckless trading provision was introduced in the Finance (No. 2) Act 2013 that makes a supplier who is reckless in supplying rebated fuel for a use connected with excise fraud liable for the duty evaded. This provision has strengthened our hand in dealing with those traders supplying fuel recklessly to dubious customers.

In the Finance Act 2014, provisions were introduced to strengthen our ability to refuse or revoke a mineral oil trader's licence where that trader does not comply with excise law, does not maintain adequate stock management systems and records or provides false or misleading information. Under the new provisions, Revenue's assessment of applications is based on the legitimacy of the applicant and their business, and the quality of their accounting and stock control systems.

The tax loss associated with fuel laundering is not quantifiable but there is no doubt that it was significant. Following the implementation of a range of measures to tackle the problem, we recently completed an analysis of oil market trends in Ireland and, on the basis of a comparison of extrapolated pre-2013 trends with actual results for 2013 and 2014, estimated that our mineral oil strategy may have saved the Exchequer up to €200 million in 2014.

Clearances of marked gas oil from tax warehouses dropped significantly in 2013 and 2014 and were stable in 2015 despite the strengthening economic recovery that saw road diesel clearances rise in the same year by over 9%. The successful implementation of this strategy has resulted in major strides made to reduce and eliminate fuel laundering. This is evidenced by the fact that a recent random sampling programme produced no evidence of the new marker in any of the samples taken.

The Comptroller and Auditor General has made a number of recommendations as a result of findings made during his review. The recommendations have been accepted and will be implemented.

On the taxpayer compliance chapter, Ireland has a self-assessment system. It is a fundamental principle of self-assessment tax systems that returns filed by compliant taxpayers are accepted as the basis for computing tax liabilities. Revenue promotes compliance with the tax system by pursuit of those who do not file returns, by auditing selected returns and by taking appropriate action against tax and duty evaders up to and including investigation and prosecution.

We carry out compliance interventions for a variety of reasons: to protect the Exchequer; to assure ourselves as to the accuracy of self-assessment returns; to influence compliance behaviour; to provide a level playing field for all taxpayers; and to minimise the distortive effects on legitimate business caused by the shadow economy. We constantly strive to prevent non-compliance by making it as easy as possible for our customers to pay the right amount of taxes and duties at the right time. Through our service-for-compliance approach we are providing more and more user-friendly ways of doing business with us, increasingly through digital channels. However, a minority of people choose not to comply with their tax and duty obligations. The type of intervention to be undertaken in any particular case is the one considered to be the most appropriate to target the specific risk or risks identified and to influence the compliance behaviour of the taxpayer. By carefully selecting the cases for intervention and choosing the type of intervention, we maximise the use of resources and minimise the compliance burden on compliant taxpayers.

We have made a strategic shift in recent years to increase the number of less intrusive non-audit interventions. This does not mean that we are ceasing our audit programme, though as the Comptroller and Auditor General has noted in his report, it does mean a reduction in the numbers of what were previously classified as audits. We believe that by increasing the focus on non-audit interventions, we can increase our coverage of potential risk and we can focus our resources more effectively on the biggest risk cases. Non-audit interventions involve verifying documentation and requesting additional information in order to address specific risks. Revenue continually assesses the appropriateness of interventions. This mix of audit interventions and non-audit interventions has led to a higher level of non-compliant yield being collected, from €492 million in 2012 to €642 million in 2015.

We also risk assess any information that might suggest the existence of aggressive tax-planning as an avoidance or evasion mechanism. An example of this is our recent review of the tax affairs of medical consultants, which also featured in the Comptroller and Auditor General's report. We opened 763 interventions nationally, 403 of which were closed by 30 June and yielded €48.7 million in tax, interest and penalties. The Comptroller and Auditor General's report also featured a chapter on the research and development tax credit, a tax expenditure that has increased considerably in recent years. Revenue's compliance activity in relation to this credit has increased proportionally. In 2015 we completed 178 interventions with total yield in excess of €46 million.

The Comptroller and Auditor General has made three recommendations arising from the review. Revenue has accepted each of the recommendations in part. While our random audit programme is not currently designed for the purpose of estimating the audit gap, I have committed to reviewing the role that audit-gap measurement could have in assessing our effectiveness. Similarly with tax-gap measurement, while continuing to have reservations on developing a full suite of tax-gap measurement tools, we will continue to carry out critical analyses of compliance in particular sectors and activities. As regards increasing the level of risk-based audits, our strategy has shifted to identifying the most appropriate intervention to address the identified risk. Risk-based audit will continue to have a very important role to play in implementing this strategy.

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

I thank Mr. Cody for his opening statement. He specifically concentrated on the two chapters in the Comptroller and Auditor General's report which we mentioned to him in advance of the meeting. Obviously, however, we will also ask some questions on general Revenue activities.

I welcome Mr. Cody. I pay tribute to him and all his staff for the work they do and their contribution to the State. I also thank the Comptroller and Auditor General and all his staff for their consistent work on behalf of the committee.

With so much focus this week on expenditure in the State, it is opportune that officials from the Revenue Commissioners are here this morning as we look at the income side. Despite the fact that Revenue collected €62 billion in gross receipts last year, listening to Deputies making statements in the House in recent days and adding up the cost of the many items on their wish lists it is possible that Mr. Cody and his colleagues may have to bring in a few more euro. Perhaps he could find out for us whether what would be possible.

I will cover the Revenue accounts and appropriation accounts before coming to the chapters on fuel laundering and compliance. In our role as political representatives, one of the items with which we continually deal is the pressure on small and medium-sized businesses. One of the issues that struck me from the figures is that which relates to managing taxpayer debt. At the end of 2015, approximately 8,500 taxpayers or businesses - covering almost €96 million of tax debt - had phased payment arrangements to enable them to overcome significant cashflow problems. Given that only €96 million of the €823 million of the debt available for collection had phased payment arrangements in place in respect of it, is there not scope for increasing the level of such arrangements so that more businesses could be helped? With 8,500 businesses covered by the €96 million to which I refer, how many are covered by the remaining €727 million? Any small businesses person would talk about the operating pressures he or she is experiencing.

I know that when they are hit with a tax bill, they say it is always something that shakes them to the core. If a greater phased arrangement could be put in place on the debt side to enable them to overcome these cashflow problems, it would be most significant. Can Mr. Cody comment on that?

Mr. Niall Cody

I thank Deputy Cassells for his compliments to Revenue staff. They do a difficult job in difficult circumstances. I will outline the position on debt collection and debt management. A comprehensive review of debt management featured in the Comptroller and Auditor General's 2014 report. We have never had a chance to discuss it but I would be pleased to touch on some of the issues now.

I have up-to-date figures on phased payment arrangements. As of 30 September 2016, the figure is 11,432, covering €108 million of debt. According to the report, we had €734 million of debt that was neither subject to a payment agreement nor enforcement proceedings. In last year's budget package, we got additional resources to focus on debt collection. This tends to be at the lower end, in other words, small rather than medium-sized enterprises. We were having difficulty getting to them. Obviously there are greater numbers of them but smaller amounts of money are involved.

Can Mr. Cody give an indication of the average figure?

Mr. Niall Cody

We are talking about a lot of debt, but not much more than €5,000 in each case.

They are sole traders and small businesses. Is that correct?

Mr. Niall Cody

They are sole traders. There are no PAYE workers. Some have small amounts of VAT outstanding as well. We focused on the €734 million. As of September 2016, of that €734 million a total of €568 million has been collected.

After the Comptroller and Auditor General carried out the study on the €734 million, we undertook to map those debts. We engaged proactively with the businesses in question. Of those, approximately 3,500 entered into a phased arrangement. We have increased the numbers under phased arrangements. However, getting involved in a phased arrangement requires two parties in the transaction. We require up-to-date returns, meaningful engagement and a commitment to keep current returns up-to-date. Of the €734 million there is only €43 million left that we have yet to engage with. We have done a considerable amount.

It is really interesting. Around 2012 we had 16,000 cases under phased arrangements. This was when the recession had really hit. Obviously it had hit in 2008, but by the time the debt had risen to enforcement stage it was 2012. By then, we had €126 million under phased arrangement. Some of this reflects the fact that people completed their phased arrangement, their debt is paid and they are on a steady basis.

We are keen to keep feasible businesses in business and to keep people in jobs. However, it requires engagement by the taxpayer. We will talk later about the tax gap. Anyway, there is a down-side. Part of the tax gap includes uncollected debt. Obviously, it has implications for feasible businesses if their next-door neighbours can trade without paying taxes.

There is a lot to get through, so I will jump from section to section. I wish to move to the local property tax, something that is also alive in the minds of people. According to the accounts, Revenue achieved 97% compliance for the tax in 2015. Recent media reports covered how Revenue would chase the remaining 3% and bring them into the net. Has Revenue identified a cohort of homes or a regional spread? Can Mr. Cody offer a comment in this regard in terms of the plan to bring in the 3%? It is all collectable? Is there always a certain portion of bad debt? What are the Revenue targets in this regard?

Mr. Niall Cody

We have reached 97% for this year, which is on target with previous years. Obviously we have a target of 100% collection on everything, but that is not realistic. There will always be an element of bad debt. There is, however, an issue around the 100% accuracy of the LPT register. The LPT register was built from scratch in 2012 and 2013. From our analysis of the 3%, we are satisfied that approximately 1.5% represents duplicate properties or flaws in the register. I imagine the committee has discussed Eircode. Anyway, there is a problem with matching non-unique addresses in country areas, where there may be a townland and commonality of names. For example, there could be Patrick Ryan and P.J. Ryan and they could refer to the same person. There could be two addresses or we could have the address in twice.

Does Revenue have teams on the ground in those instances? Obviously estates are easy to target and so forth. Is Revenue deploying teams to look at this in rural areas?

Mr. Niall Cody

It is more a question of using data matching tools and analytical tools. The idea of putting officers on the highways and byways and counting the number of houses in townlands would not represent a sensible use of resources. It is really interesting that the census data were published recently. While the Central Statistics Office cannot by law give us details, it publishes a wealth of information on the distribution of houses and we map census data to our data. We have some really interesting tools for geographic mapping. We can look at areas, essentially at the desk, and see whether there are areas we need to target.

The LPT is designed in such a way that if we do not write to the property owner but the property owner is liable, he or she is still liable. Ultimately, the liability remains a charge on the property. It is a tax that is really hard to avoid. It is probably a tax that will eventually have a 100% liability.

Can Mr. Cody provide a quick comment on the appropriation accounts for 2015 and the payroll overpayments? A total of €1.1 million is involved or 827 cases. Of this, Revenue has recovery plans in place for 279 cases totalling €432,000. Can Mr. Cody comment on how they occur and on recouping the remainder?

Mr. Niall Cody

Overpayments are a feature of any payroll system. There has always been a level of overpayment.

It is still significant at over €1 million.

Mr. Niall Cody

Absolutely, but there have been changes in recent years. There have been three main policy changes. Most overpayments are as a result of sick leave. Sometimes people go on sick leave and then go above the threshold where pay gets reduced to half-pay or gets stopped. During the downturn and the change in rules, the threshold for sick pay was reduced or halved from six months to three months. More people hit the threshold following the sick leave policy change.

The other major change in the Civil Service has been the move to a shared service called PeoplePoint. Whereas up until 2013 we had full control over our payroll, from 2013 we became part of the shared services operation provided by PeoplePoint. It is acknowledged by those in PeoplePoint as well as all the constituent parties that the integration of the information technology systems that allows reporting of sick leave instances to PeoplePoint is improving but it is still not there. Certainly, for the first year and a half there were difficulties.

There is an active campaign to tackle the overpayments and enter into payment arrangements. In the past two years, while the amount has increased, the actual rate of increase has gone down significantly. We are now in a situation where we have PeoplePoint and a shared services payroll function as well as ourselves. We need to continue to build up the integrated IT system. I think this will be a feature of the appropriation accounts for all offices. We are more than 6,000 people or approximately one sixth of the Civil Service. The Office of the Revenue Commissioners, the Department of Social Protection and the Department of Agriculture, Food and the Marine are the largest organisations. Therefore, because of our size and scale, there is a concentrated attempt on the part of PeoplePoint, which does not come under the auspices of ourselves, our central HR and all our managers to try to prevent the overpayments arising in the first place. We have also set up a proactive team to manage overpayments. In certain cases, the overpayments are particularly sensitive in that they mainly concern sick leave. We have to have a sensitive approach. It is a bit like what Deputy Cassells spoke about earlier. We have to agree an instalment arrangement or a deduction over time.

To move onto the bigger picture and the issues Mr. Cody touched on in respect of the audit gap, the statistics in the random audits are consistent over the past number of years. Roughly one third, and for the past few years it has been as high as 40%, of those audited have been found to have underpaid their tax and owe on average of €18,500 in unpaid tax. In terms of the audit gap, the loss in a tax year as a result of non-compliance was put at about 2% of total liability by the Comptroller and Auditor General in his report. Mr. Cody said that his office does not produce estimates of the gap. Has his office drawn up a plan to implement its undertaking to review the role of the audit gap measurement and its impact on the office's random audit programme?

Mr. Niall Cody

We have started the process. There was an initial discussion at board level on the review of the random audit programme. The random audit programme has been in place for a long number of years. It has run at approximately 400 cases per year, with cases selected randomly in the same way. This allows us to identify a trend over time. As a result of the changes we are making to our overall risk-based approach to interventions, now is an opportune time to review how we do it. A paper has been submitted to the board and we have asked for further work to be done. Obviously, before we sign off on any changes, we will discuss them with the Office of the Comptroller and Auditor General to ensure that we do not have a row in three years time when taxpayer compliance is reviewed and it says it would never have agreed to the changes.

Some of the work we are doing in the office concerns segmentation of our case base. The random audit programme is taken out of the 850,000 chargeable persons and companies that are self-assessment cases. However, there is a huge variety of self-assessment cases and the bottom end of the self-assessment register are those who are more akin to PAYE workers. For instance, they might have a foreign pension. They would be PAYE taxpayers if we had anyone to collect it from. We need to segment it.

I have examined some of the approaches. For example, HMRC in the neighbouring jurisdiction carries out 4,000 audits for its random audit programme but it takes three different sectors - sole traders, companies and SMEs - and leaves all the large cases out of the programme. We are interested in examining the random audit programme.

A couple of matters arise when this review takes place every few years. We always counsel against relying on the average yield. The average yield was hugely distorted by one case. A total of 79.9% of the cases have a yield of less than €2,000 and 1% of the cases had a yield in excess of €50,000. One can get a very false-----

In terms of the costs of the audit versus the pursuance of the-----

Mr. Niall Cody

The issue with increasing the random audit programme is the huge opportunity cost. Our colleagues in the Danish revenue authority, which has focused very much on tax gap analysis and audit gap analysis, carried out 10,000 random audits. They practically stopped their risk-based audits in one year in three to try to assess it. We are not convinced that is the best use of what are scarce resources. It is also a huge burden and cost on business. We think the random audit programme provides a useful measure but are yet to be convinced that Ireland and Revenue, moving to full tax-gap, outcome-based measurement, will add to the work we do. There are also a number of other examples. The European Commission does a VAT gap analysis across the 27 member states although there are a couple of countries that have not been able to provide statistics. Other measures are available.

I mentioned compliance and the fact that there is a steady figure of approximately one third of underpayments by individuals and businesses. As Mr. Cody has stated, these are mostly small businesses which would, according to the figures, owe an average of €18,000 and, in many cases, it is less than €2,000. I am sure these people would be interested in hearing about compliance or, indeed, non-compliance by larger companies. Will Mr. Cody speak to that for a moment?

The one that captivated people's imaginations was the recent EU ruling in respect of Apple. We have heard plenty since then from the company and the EU Commissioner as well as many other commentators. Politicians here debated it in a special sitting of the Dáil as well. What is Mr. Cody's assessment of the ruling? Does he believe it is correct? I am sure plenty of those small businesses would be interested to hear his analysis of what has been said by the Commission and in our Parliament? Also, what are the next steps for Revenue in terms of engaging with Apple and where the process goes, as has been explained to us, in terms of acquiring that money and the establishment of a fund?

Mr. Niall Cody

In my opening remarks, I mentioned the issue around taxpayer confidentiality. We are bound by it. Apple, just like any other taxpayer, is afforded that confidence. Also, the issue is now subject to legal proceedings. I am, therefore, a bit constrained in what I can say. Having said that, I want to be as helpful to the committee as possible. I also want to take the opportunity to set out Revenue's view of the issue.

On the day the Commission had its press conference and launched its decision, I issued a statement. It is worthwhile repeating our initial remarks. We co-operated fully with the Commission inquiry. We provided all documentation and all explanations that were asked of us by the Commission. The issue of international tax planning involving mismatches between different countries' tax rules is well known and is the subject of the OECD BEPS project. Those mismatches go to the heart of what the case is about.

Revenue can only implement Irish tax law. It cannot say that EU state aid rules apply directly. It cannot say that someone is liable to tax if it is not in accordance with the relevant tax code in Ireland.

Under Irish tax law, non-resident companies are chargeable to Irish corporation tax only on the profits attributable to their Irish branches by references to the facts and circumstances. The profits of non-resident companies that are not generated by their Irish branches, such as profits from technology, design and marketing generated outside Ireland, cannot be charged with Irish tax under Irish tax law. I went on to say that while I could not comment otherwise on the specific facts of the case, I could confirm that there is no departure from the applicable Irish tax law by the Revenue Commissioners, there was no preference shown in applying that law and the full tax due was paid in accordance with the law.

In regard to the engagement and follow-up, the Commission has issued a decision. Under state aid rules, the country is obliged to implement and collect the state aid regardless of the appeal. The appeal will take its course and the European Court of Justice will eventually give a view. There is a four-month period from the date of the decision to the collection of the state aid. That runs to 2 January. Our responsibility is to calculate the actual liability. The decision has not been published and it does not contain a figure. At the press conference, the Commissioner mentioned a figure but the decision was not with her. The responsibility is on us to calculate what that would be. That process has started.

Mr. Cody is saying the onus is on the Revenue Commissioners to get that figure. His opening remarks in response to me were very definitive.

Mr. Niall Cody

No, the opening remarks were about how we implemented the tax code. We have to collect and calculate the decision, having regard to what the Commission said should have applied.

Mr. Niall Cody

The Commission said it should have been taxable here and we must calculate the figure. That process has started. There have been meetings with the Commission and it has a number of teams working on the case. There is a recovery team in the Commission who are not engaged with the appeal or anything like that. We must engage with them.

Mr. Cody was very definitive in saying that Irish tax law was complied with.

Mr. Niall Cody

Absolutely.

He also indicated as a representative of the tax collecting body of the State that there was not an evasion of tax. On that basis, is it a red herring from the Commission that there is a pot of money due to the people of the State? It is being used in a political context as a pot of money that could be used for expenditure on a range of items. As the tax collecting body of the State, the Revenue Commissioners have been very definitive in saying there was full compliance with Irish tax law.

Mr. Niall Cody

The Commission is not saying there was not full compliance with Irish tax law. It is saying there was state aid; essentially, that there was an interaction of the tax code, opinion and treaties resulting in state aid. That is the job of the Commission's competition authority. It is entitled to carry out the investigation and form its view. We do not agree with the view but because of EU rules, regardless of whether we are appealing it, we must agree to collect the amount and put this back to the position that would have existed if there was not state aid, according to the Commission. That process has started.

The Minister has indicated the amount will be held in escrow. That is a matter that is still to be finalised and agreed, along with the process of how it is collected. The way corporation tax works, the easiest element is to take the figure of the profits that were not taxed in Ireland and multiply them by 12.5%. That gives a figure. There are other compensating amounts and claims, and as the Commission noted in its decision, depending on what other countries do, that amount might change. The process has started and although good progress has been made, I do not know what will be the final figure. We can rest assured that the figure will be collected, depending on what the process for the collection will be. Ultimately, it will depend on whether it is a tax assessment or another amount.

From Mr. Cody's perspective, has this been a damaging period for us as a country, for the Revenue Commissioners and people's interpretation of our tax code, when we consider that outside commentators have looked at and analysed us?

I ask the Deputy to conclude on the issue as we want to move on.

Mr. Niall Cody

I would rather speak in generalities about international tax. I was appointed to the board of the Revenue Commissioners on 1 February 2012. We had the EU Presidency for the first half of 2013 and until March 2013, international tax was a subject for tax journals and occasional business articles. In March 2013, the environment changed. We had an EU Presidency in which we wondered if we would have enough business to keep going. The issues surround base erosion and profit shifting, BEPS, took off, along with the European Commission efforts in this regard, and international tax has been the front page story since March 2013. The public accounts committees here and in the UK have dealt with it and the finance committee here had a sub-committee examining international and corporation tax. International tax, tax avoidance and international mismatches that allow multinationals to minimise their tax is a serious story. Ireland is part of that but it is not the cause.

We have invested significant resources in people dealing with international tax. We made a commitment at the start of the BEPS project to be fully involved. For a small country with a small administration, we talk about resources that are to be dedicated to risk-based audit. We are punching above our weight in solving the issue and it must be done on an international basis. Other countries comment on what happens in Ireland but a detailed study of what they do may also show issues. This is a competitive world and we, as the Revenue Commissioners, implement the tax Acts as they are.

There is a portion dealing with fuel laundering, which is a very big issue in the north east and my neighbouring county of Louth. The Comptroller and Auditor General report and the Revenue Commissioners have indicated there were clean-up costs of nearly €7 million. I know the strain this puts on the State and local authorities. At one stage, there were 539 cases in Louth and 459 cases in Monaghan. The Revenue Commissioners have spoken of efforts to crack down on fuel laundering and they have clearly been successful, as in Louth the case numbers have dropped from 239 to 69 and from 186 to 11 in Monaghan.

In liaising with agencies such as the Garda, are the Revenue Commissioners getting to the point of negating the problem? Is there a criminal aspect lying in the long grass? I am sure there is regular contact between the Revenue Commissioners and the Garda because it is a cross-agency issue, both in terms of the loss of funds to the Exchequer and the damage being done to small businesses, people's automobiles and, ultimately, the environment. I know in very scenic parts of County Louth and County Monaghan the criminal underworld involved with this activity has no regard for the communities they devastate from an environmental perspective. Will the witness address this and how the Revenue Commissioners liaise with the Garda? Is there a tangible analysis done so there can be a real crackdown on the criminal element?

Mr. Niall Cody

I can definitively say there is a level of co-operation between us and the Garda, Her Majesty's Revenue and Customs, HMRC, and the Police Service of Northern Ireland in tackling fuel laundering and fraud.

This is evidenced by the joint project with HMRC on the fuel marker, which has been a real game changer.

I would hesitate to say that the problem is solved because the people involved in this fraud are not motivated by a desire to launder fuel. They move from fuel laundering into tobacco. There was a recent discovery of a giant operation between ourselves, the PSNI, HMRC and the Garda in which designer fuel was tracked to the port. Designer fuel is where one uses different lubricants to essentially dilute ordinary diesel. The activity is not as profitable as fuel laundering but it shows that the people involved are looking at we have done and for business opportunities.

I would say any Deputy from the northern half of the country will have had representations from people involved in solid fuel about cross-Border solid fuel from North to South - there is a big differential because of the carbon levy on solid fuel - and that also is organised gangs. We have had carousel fraud. Ultimately, with the Border and the differential and now with sterling the way it is, opportunities will be taken. We decided that tobacco smuggling, because of the quantities and how one can smuggle it in different ways, is very difficult to eliminate. Fuel laundering is different. It is big, bulk quantities, it all has to be brought in ships and tankers and moved about. We decided that we would actually defeat fuel laundering. Last week, a fuel laundry was found in sight of but north of the Border. The sludge that has been found this year has had traces of red diesel, which is laundered Northern Ireland fuel. The North uses a red marker and we use a green marker. Fuel laundering is not eliminated on the island but we are very satisfied that we have practically eliminated it on this side of the Border. The only thing is that if it is laundered in the North it can be sold in the South, so we have to keep testing it.

The last time I was here, the Comptroller and Auditor General and myself talked about how they had started to work on the fuel laundering. What he was interested in was doing a random sampling with the analysers to give that view of tax gap analysis. Most of the work we do is risk-based. Where it is risk-based we hope to get results. With a random sampling we were hoping not to get results. It was statistically sound. The sample was picked by our statisticians, who have no involvement in the control. It was very positive and we will continue that exercise on an annual basis. There is no doubt that the people who were involved in organised excise fraud have not stopped doing something. We are very interested in looking at-----

What will they move into next?

Mr. Niall Cody

Drink. The UK has suffered significantly. Now it is a different issue because the white van trade from Calais to Dover is much easier than from Calais to Rosslare or wherever. In the UK tax gap analysis, they put a figure on what is due to criminal gangs, and this is part of that process.

It is time to move on to the next speaker and I call Deputy Murphy.

I shall pick up on the same topic, to begin with. Obviously there was a high level of co-operation with designing the new fuel marker. The measure has assisted, eliminated or reduced a significant issue that has been damaging in a whole lot of different ways.

In terms of that level of co-operation, we are moving into a different era in which the customs and excise element will be a significant issue for Revenue. Mr. Cody mentioned Revenue’s 6,000 staff. I presume there is a degree of planning going on at present. I presume the likes of fuel laundering and other things that will crop up will be used to make money by sources that would not be acting legally. I ask Mr. Cody to tell us what Revenue does to keep up to speed with an evolving situation and whether its resources are adequate to cope. Does Revenue look at worst-case and best-case scenarios? What is Revenue’s approach?

Mr. Niall Cody

I thought when the Deputy was asking her question that she was going to ask whether there was a degree of panic but she asked whether there is a degree of planning and I was going to agree.

We have put a lot of thought into what will be the impact of Brexit on customs controls. In a way, excise and VAT all flow from customs when it involves third-country imports and exports. The issue is confused because it depends on the actual model that is taken. There are various different models and we are looking at the contingency. There is the Norway agreement, which has a level of cross-border checking between Norway and Sweden even though they are part of the Single Market. There is a Turkey arrangement that has Turkey as part of the customs union for the EU but it all involves a level of customs declarations, not tariffs, so there is a process. We have done scoping of the implications. One can compare the present with the time before the Single Market in 1993 or before we joined the EU in 1973 and 99.9% customs control of the legitimate trade is handled electronically. It is all based on a risk-based approach to flagging goods for physical presentation. We have done an analysis of our IT systems to be able to cope with the scale if customs procedures will be required between the UK and the Republic.

The issue is that the level of imports and exports from non-EU third countries will double when the UK leaves. That is the scale. The values will double. The numbers will probably be something in the region of five times that because there are far more small importers and exporters. For years they have not even considered themselves as being importers and exporters so there are significant implications. Just to scale up our IT systems for customs procedures would probably cost something in the region of €3 million.

In the budget on Tuesday, the Minister for Public Expenditure and Reform mentioned in his Brexit chapter that additional resources are being provided to us for planning around Brexit. What happened in this year’s budget is that we looked for an indicative number of something in the region of an additional 40 resources. Thanks to the Department of Public Expenditure and Reform, we got that approved but we will not be bringing them in now because it depends on what happens in March. By the end of next year we would expect to have additional resources.

We had started a process of reorganising our customs policy division. The division, for about the past 15 years, has been based in Nenagh as part of the overall decentralisation process. Last year, we had decided to pull back some of it to Dublin because the problem about having a customs policy area in the middle of the country is that the people who work in the ports are not easily moved in and one does not keep refreshing with practical operational things.

It is like we must have known something was coming, but we did not. We have started that process. We are looking at how to facilitate legitimate trade because first we must concentrate on how to let legitimate trade work. There are significant problems. Deputy Cassells mentioned the cross-Border movement in the agricultural sector. This is an all island market and theoretically there are customs procedures. If we look at the supply chain of any of the big multiples, it is just a stock control system for them at present, but theoretically there are potentially imports and exports post-Brexit.

We are putting a lot of thought into it. Obviously we cannot negotiate agreements with HM Revenue & Customs, HMRC, but we have excellent relationships with it. We have bilateral meetings at board level on an 18 month basis and we have ongoing bilaterals on practical issues. We hope that whatever the outcome, legitimate trade will be facilitated as much as possible.

To go back to one of the other points raised on the general area of the Apple tax issue, the Revenue Commissioners look at it exclusively from tax law. I am concerned about a number of issues from this point of view. Who informs or questions Brussels? Is there any role for Revenue when it is asked to adjudicate on something, as was the case in 1991 and 2007? We are not isolated, we obviously exist in the European Union, and there is a connection between the two things. Is there a role for asking whether the state aid rules have been checked? If we do not do this, we can hardly complain afterwards.

Part of the reason it landed on our doorstep is because the companies facilitating this and domiciled here did not have a headquarters or staff. Is there an issue regarding examining the number of companies? It is easy enough to set up a company. Is there an issue with companies? Does Revenue keep records of large companies which are only brass plate? Obviously this is how it is facilitated.

Mr. Niall Cody

In the actual case, they are not brass plate operations in Ireland. The two companies have significant Irish activities in Cork. We have taxed the companies and they have paid Irish tax in respect of the branch profits in Ireland. The use of Irish registered non-resident companies has been a feature of tax planning by multinationals. Irish law and changes in tax law usually involve a budget announcement where state aid approval must be given, so there is a process around changes to Irish law being subject to state aid. The Commission regularly reviews our legislation to see whether it is in accordance with state aid rules.

There is no doubt the motivation for the investigation was the Senate hearings in the US. The issue around the tax paid by multinationals which have an Irish registered non-resident area has been well known for a long time. The US equivalent of the CSO published data on the effective rate of US-controlled Irish registered non-resident companies and it features in the review of the effective tax rates the Department of Finance published in 2014.

Clearly, over recent years, with the base erosion and profit shifting, BEPS, project, the use of these types of procedures is clearly not acceptable. The Minister in recent budgets has moved to close down the opportunity for stateless companies and then to rule out the opportunity for the double Irish process. Anybody who has-----

Will Mr. Cody explain to the viewers what he means by the double Irish? A group of people hear and speak about it, but I suspect 95% of the people do not. Is it possible to say it in basic English, for the viewers who do actually watch these programmes, or is it too difficult an issue? Mr. Cody understands we up here get caught up in these double Irish and stateless companies. I am saying this in the interest of helping people who zone out when they hear these words.

Mr. Niall Cody

I will try. What is the double Irish structure?

Go slowly so people listening can get it step by step.

Mr. Niall Cody

The so-called double Irish structure involves two Irish registered subsidiaries of a US multinational company, an Irish resident company for the group's Irish operations and a non-resident company-----

Non-resident for tax-----

Mr. Niall Cody

Non-resident for tax.

-----but registered with the Companies Registration Office, CRO.

Mr. Niall Cody

An Irish registered non-resident company.

Explain that. Mr. Cody means registered with the Companies Registration Office as a company registered in Dublin Castle, but it is not registered with Revenue for taxation.

Mr. Niall Cody

It is not resident-----

It is not resident.

Mr. Niall Cody

-----in Ireland for tax purposes.

Is it registered with Revenue for tax purposes?

Mr. Niall Cody

It is registered with the CRO.

That is the companies office, but it is not registered with Revenue.

Mr. Niall Cody

No.

That is the crunch issue.

Mr. Niall Cody

It is legal to do this, but it is not possible for companies since the last change in 2015. There was a grandfathering arrangements for companies-----

The old companies Act.

Mr. Niall Cody

-----that have it until 2020.

I will ask Mr. Cody to circulate the note to us afterwards for public distribution. When Mr. Cody says "registered" I ask him to state the company is registered with the Companies Registration Office and that "non-resident" means it is not registered or resident with Revenue because people do not know what public office he is speaking about. I ask him to break it down step by step for the public because I really believe 95% of people do not get it.

I apologise for the interruption and I will not take up Deputy Murphy's time.

I am trying to get it in my head who has responsibility for considering such a scenario as outlined by the Commission and looking at it from the point of view of state aid. How would a Department know that, for example, a company was seeking a ruling from Revenue on the scenario we saw? Who would consider the other side of it? Does Revenue have any role in considering the other side or even suggesting the other side should be looked at?

Mr. Niall Cody

It is important to look at what a ruling is about. It is not a negotiation of special arrangements. It is applying the Irish tax code to the facts and circumstances of a case. A company is entitled to look for a ruling, we call it an opinion, on complex issues. We have published guidelines since 2002 on how to get a ruling.

We revised them in 2014 for cases dealt with by our large cases division. Under the ruling, the company puts to us a basis of calculating its liability, having regard to the tax code and what the company does. It is about how the company calculates the profits for its branch in the case of an Irish branch of a multinational company. We engage with the advisers and the company and agree a process for calculating the profits, having regard to that activity. We would not, nor would anybody, have the idea of asking whether there is a state aid issue. The authority to determine whether there is state aid is the European Commission Directorate General for Competition. It may examine our legislation on occasion and we receive requests from it to review or provide information on a specific section of the Act as to whether it meets state aid rules. We engage in this. In some cases, it goes on to a legal challenge, in others, when we explain what the system does, that is the end of it. In the original opening statement by the Commission, it stated that, regardless of whether there was an opinion or a ruling, if the law were applied in the way it was applied, it could still be state aid.

No revenue authority would want a situation in which very large amounts of tax are stateless. This is what happened and this is the central point. This is what the BEPS process is aimed at.

Mr. Niall Cody

Absolutely, and being stateless or being resident in a tax haven where there is no corporation tax, which is the other variant of it, have exactly the same outcome. Ultimately, the tax in most of these cases is deferred tax which is due in the US when it is repatriated.

Regarding the audit gap measurements on which Mr. Cody says Revenue will embark, what will its methodology be? There are obvious examples such as tobacco. No revenue is paid on some of the cigarettes that are imported, some of which are even more dangerous than regular cigarettes. At the top level, would Revenue look at it from the point of view of aggressive tax planning? Is that where Revenue will bring in the bigger return? Will Revenue look at it from the point of view of where it will get the biggest return? While section 110 is used legally, I do not believe anyone considers use of the provision by non-charitable entities to be legitimate. Revenue needs something to measure tax foregone, and it is an obvious gap. Will Revenue examine such areas, where it is likely to pick up on big, aggressive tax planning schemes in real time or nearly in real time? It is difficult to see how it is possible to get to grips with the big audit houses, which open a new loophole on the day another is closed up. What methodology will Revenue use? Will it be small-medium, quick wins or particular sectors?

Mr. Niall Cody

We have been very proactive in tackling tax avoidance and we have three branches in our large cases division focusing permanently on tackling tax avoidance. We can provide the committee with summary data on the type of tax planning schemes we have come across. Tax planning is tackled in a number of ways. We need to identify the schemes and have the legislation. Sometimes, legislative change is the only solution. Ultimately, we have our general anti-avoidance provision, originally section 811 of the Taxes Consolidation Act 1997. Ireland was one of the first countries to have a general anti-avoidance provision. The UK has only recently introduced one. As part of the BEPS and EU approach, there is a need for a general anti-avoidance provision. The Deputy is right. When the law is changed, unintended consequences flow from the changes. Artificial losses are created and there is tax arbitrage between capital and income, to use the reduced rate that applies to capital taxes. All this process is on an ongoing basis.

The challenge in anti-avoidance is that the people involved are very well resourced. We are challenged. During recent years, the first challenge is not an appeal but a judicial review. Judicial review is the first port of call. Earlier this year, the Supreme Court found in our favour in a judicial review process of a significant tax planning scheme involving high-worth individuals, most of whom had sold significant businesses. The result of two to three years through the court process is we now are in a position where the appeal of the tax issue is only starting, and it could, potentially, go through the appeal process to the High Court, the Court of Appeal and the Supreme Court. It is a difficult and long-standing area. In the Comptroller and Auditor General's report, it is highlighted that some of the medical consultants' cases took more than four years to finalise. Those were the early cases. We had to get senior counsel advice.

Tax avoidance happens very much, in some ways, in the open. It has significant legal documentation. Tax evasion happens in the undergrowth. It is a significant job to challenge it. The Deputy's comments on the tax gap analysis are probably closer to our own than the recommendations about overall tax gap analysis. We are interested in focusing on segments where we can, hopefully, find not only what the gap is but where it is. While we did not do a tax gap analysis with oils, we did the opposite and looked back at it. We are trying to fine cases and, to use a verb that only we use, we try to operationalise the results. We did it with tobacco. We try to fine people.

The Revenue's systems will be evolving. How evolved are they? What are the plans for the audit gap measurements?

Mr. Niall Cody

As I said earlier, we are re-examining the random audit programme with a view to next year's random audit programme being different. We are probably looking at more cases but maybe not all of them in the form of a comprehensive audit to reflect the type of work we do. I hope we can have preliminary discussions with the Comptroller and Auditor General within the next few weeks. To build it into next year's programme, we must finalise it and factor it into our business plans.

Deputy Connolly indicated and she will be followed by Deputy Cullinane.

I thank Mr. Cody for coming in. He accepts all the recommendations of the Comptroller and Auditor General except two which were only part agreed. I welcome that he has come in, put his hands up and agrees with the recommendations. That is a very good start. Mr. Cody should correct me if I am wrong but the only two items he disagrees with is the concept of the audit gap and the tax gap. He partly agrees with those. To clarify that I understand what the audit gap is, it is the possible difference between registered taxpayers that are audited and those who are not audited. Is that correct?

Mr. Niall Cody

It is if we audited them all.

It is if Revenue audited them all as opposed to the number it is able to audit.

Mr. Niall Cody

Yes.

That is the audit gap.

Mr. Niall Cody

That is the audit gap.

The tax gap is a more general, wider thing.

Mr. Niall Cody

It is a wider thing.

Is it if the number of people who are not registered for tax were registered? Is that correct?

Mr. Niall Cody

It includes the audit gap but also people who are not registered and who are trading in the shadow economy. It also includes the criminal elements we talked about earlier. It also includes money not collected and liquidations.

Could that tax gap also possibly include all the multinationals?

Mr. Niall Cody

No, the tax gap is if people complied with the Irish tax code in full for all their transactions and all their business and we got all of it.

Mr. Cody has made that point clearly. I will come back to Apple. Mr. Cody said that Apple complied with Irish tax law. If Revenue was given more resources to look at multinationals and big companies there would be potentially a lot more money coming into the Exchequer?

Mr. Niall Cody

I hesitate to say we do not want more resources because in our business we can always use resources.

Why does Mr. Cody not want more resources?

Mr. Niall Cody

I said that I would hesitate to say that. In budget 2017 there is a commitment to give us an additional €5 million to cover people and analytical IT resources. In budget 2016, there was a commitment for an additional 50 staff; in the previous year's budget it was 126, which was a net increase on our resources. We will now have a full-time equivalent of just over 6,000 staff. In 2008, we had a full-time equivalent-----

Did Mr. Cody say 500? How many extra staff did he say were provided for in the 2017 budget?

Mr. Niall Cody

There is an additional administration budget of €5 million.

How many staff?

Mr. Niall Cody

We put that down to 50 additional staff plus €2.5 million on IT resources to deal with analytics.

That is 50 extra staff next year compared to 50-----

Mr. Niall Cody

There were 50 in 2016.

-----in 2016 and 126-----

Mr. Niall Cody

There were 126 in 2015.

That is not a lot.

Mr. Niall Cody

It has to be looked at in the context of the demographics of the organisation and the number of people who are retiring and leaving Revenue. Last year we recruited 407 staff. This year to date we have recruited 467, including the additional resources. This year we will recruit over 500 staff. Next year, we will recruit over 500, including the additional resources. The issue we have is the capacity to take people in and train and develop them. The organisation is working flat out to regrow itself. There has been an embargo on recruitment for a considerable number of years. A number of years ago, 50% of staff in the organisation were over 50 years of age; it is now 47%. A significant proportion of staff have over 35 years' service. In three years, there will be over 1,000 people who have less than three years in an organisation of 6,000 people.

How many have retired each year since 2013?

Mr. Niall Cody

I will give the committee the actual figures. In 2009, 449 retired or left. That had to do with a lot of the packages. They were not packages, they were threats of what-----

Incentives.

Mr. Niall Cody

-----would happen if one would not go.

Early retirement incentives.

Mr. Niall Cody

From 2009 to date, 1,514 have retired or left.

That is 20% of Revenue's staff, so it lost all that experience.

Mr. Niall Cody

We do workforce planning projections and we are looking forward. When I got this job I had been on the board for three years. Last February when I got this job, the most important challenge facing me was how the organisation will be in five years' time. We will lose significantly experienced people. We have 1,973 people over 55 years of age.

Over 55.

Mr. Niall Cody

Yes.

That is 2,000 people - 25% of Revenue's-----

Mr. Niall Cody

It is a third.

A third.

Mr. Niall Cody

As one can imagine, it is senior grades. This is common - the Comptroller and Auditor General has the same problem. Demographics is an issue across the Civil Service. We all joined between 1979 and 1981 when there was big recruitment in Revenue. The previous one was when Ireland joined the EU in 1972, 1973 and 1974. From 1982 to 2002, there were really small numbers recruited. All the people who are between 50 and 60 are not lifetime civil servants because now recruitment happens at all ages and levels of experience. We have 2,000 over 55 and we have another 1,100 or 1,200 over 50. We are looking at an organisation in which over the next ten years practically all our senior management, with a few exceptions, will have retired.

Presumably it is not a negative thing that people are over 50. What Mr. Cody is saying is that Revenue will lose all its experience.

Mr. Niall Cody

I am going to lose them.

It does not have the resources or time to train new people.

Mr. Niall Cody

It has to be managed. In the context of the increases, since I got this job I have made a case every year for additional resources and they have been granted as asked for.

Was Mr. Cody's wish for additional resources granted for this year?

Mr. Niall Cody

I mentioned it already. We looked for 40 for Brexit planning and we looked for 50 for overall compliance. The other thing I wanted was additional resources for information technology because the key to the success of our organisation, as we see it, is our ICT system. We get visits from revenue authorities from very advanced countries and they cannot believe how joined up our ICT systems are.

I will stop Mr. Cody there. I hope the Chairman is a little bit generous with me because he has come in quite helpfully during my time. I will run through a few things on IT and then I will come back to Apple. On the excise duty, it says here it is currently not incorporated into Revenue's mainstream IT system. Mr. Cody has acknowledged that and has acknowledged that there will be audit training. What is the timeframe for the review of the procedures that have been promised? A number of anomalies were pointed out and only one of them came to light - perhaps it was more than one - through the Comptroller and Auditor General's report. Mr. Cody is nodding and I appreciate that he accepts that. What is the timeframe to review that?

Mr. Cody dealt with the question on overpayments from Deputy Cassells. What is the strategy and timeframe to deal with them? He said sick pay was the issue.

Some items relate to the seizure of goods and the exchange of financial information. A total of 28 criminal convictions have been obtained for serious tax issues. Was any money paid as a result of those convictions or did we lose out? The next section is on convictions with fines. It states that the first exchange of financial account information between Ireland and the US took place in September 2015. What was the nature of this financial account information? What was its purpose and what did we learn from it?

Does Revenue anticipate that, with the price of cigarettes going up, there will be more illicit activity? Is there a way of valuing the loss to Revenue? There were 2,722 detentions of counterfeit goods with an estimated value of €5.45 million. What is the context of that? What percentage of the total figure for legal goods does this represent?

Mr. Niall Cody

The Deputy asked about IT developments for excise. Excise has traditionally been a stream within Revenue. It has been very tightly controlled and a lot of money is collected from a small number of traders very high up the supply chain, which is its great advantage. We launched a process of integrating the excise suite into our IT general systems, to take place in the next three or four years.

Three or four years?

Mr. Niall Cody

Yes. There is a detailed plan and we have started with oils. In 2013, before we started integrating, we put in place the supply chain system, which was a first and which gives us a monthly report of oil movements from traders. We have several systems for turning up anomalies. We introduced new IT systems to monitor and control the process but we are a big, diverse organisation and our senior people know an awful lot about stuff. One of the disadvantages is that it takes time to get them to work in a different way. They think they know how to do it so it takes a bit of time and this touches on the need to improve communications within districts, a point on which the Comptroller and Auditor General picked up. The revised guidelines will issue before the end of the year. Oil has gone into our integrated tax system, ITP, and the next project is alcohol.

Guidelines will be issued before the end of the year and the timeframe for implementation is three of four years.

Mr. Niall Cody

Yes.

Perhaps Mr. Cody would answer my other questions. I would also like to ask about Apple.

Mr. Niall Cody

If I keep talking, will it work?

I am going to ask about Apple to prevent Mr. Cody from talking further.

There are no votes in the House at all today, so there is no pressure on anyone to leave.

Mr. Niall Cody

The Deputy also asked about overpayments.

I asked about the strategy and plan to deal with them.

Mr. Niall Cody

The strategy is covered by PeoplePoint and there is a national shared services project board, on which I, as chairman of one of the biggest organisations in the State, sit. The board is developing its IT systems, like ourselves, and is carrying out a root cause analysis of specific elements of its overpayments. It is developing a strategy to tackle each of them. Staff in Revenue give out about PeoplePoint because we had a highly developed system and they see it as worse than what we had but there is a concentrated attempt by PeoplePoint and the services board to improve the system. The reality is that the system was rolled out before the IT system was fully developed. The plan is in train, however, and I am very confident that it will bring about a significant reduction in overpayments. I hope to get back to the levels we were at before we were in PeoplePoint.

Can Mr. Cody answer my other questions?

Mr. Niall Cody

One question was on the 28 criminal convictions. A criminal investigation is a parallel process and we look at the referral for prosecution from the DPP.

Did Revenue take in tax as well?

Mr. Niall Cody

We also look for the money.

Did it do so in the cases to which Mr. Cody referred?

Mr. Niall Cody

I cannot say so for definite as regards the 28 cases.

Will Mr. Cody come back to me on that?

Mr. Niall Cody

I will. One of the key issues in the sentencing process is whether the money was paid.

It is a mitigating factor.

Mr. Niall Cody

If the money is paid, sentences will generally be suspended.

What is the position in respect of counterfeit goods?

Mr. Niall Cody

On cigarettes and the loss to Revenue, we carried out a survey covering a number of years and we have put a figure on the tax gap for tobacco. The most recent figure we have is €194 million.

That is the loss to Revenue.

Mr. Niall Cody

Yes. That would be the amount if everybody who smoked an illegal cigarette would otherwise smoke a legal one.

Does Mr. Cody expect that loss to increase now?

Mr. Niall Cody

In the 2016 survey, 12% are illegal and 6% are legally brought in by people who go on holiday in the Single Market. The figure for 2015 was 11% but it has stayed between 11% and 12% for the past few years. There is a constant battle between ourselves and the UK to have the highest-priced cigarettes and with the way sterling has gone we are probably first again. The projected figures in the past couple of years, when there was a 50 cent increase, were met and we are confident that the forecast of a €65 million increase, arising from the rise in tobacco duty in this budget, is robust. Obviously, the incentive to smuggle is increased and in 2007 and 2008, when I had responsibility for policy in indirect taxes, we would have been more comfortable with 20 cent or 30 cent increases. That was 20 cent or 30 cent out of €7 or €8, however, whereas now it is 50 cent out of €10 or €11. In other words, 50 cent is starting to become the new 20 cent. There are health considerations too, of course.

I will forgo the answers to the other questions because I want to finish with a question on Apple and on section 110. Deputy Catherine Murphy has also asked about this and I understand Mr. Cody's explanation. Even if I do not accept it, it is a rational explanation. Did Revenue have any role in going back to Government to highlight what it saw on the ground with this company, or any other company, in relation to its head office, the lack of premises or the lack of employees? Apple is not the only company that avails of these procedures. Does Revenue not have a role in highlighting these aspects of what it sees on the ground, even if such things are within Irish law?

Mr. Niall Cody

There is a premise that the Commission's case stands up fully.

I am leaving the Commission case and the judgment out of it.

Mr. Niall Cody

The Commission has brought in this idea that the head office-----

They were the facts, it was a head office with no employees and no premises.

Mr. Niall Cody

The question of the Apple group is actually real. The development of the intellectual property took place. The management and control of the companies took place outside of Ireland. The Commission has presented a set of facts.

I am leaving the Commission out of it. I am asking a general question and I am using the facts of Apple. Does Revenue see itself as having a role in going back to the Government and stating that the company is technically within the law but there is scope for Revenue in this area?

Mr. Niall Cody

It is a matter of public record that there was a tax strategy group paper in 1998, which talked about Irish registered non-resident.

The issue is there for a long time.

Mr. Niall Cody

The issue around it has been understood for a long time.

But nothing has been done about it.

Mr. Niall Cody

Actually, in the context of base erosion and profit sharing, BEPS, and the changes that have taken place, it has.

The changes that are going to happen.

Mr. Niall Cody

The stateless change has happened. The double Irish opportunity is gone.

I understand that.

Mr. Niall Cody

The issue is that there has been a concentrated effort at OECD level in which we are playing a full part.

In the same spirit, on the issue of section 110 entities and charities, the HSE appeared before us to address the issues arising from Console and the general issues concerning charities. I wish to raise the issue of businesses using the designation of a charity to avoid paying tax. What is the role of Revenue in highlighting that? People bring this information to our attention as Deputies. Does Mr. Cody see that Revenue should have a proactive role?

Mr. Niall Cody

I will address section 110. This is a matter of public record because it has appeared in the newspapers as a result of requests under freedom of information, where Revenue was identifying issues in relation to section 110 and the use in the context of Irish property. Deputy Catherine Murphy mentioned earlier about real time. "Real time" in the context of business taxes for Revenue is at least 18 months after the event because of the way returns are filed and accounts are prepared. We started raising the issue when we saw evidence of Irish property in section 110 vehicles. We first had to do an analysis on it. Obviously Deputies and journalists have raised the issue as well. The Minister has now published draft legislation and has undertaken to bring forward further amendments in the Bill as published.

The use of charities in the context of section 110 is not about tax at all. It is about the use of a trust. The only type of trust available in Irish law is a charitable trust. The issue is, I understand, subject to inquiry by the charities regulator. Up to last year-----

A regulator who is under-resourced.

Mr. Niall Cody

The Charities Regulatory Authority is a new body which is starting from scratch. We have worked with it and we were responsible for the tax affairs of charities and we have exchanged our register with the authority and we are engaged with it in a very close relationship to try to help it. We have a role but we are not the charities regulator.

I welcome Mr. Cody and his team. I was going to finish with Apple, but I will start with it, given that it follows logically from the previous speaker.

Much has been said about this in recent weeks and months. The Government has stated its position. Revenue has stated its position and Apple has stated its position, but there seems to be a difference of language when Apple is talking in public and in the statement it made on RTE and on national radio and television stations and what it said at the US Senate hearing a number of years ago. I wish to clarify what Mr. Tim Cook said when he was before the Senate hearing giving sworn evidence. There is a difference between what they say when they give sworn evidence and what they say publicly when they are speaking to the media in Ireland. Mr. Tim Cook said at the hearing that the Irish Government gave the company a tax incentive agreement. He talked about a special arrangement. When the head of tax of Apple was pressed about what that meant, he said that they had negotiated a tax rate which meant that their tax was calculated at less than 2%. Was Tim Cook wrong when he said that he and his company had negotiated a tax incentive agreement with the Irish Government and was his head of tax wrong at that hearing when he said that negotiation meant that the company could calculate its taxes at less than 2%?

Mr. Niall Cody

I do not think Deputy Cullinane was present when I read my opening remarks about Apple. First, I am bound by taxpayer confidentiality. I will come to the Deputy's question.

It is not confidentiality but we are talking about-----

Mr. Niall Cody

There are also legal proceedings. Let me repeat that.

I understand that. I read Mr. Cody's opening statement.

Mr. Niall Cody

The issue around what Tim Cook said in the Senate hearings is absolutely in Revenue's opinion not correct.

It is very serious to accuse the head of a multinational company who is giving sworn evidence. This is a very high powered committee in the US. It is illegal to give false testimony to the US Senate. If we have the head of Revenue, or somebody in Revenue who is in a senior position in this State, who is saying that Tim Cook gave false information under oath, or gave incorrect information or maybe his interpretation of what he said, but he gave wrong information to a Senate hearing, that is very serious. It was not just Mr. Cook who gave this information, it was also the head of tax in Apple, who went further and said that this arrangement meant that the company could calculate tax at 2%. Apple was under pressure at that hearing and the representatives said what they said. I think it is very serious when Mr. Cody says, and he may be correct, that the information was incorrect. I think that is serious for Apple as a company. It raises more questions on this issue. Does Mr. Cody accept that it is a very serious matter for Apple if its representatives gave incorrect information to a Senate hearing?

Mr. Niall Cody

I can only talk about what happened in relation to Revenue and Apple in 1991 and 2007. I can see how it can be presented because they are looking at it in the context of a global rate but we were only engaged in the attribution of profits to the Irish branches. That is what we were dealing with.

I understand that, but that is not the point I am putting.

Mr. Niall Cody

I cannot answer whether what was said in the Senate hearings was right or wrong. I can only say what happened in Ireland and in Irish Revenue. The impact of that is that Mr. Cook was wrong. I cannot repeat it in any other fashion.

I think that is serious. That is acknowledged. To be fair, Mr. Cody has acknowledged that. We should come back to this issue at some point. We cannot do that issue justice when we are trying to deal with all the other issues that we are dealing with.

Absolutely.

We have a lot to get through.

Mr. Niall Cody

There is also a legal process in place.

Mr. Niall Cody

We will be limited.

A difference of opinion does not mean that one is accusing the other. People are entitled to different opinions.

With respect, Chairman, we are not talking about differences of opinion. We are talking about statements of fact that were made at a Senate hearing under sworn testimony when they said two things which somebody in Revenue says is wrong. That is not just a difference of opinion. We will park that and come back to it.

I am one of those whom the Chairman mentioned earlier that needs things explained in very simple terms to them. I am a bit like those who listen in to the hearings. Will Mr. Cody bear with me as I want to get clarity on what was in the Comptroller and Auditor General's report on tax compliance?

Am I correct in stating that the headline figures show that 39% of taxpayers who were audited between 2008 and 2015 were found to have underpaid?

Mr. Seamus McCarthy

In a sample.

Yes, it is a sample. Is it correct that the average of unpaid tax was €18,500 and that, in 2015, of 270 random samples that were finalised, 170 people or companies were given a clean bill of health and that 100 were not?

Mr. Seamus McCarthy

Yes, I think so. From where is the Deputy quoting those numbers?

It is from media reports. I am merely seeking to discover whether the media reports are correct.

Mr. Seamus McCarthy

I am not quite sure which media reports the Deputy is quoting.

The Comptroller and Auditor General would be aware whether the information is correct or incorrect.

Mr. Seamus McCarthy

I would have to go back and recalculate some of the numbers the Deputy quoted because they are not figures quoted in the report.

This media report also states that of the 100 companies that were not given a clean bill of health, five randomly selected companies or individuals were found to owe over €50,000 and seven were found to owe between €20,000 and €50,000. This means that 4.1% of companies or individuals that were audited were found to have a tax liability outstanding of between €20,000 and €50,000 and a further 3% had liabilities of over €50,000. In any event, we all accept that the overall figures - in terms of the 35% - are high. I merely want to establish the facts first.

Obviously, that is of concern because this is merely the sample. It goes back to what was stated earlier by an Teachta Connolly on what is the tax gap. My understanding of the tax gap - perhaps I can obtain clarification on this - is that it is the difference between what is paid and what should be paid if everybody was in full compliance with the tax code. Is that correct?

Mr. Seamus McCarthy

Yes, that is the tax gap.

We have a report which states that 39% of taxpayers who were audited between 2008 and 2015 were found to have underpaid their taxes. This was the result of the audit. What is being said in the report is that it is difficult then to get a clear picture of the exact nature of the tax gap and, consequently, the actual loss of revenue to the State.

Mr. Seamus McCarthy

That is effectively what I am drawing attention to. What the figure coming from the random audits is looking at is the audit gap rather than the tax gap. That is people who have registered with Revenue as taxpayers. The Deputy might look at that diagram 15.1. I wonder if we could just bring that up more fully on the screen.

What page is that?

Mr. Seamus McCarthy

It is on screen now.

Mr. Seamus McCarthy

If the Deputy looks at the green panel in the centre, the audit gap is the relationship between the tax paid by taxpayers who are recognised and registered with Revenue. The tax gap is a broader definition.

It is the difference between tax collected and tax liability.

Mr. Seamus McCarthy

Yes, in terms of people who are registered with Revenue. But there are economic agents who are not registered with Revenue.

Let us stick with those who are registered for a second.

Mr. Seamus McCarthy

That is what the random audit is focused on.

That is what I am focused on. What we do not have is any sense of how much unpaid taxes there are year on year because of underpayment but we can say with certainty that it is a sizable amount. It is crucial to taxpayers and policymakers. We just had a budget in which we had difficult decisions to make in respect of investment, tax, etc. We at least expect that taxes due should be paid. Why is it so difficult to calculate or even have some estimation of the total lost revenue or tax gap? Why is that one of the recommendations that is only part agreed? Is it because Revenue - this is for Mr. Cody - believes that there is no real value in having that data or putting the resources into it, is it that it would just take a lot of resources to calculate the figure or is it that it is complex to do it? What is the problem?

Mr. Niall Cody

There is no international acceptance that tax gap analysis is the best measure. Tax gap analysis is arrived at in a number of ways. Sometimes it is taken from the top down, one uses the Central Statistics Office's GNP figures and national accounts figures and then one works out a theoretical gap. However, the reality is that tax evasion and the shadow economy are, by their nature, hidden and the figure is always an estimate.

The country that has gone furthest down the road of tax gap analysis is the UK. The authorities there do it annually and it is their major measure of the success of the organisation. What happens every year is that HMRC arrives at a tax gap analysis which is subsequently amended by national accounts figures. One has an agreed tax gap for 2013, in 2014, that is changed and in 2015 it is changed, depending on what happens with national statistics.

Some of the issues around identifying the top-down approach is that there is an estimated figure put into the national accounts for the shadow economy and then one works out the shadow economy based on an estimate that has gone in to the overall figures. Sometimes you are actually chasing your tail.

Even if the shadow economy is stripped out of it, as I said, we are talking about people who are registered. We have taken a sample of people who are registered for tax. We can see that there was a non-compliance rate of 35%. Surely there would be value in knowing - in circumstances where there was full compliance - what would be the lost revenue, especially when we, as politicians, have to make tough decisions on behalf of taxpayers.

Mr. Niall Cody

As we discussed earlier, we are looking at revising the random audit programme to look at how we can better measure the audit gap because that, at least, is a clientele we have. As it is designed, it is not big enough to get a proper view of the audit gap.

While there is a consistent figure of 35%, it is important that 80% of cases had a yield less than €2,000. The yields and underpayments in tax arise from a lot of reasons. Some of them are interpretation. Some of them are just pure error and mistake. We have classification of a technical error, innocent error, carelessness, carelessness with significant consequences and deliberate default.

I accept all of that, but carelessness and errors still result in taxes being unpaid.

Mr. Niall Cody

Absolutely.

Whether it is intentional or unintentional, we end up with taxes not being collected. Does this tell us that there is a potential problem with the self-assessment process?

Mr. Niall Cody

When I read the draft of the Comptroller and Auditor General's report in the first instance and saw a figure of 2% for the audit gap, I wondered was it accurate. If we, as a revenue authority, have managed to get 98% through the self-assessment system, that, to me, is nearly better - I was going to say the random audit programme is perfect and we will take that audit gap of 2%. If it is right, one would suggest that if one applies our risk-based audit programme - in which we collect significantly higher averages and a significantly higher hit rate - to the audit gap, we at least collect half of it every year through our risk-based system.

Looking at the figures, I suppose that if we manage to carry out more risk-based audits, at some stage we might actually collect more through the risk-based programme than the audit gap displays from the random programme. Then we will have managed to collect over 100% of the tax due. I do not know where that will leave us because that is the possibility.

Mr. Seamus McCarthy

We need to focus on the tax forgone in a particular year. The targeted audits are looking at multiple years and relating collections for multiple years to the tax forgone in an individual year is probably a complication there.

We have, in a number of reports over the years, championed the importance of the random audits to try to give us some sort of a fix on what is the level of tax foregone in an individual year. Essentially, it is useful to Revenue to be able to say the level of activity we have targeted is capable of being expanded and of yielding more revenue. To me, it is a useful technique, a useful tool and a useful estimate. It is valuable over time to see that if there is a deterioration, if it goes to 3% or 4% as it might do, at least we could then signal that more effort is needed on targeted-----

What is the breakdown of the random sample for small traders, individuals and bigger companies?

Mr. Niall Cody

As I outlined earlier, it is a random selection out of the self-assessed case base. There are about 850 between individuals and companies. It is purely random. It does not include PAYE cases and I believe that is one of the flaws. Earlier, I outlined that because of how self-assessment works, there are a lot of non-trading people in the self-assessment system who are not really businesses at all. What we are really interested in doing is segmenting our case base to establish the traders who have trading activity and we could get a more sophisticated random audit programme. We are doing a lot of work on this. It is actually partly why we agreed to undertake the work on improving the audit gap. Improving the audit gap and the random audit programme is achievable. With the tax gap we would much prefer sectoral approaches and focusing on things such as oil and tobacco where, because they are excisable goods, they are properly controlled at the very top of the chain and one can ask where are there linkages.

That is good to hear. I will turn to section 38 and section 39 organisations and charities and their compliance with Revenue. There has been some discussion on this matter because there have been a number of HSE audits, which have not been good. I will not go into any of the details of the organisations or name them but I tabled a parliamentary question to capture exactly how many Revenue interventions there may have been with charities. For the years 2007-16, Revenue conducted almost 7,500 debt management interventions and in excess of 1,600 compliance interventions with regard to charities. That seems like a very high figure to me. It is 177 compliance interventions every year since 2007. The reply explains the exemptions in place for charities. From internal audits we have seen there were issues regarding salary payments that were not taxed or subject to payroll taxes or that untaxed salary payments were made to employees who were working for some organisations to other organisations. There were all sorts of issues. Is Mr. Cody concerned about that and would he see the intervention figures for that period - of 7,500 for debt management and 1,600 for compliance - as high?

Mr. Niall Cody

Debt management interventions-----

Sorry, that is only a sample. If that is only a sample, then how many more interventions would there be if this audit was applied to all charities across the State?

Mr. Niall Cody

Debt management interventions arise when there is a debt issue such as the non-payment of PAYE or P30. Most of the debt management issues in charities relate to PAYE. With regard to debt management intervention, if a charity is late in its payment, it is driven by the non-compliance that takes place. It is a feature of charities that when they start getting into financial difficulty for whatever reason, PAYE seems to be one of the early triggers. That applies to most of the charity-----

I accept that but the job of this committee is to make sure we improve compliance. We look at the processes and the failures-----

Mr. Niall Cody

Absolutely.

If there is a failure on the PAYE side or the payroll side, what improvements in process is Revenue looking at to ensure these types of interventions can be avoided and to ensure stronger compliance in the charity sector?

Mr. Niall Cody

A total of 8,160 bodies or trusts hold the charitable tax exemption. Like every other sector, we make risk-based interventions having regard to risk that arises. We have a charity section which monitors and controls on an ongoing basis. We also engage with the Charities Regulator. With the nature of its business, there is not significant tax risk in the charity sector. Charities' incomes are not liable to income tax or corporation tax. They may have some VAT liabilities but generally it does not apply. The big issue is the payroll. Obviously, there are rules around employees and directorships and that is an area to which we pay close attention.

An interesting item from the budget speech that has not yet received any coverage - and this is relevant to PAYE, charities and all businesses - was the Minister's announcement of our engagement in a consultation process about the modernisation of the PAYE system and a move to real time. We have launched that. It was published on our website on Tuesday and we are going to engage with payroll businesses. The key issue there is it will give employees control over their tax affairs. Currently, no employees, be they charity employees, public servants or private sector business employees have control over their own tax details through the year. They are fully dependent on the employers and the end-of-year process. In a way, if a business is running into difficulty, the employees often are the last to know. They do not know the real-time situation, as it is not there to see. From this committee's point of view, and in improving the overall compliance, I believe that PAYE modernisation events over the next couple of years are very important.

I am going to call Deputy Aylward. We will then take a ten-minute break. A couple of people have indicated to speak and I do not want to run on too long.

I will not hold the committee up for too long. Mr. Cody has said the illegal seizures represent a value of €194 million. What percentage of illegal or counterfeit goods would that represent overall?

Mr. Niall Cody

The €194 million was in respect of illegal cigarettes being sold on-----

Has Mr. Cody an idea of the percentage that would be overall?

Mr. Niall Cody

It is 12% of the whole cigarette market.

What about drink, is it the same way for alcohol?

Mr. Niall Cody

We do not have similar evidence of illegal drink sales. There are certainly some but all our engagement to date suggests that drink is not as significant a problem as it is in the United Kingdom. One of the ways we always will know if there is a serious issue is the legitimate trade will be very quick to complain. The legitimate trade complained significantly around fuel and has complained constantly about the cigarettes. I believe some of the complaints on cigarettes are to try to prevent excise increases happening but there has not been that same level from the alcohol sector, but no doubt there are some.

How does one identify seizures? Is it a raid on a depot or does the Revenue identify a retailer such as drink over the bar or shops that sell cigarettes? How does Revenue identify these and follow up on them?

Mr. Niall Cody

Most of the significant seizures of cigarettes involving big quantities take place at points of entry such as at ports. For example, this week we seized 999,000 cigarettes in three operations. Some 900,000 were in a container in Dublin Port, 40,000 were in a seizure in Castletownbere and the balance was seized at Dublin Airport. Generally, we do pick up things in markets, streets and city centres but they always are in small quantities because nobody is going to have big quantities of cigarettes there.

In regard to alcohol, we carry out test purchases in bars, which is not a secret. That has been done by excise officers since well before the foundation of the State.

I will move on. I understand some 40% of Revenue's total take is from income tax. Does Mr. Cody have a breakdown of how much of that comes from PAYE workers and how much from the self-employed?

Mr. Niall Cody

I do not know that breakdown off the top of my head. Certainly, a significant proportion of the 40% comes from the PAYE sector. If I recall rightly, something like €2 billion comes in through the self-assessment system, but it might be slightly more than that.

What percentage would that represent? I am asking merely for information purposes.

Mr. Niall Cody

It would be 5% or 6%. I can provide those figures to the Deputy later.

Does that mean 34% of all revenues are from the PAYE sector and 6% from the self-employed sector?

Mr. Niall Cody

I can provide those figures. In fact, we will have them for the Deputy after the ten-minute break.

I thank Mr. Cody. To what does the 7% figure for other taxes refer?

Mr. Niall Cody

That refers to capital gains tax, local property tax and capital acquisitions tax.

Mr. Seamus McCarthy

For the Deputy's information, there is a breakdown by value given in the account of the receipts to Revenue. The detailed numbers are given in note 1.

I thank Mr. McCarthy. In the case of people who are paying tax that was previously underpaid, a complaint I often get relates to the interest that is charged. These people are caught for whatever amount but the interest doubles or triples it. How does Revenue assess the interest owing, which is sometimes very severe? I am talking about people who have no problem paying back when they are behind for whatever reason, but the interest on top of that crucifies them. How is that calculated and what rate is applied?

Mr. Niall Cody

The interest is provided for in legislation. The Taxes Act provides for an 8% rate for income tax and corporation tax and a 10% rate for PAYE and VAT underpayments. It is an annual charge. The Deputy is right that if the debt is owing for a number of years, the interest rate adds up very quickly. In some of our back duty investigations, there would be interest owing equivalent to 100% of the underpaid tax. That is provided for in legislation and is not something we calculate individually. It comes down to the idea of taxpayers making a declaration and coming forward earlier rather than later.

How does Revenue set the interest rate? Is it fixed at 8% or 10% with no variations as in normal interest rates?

Mr. Niall Cody

It is set in the Taxes Act.

Does Mr. Cody agree that 8% and 10% is very severe?

Mr. Niall Cody

It depends on what the purpose of the interest rate is. We are not a bank. If we had an interest rate that was less than an overdraft rate, why would people go to the bank to get a loan when they could choose instead not to pay their taxes? This issue has been the subject of discussions with tax advisers for years, with the argument being made that the interest rate is too high given the ECB rate is now practically nil. However, one would not get an overdraft at 8% if one had outstanding taxes to be paid. A case that was brought to court some years ago saw the matter of our interest rate challenged. The judge asked why there was all this talk of the ECB rate and pointed to the credit card rates of more than 20% at that time. The interest rate has to be set at a level that makes sure there is no incentive for people not to pay tax.

Is there no leeway on that?

Mr. Niall Cody

No. If we did not collect it, the Comptroller and Auditor General would have something to say.

I understand there is no difficulty with making an arrangement for stalled or stretched payments with clients.

Mr. Niall Cody

Absolutely, we are proactive on instalment arrangements. Business representative bodies have acknowledged that throughout the period of economic disaster, we were always open for business and willing to talk to people and enter into sensible arrangements. Ultimately, however, our job is to collect the tax that is due.

I found Revenue very helpful in respect of term arrangements I was involved in negotiating.

On the famous corporation tax rate of 12.5%, rumour has it there are companies, whether resident or non-resident, which, by arrangement, are paying only 6% or 7%. Is that true? I do not understand tax too well but I am being told that if every company trading here, both foreign and indigenous, paid the full 12.5%, the revenue from this source would be a lot more. Do certain large companies have special arrangements to pay 8%, 7%, 6% or 4%, or is every company paying 12.5%?

Mr. Niall Cody

The standard rate of corporation tax in Ireland is 12.5% and it applies to the profits attributable to activity in Ireland. There are a couple of exceptions. The research and development credit, which features in the Comptroller and Auditor General's report, comes off that figure. There are many ways of measuring effective tax rates and no agreed method. A report published by the Department of Finance in 2014 found the effective tax rate in Ireland for corporation tax is 10.1%. That takes into account the credits that come off the 12.5% rate.

Will Mr. Cody explain these credits? Why and how are they applied such that a company might end up paying only 10%?

Mr. Niall Cody

The research and development incentive is given as a credit. A company can claim back 25% of its research-and-development expenditure, which comes off its tax bill just like tax credits come off individuals' tax liabilities.

Will Mr. Cody explain about deferred tax whereby when a company makes a capital investment, it can write it off against tax for a period of X years? Farmers can do the same thing and it is somewhat akin to depreciation. Do we know how much deferred tax is legally in the system?

Mr. Niall Cody

We publish a detailed breakdown of corporation tax showing losses, capital allowances and so forth every year. If Members of the Oireachtas put in parliamentary questions about statistics, we always give the link to our statistics site, which has a comprehensive breakdown of all the different levels. This year we published an analysis of corporation tax receipts in 2014 and 2015, against the background of the spike in 2015. It shows all the detail, including on the research and development tax credit, losses and the payment of other taxes by corporate tax sectors. We are committed to issuing the same report in April 2017 giving the figures for this year. One of the things we have tried to do is to put out as much understandable information as we can, having regard to taxpayer confidentiality. That aids the discussion on corporation tax, which is not simple.

Why was there an increase of 4% in corporation tax receipts between 2014 and 2015? Was it because all the publicity around corporation tax led to more companies registering and paying up properly?

Mr. Niall Cody

The increase between 2014 and 2015 was broad-based and amounted to an extra €2.5 billion. The proportions increased both for Irish indigenous companies and multinationals by approximately the same amount. The issue about corporation tax - this is in the public domain and we have published the figures - is that the ten largest multinational corporations in Ireland pay 40% of total corporation tax receipts.

We are heavily dependent on foreign direct investment companies that pay corporation tax and a significant amount of payroll taxes. They employ many people and they tend to pay higher wages and a great deal of PAYE. We can send the committee a link to the paper because it provides a clear and straightforward presentation of the figures.

Is Mr. Cody happy that everything is in order with regard to corporation tax, that companies are complying, that the rumours we hear about evasion, etc., are not true and that we are getting our full whack of corporation tax from foreign and local companies?

Mr. Niall Cody

The idea that the Chairman of the Revenue Commissioners is happy is probably stretching things.

Mr. Cody is smiling in any event.

Mr. Niall Cody

Obviously, there are errors. Most of the underpayments that arise in large cases result from varying interpretations of the legislation and differing accounting treatments. Our large cases division is dedicated solely to monitoring and controlling, on an ongoing basis, the large cases that pay approximately half of the total tax revenue. There is no doubt that there are errors and mistakes. There are companies that are not paying the full amount. It is probable that some companies pay too much as a result of errors. That is what our compliance programmes and our risk-based programmes are about. We use all our analytics and datasets to monitor and control that process. I do not think any future chairman of the Revenue Commissioners will come in and say he or she is happy that all of this has been sorted. It is an ongoing business.

Does Revenue have a role in trying to attract foreign direct investment through IDA Ireland? Does it play a role in getting new companies to come here as part of the foreign direct investment process?

Mr. Niall Cody

Our role is to implement the tax code as presented to us.

Mr. Niall Cody

IDA Ireland plays a really important role in attracting investment. We do not engage in trade missions. Representatives of Her Majesty's Revenue and Customs attend some trade missions in the UK, but we do not play such a role. The various Departments do that. Our job is to administer the tax system. We deal with it as we get it.

I thank Mr. Cody.

As indicated, we will take a break for 10 minutes at this stage.

Am I the final speaker?

Two more Deputies have indicated that they would like to speak. They have slipped out to the Chamber, but they will be back. Deputy Farrell is not the final speaker.

We are coming back for another session at 2 p.m.

We will finish off this section of the meeting when we return after the suspension. Then we have another meeting in connection with Project Eagle after 2 p.m.

Sitting suspended at 11.35 a.m. and resumed at 11.50 a.m.

We are resuming in public session. The next speaker is Deputy Farrell.

I thank the witnesses for attending. I wish to touch upon the risk-based audit success - or relative success - that Revenue had, particularly with regard to the random audit programme. The report identified a 39% rate of non-compliance, with the random nature of the programme, as far as I understand it, yielding approximately €18,000 per case. Given that the Government is investing an additional €50 million in Revenue for the purpose of bolstering that particular programme, from a policy side in terms of implementation, would there be an enlarged revenue gain for the State on the basis of further investment? Is there a case to look at the self-assessment process, given such a relatively high level of non-compliance? It must be said that 39% is a significant amount of non-compliance. I do not want to be badgering the Revenue Commissioners, as I think it does an exceptionally good job, but at the same time, 39% is a very high level. An average of €18,000 of collected taxation on the basis of an audit is a significant figure. Perhaps the witness would like to comment on that.

Mr. Niall Cody

As I said earlier, 35% to 39% has been the rate of cases that have had an issue throughout probably the whole life of the random audit programme. It has constantly stayed at around that level. The issue around the average is essentially a presentational issue. It is the average, but it is not the norm. As I have said, 80% of the cases had a liability of less than €2,000. The outliers constituting less than 1% had a yield in excess of €50,000. The results of the random audit programme and the area in which the audit gap is really important is in how it tries to show what it is, which is that 2% figure. It is important to note that among businesses - the self-assessed community - there is a very high level of voluntary compliance with the Irish tax system. I think it is really important to think back to where it was before we had a self-assessment system, when we had bogus non-resident accounts and there were serious levels of unpaid tax. Obviously, the committee and the Comptroller and Auditor General have to focus on areas in which there are errors, omissions and mistakes. However, I think it is really important to acknowledge that Irish businesses' compliance levels are very strong. It is important to recognise the important role played by tax practitioners and advisers. In an earlier discussion, we spoke about tax planning and tax avoidance but the majority of taxpayers are just trying to get on with their business and pay the correct tax. They would rather not see sight nor sound of us from one year to the next.

The random audit programme has an average. A risk-based audit programme has a much higher average. The risk-based audit programme has a yielding of 68% as opposed to 39%. The average yield is €52,000. The average yield per yielding audit is €75,000. What we try to do and what the Comptroller and Auditor General recommends is that we carry out more risk-based audits. To make the right intervention in the right case, with regard to the risk, is what we are keen on. What I am really interested in doing over the next couple of years is carrying out more detailed investigations of serious evasion cases. Less of them are done because they take time and are not sorted easily. I agreed in part with the recommendation because I believe that we should do more intensive investigations, though they might be less in number, if that makes any sense. It is about how many person hours, man hours or officer hours that we engage in detailed risk-based programmes.

That is why the other issue mentioned in the budget speech is around changes and proposals around offshore evasion that I hope are being introduced in the finance Bill next week. The Minister announced in the budget that we were going to remove the opportunity for disclosure from 1 May for people who have engaged in serious tax evasion using offshore facilities. What that will mean is a serious increase in the level of penalties as well as the introduction of a strict liability offence for people who have engaged in it. The audit gap is useful. We have committed to work with the Comptroller and Auditor General to improve it, but what we really want to do is make the intervention that is appropriate to the taxpayer's behaviour. Because of our technology, our third-party reporting, what is coming down the tracks in the international exchange of financial information and what happens with things like the Panama papers, HSBC or LuxLeaks by which information comes into the public domain, the environment for serious tax evasion is going to get a lot chillier. Those are the things that we have to balance.

It would be interesting to know the cost of the random audit programme. It may well be in the report but I am afraid I have not been able to identify it. Does the witness have a ballpark figure for that? Does he have a figure for the number of man-hours used per case assessed? What I am trying to get at is that if Revenue is identifying an average settlement of €18,000, how much does it cost to get the €18,000?

Mr. Niall Cody

I cannot give the Deputy a figure for the cost of the random audit programme. We do 400 audits. The scale of some of the cases are very short because they are picked at random. Obviously, the small number of yielding cases take time. In the comprehensive review of expenditure that took place in 2014, we talked about how for every €1 spent on an auditor, we would expect to bring in €10.

It is a multiple of ten to one. It becomes an opportunity cost if the auditor spends time doing cases with an average yield, even taking the average yield of 18 as opposed to an average yield of 72. Across the board of our audit and risk management interventions we try to benchmark this. The Organisation for Economic Cooperation and Development, OECD, does a lot of studies on benchmarking across tax authorities. A year ago the audit had a slightly higher return than the risk management interventions. For the first time, this year, the risk management interventions are slightly higher than the audit. It is so affected by outliers and voluntary disclosure. This is where the figures that are put into the budget around an additional 50 staff and the result of that come in. It depends on their level of training but the great thing about what has happened over the past few years to get the facility to increase our numbers is that there are people who came in two years ago who are coming out fully trained now. We will see the benefit of that next year and thereafter.

Under the help to buy scheme as announced, although that measure has not been passed yet, first-time buyers will have to file a return for the previous four years, form 12. I presume it will be an online process. Is there an opportunity for the Revenue Commissioners to simplify it for the normal self-employed or multiple income earning, pay as you earn, PAYE, worker and how might that be improved for this particular programme? These will be people who probably have never filed a tax return in their lives.

Mr. Niall Cody

I am tempted just to say we have. Two years ago we introduced the electronic form 12, which is absolutely brilliant and very simple. We will take it that the system will come in as intended, although it has to go through the process in the Oireachtas. For the years required to get the tax back the taxpayer will have to have form 12 completed. We are building a system whereby the intending purchaser can give the mortgage company one-off online access to confirmation from us that he or she will be eligible for the refund. That will carry forward. It is also really important that we ensure that people who have, for example, health expenses, claim them and that is factored into the process and that it is final. They will not have to do four years if they have paid enough tax in the previous two years to cover it. It is for the years in question. It is a very simplified form 12 and we see it as one of our best flagship developments. It has taken off. It is not compulsory but 89% of form 12s are filed electronically, although it has only been in place for two years.

The Revenue Commissioners already have that information through the P60 documentation that is issued every year.

Mr. Niall Cody

I spoke earlier about the announcement of the PAYE modernisation programme. We do not know if the taxpayer has other sources or other things to claim on. When the taxpayer goes online the form 12 will be populated with pay and tax details from the P60 and he or she will probably have nothing to do but confirm that it is right. If the person or couple is buying their first house, is reasonably well, has no issues, and does not have any other sources they will only confirm that it is right.

In a different area, voluntary compliance and customs within the report specifically relating to the automatic entry processing, AEP, system, the Comptroller and Auditor General has said that 96% cleared immediately. Does Mr Cody have a little more information on the 4% that did not? Are there problems or were they just anomalies?

Mr. Niall Cody

The customs clearing system is an EU-based system, customs entries are entered through the AEP system. There are green, orange and red routing. Under green routing goods are cleared automatically and there is a whole set of rules behind the interface. Orange routing requires a documentation check, the goods are not presented but the documentation needs to be examined. The red routing is less than 1%. In the case of red routing the goods have to be presented for clearance. This would not be for example to do with items such as tobacco, this would be tariff-related goods coming from particular countries depending on what the EU customs rules are. In the context of whatever happens in a post-Brexit environment, the challenge becomes really significant, if it is a full third country because the numbers are very different.

Would Mr Cody envisage additional costs for Customs and Excise and the Revenue Commissioners post-Brexit in terms of free movement of goods and have the Revenue Commissioners done any preliminary figures on what that might entail?

Mr. Niall Cody

We discussed this earlier and it is impossible to say right now what it will ultimately involve but in the budget we got arithmetic additional resources to start scoping out that problem, depending on what happens. If there are customs procedures required it will impose costs on business, development costs. There are procedures which obviously entail costs. We are in a very electronic environment and we will be working closely to ensure that Irish business will still be able to benefit from whatever simplified procedures are in place. There is no doubt there will be challenges in respect of the transit across the land bridge that we have not had to think about for a long time.

Mr. Cody mentioned earlier from the 2014 report quite rightly that our effective corporate tax rate is 10.1%. The Revenue Commissioners and the Comptroller and Auditor General are competent authorities in the field of taxation. Would Mr. Cody confirm to the committee that he has a view that in respect of its findings against the State and Apple there is a question as regards the Commission's competence in respect of taxation in this jurisdiction?

Mr. Niall Cody

The Directorate General for Competition is the competent authority in respect of state aid. There have been tax cases in respect of state aid for a long time. Whether it is right in its interpretation-----

I apologise to Mr. Cody but I will interrupt him to highlight the point that the Commission itself said no Irish law was broken. I just wonder-----

Mr. Niall Cody

I hesitate to get involved in this discussion, but we have had the issue of air travel tax, for example, which became a state aid issue. No Irish law was broken because the Irish law was introduced. Ultimately the Directorate-General for Competition would have been saying how the Irish law was structured was in breach of state aid rules. It is the competent authority on state aid and is therefore entitled to investigate. If it were not entitled to investigate, we would not have given it the information. That does not mean that by investigating and reaching a finding it is right. Others might say it, but I could not say it had no entitlement. If it had no entitlement, we would have had no entitlement to give them-----

There is entitlement and then there is competence. I think they are two different things in the context of the findings. I wish to stress another matter. It has been regurgitated many times since the press conference, but there are references to the findings as statements of fact, which they are not. The Directorate-General is not a court and therefore does not get to make that determination.

I have a fundamental difficulty with the fact that the Revenue now has to go off and assess the tax liability under its findings. If the economic activity did not occur within this jurisdiction, the Revenue Commissioners will not have any information on it other than the stated public accounts of a public limited company, that is, those of a multinational firm. I am not being flippant about it, but are Revenue officials literally picking up the phone to Tim Cook and asking him for Apple's global accounts so that Revenue can make up a notional figure to comply with the request of the Commission?

Mr. Niall Cody

No. The state aid decision is the decision. That is where we are at. Ireland has an obligation to follow it and we have remedies through the appeal process. The company also has remedies through the appeal process. From the outset, we have co-operated fully. The company has co-operated fully in the context of the case as well, but the position is different now from what it was during the investigation. The company now has its own standing and has appealed the decision as well. As a regulator, people may not agree with what we do at times, but we do what we do and people can challenge us in the courts. The Directorate-General for Competition is a regulator. It works as it sees fit and the remedy is through the court process. There is an issue, but it clearly is the competent authority in this area. However, that does not mean it is right. Further, it does make a decision. It is a bit like us raising an assessment. If an assessment we raise is not appealed, the assessment is due. That does not make us a court of law. However, if we raise an assessment and it is appealed, we cannot collect it until the appeal is settled. That is as close as I can get to explaining where we are in the process.

I have two further questions. One relates to a number of different issues, one of which is vehicle registration tax, VRT, and the diesel controversy surrounding Volkswagen, Audi and others. I understand there are issues in terms of who has jurisdiction over this matter. Indeed, this is occurring outside the State as well. However, there have been findings in the US to suggest that on a technical basis the cheating software and-or hardware installed in certain vehicles - I will declare an interest because I have one of them - is also limiting or suppressing the NO2 levels that are recorded and assessed in the United States, for instance, but which are not recorded or assessed in Europe or this jurisdiction. A US court has found that the effect of the software or hardware is that it is also suppressing CO2 emissions. I am sure Mr. Cody is aware that the same allegation has been made in documents here in Ireland and in a case in Mayo.

If that is the case, there is an impact on the assessment on the vehicle from the VRT perspective and on the local authority system from the perspective of motor tax. Are we examining this issue and are we assessing the technical side? Are we in contact with Volkswagen and Audi Ireland? Are we assessing whether the cheating software and hardware, where appropriate, has not broken any Irish law or EU regulation? Does Mr. Cody agree that the finding and the cases that are pending and in the public domain will have a profoundly negative effect on the diesel market and will have implications for the Revenue Commissioners in the collection of tax and VAT and all the rest of it as detailed in the report? Will Mr. Cody comment on that?

Mr. Niall Cody

Volkswagen and Audi are taxpayers. The same provisions on taxpayer confidentiality apply to the VRT affairs of a car distributor or importer. I therefore do not want to speak about what we are doing or might be doing in a specific case. However, we are closely monitoring the situation. The major effect of the suppression software concerned NO2 emissions. I mentioned earlier my role in indirect taxes in 2007 and 2008. I was in charge of the VRT policy when it moved to being based on CO2 emissions. I was speaking to the current head of it when the controversy arose. At the time I was awake in the middle of the night trying to convert what it would mean if the CO2 emissions were understated and how it would be calculated having regard to the number of diesel sales. We have carried out an analysis and, essentially, the impact on CO2 seems to be much smaller in respect of the banding. It may well have implications. We are not-----

Will Mr. Cody explain what he means by banding?

Mr. Niall Cody

The VRT works on CO2 bands. Between particular bands of CO2, the rate goes up. If the effect of the software is to suppress the CO2 levels below a band-----

It will drop to a lower band.

Mr. Niall Cody

It drops to a lower band. The legislation is drafted on the basis of agreed CO2 emissions by approved testers. There is a number of approved testers throughout the community and we follow that. To get to the end of this will require a co-ordinated EU approach. If there is revision of the CO2 bands in respect of any vehicle, that will have to be looked at in that process. The reality is that Ireland is not alone in this. I am fairly satisfied, to the extent of current knowledge, which could change-----

It is very limited.

Mr. Niall Cody

Yes, it is very limited. The CO2 levels were not exactly the driver on this issue. The noxious emissions were the main driver on it. I do not think Irish VRT was driving the suppression, but if there are knock-on effects we will be looking at it.

Mr. Cody commented earlier about IDA Ireland and its role in attracting companies to Ireland versus the suggestion that special deals were done on corporation tax. Mr. Cody has answered the question on that matter very clearly. As I understand it, and Mr. Cody might correct me if I am wrong, IDA Ireland offers incentives to companies to locate outside of Dublin.

That might be a question for the Comptroller and Auditor General.

Mr. Niall Cody

That sounds better.

Sorry. As far as I am aware, the IDA offers incentives for foreign firms coming into Ireland to locate outside of the Dublin region. Is that a financial measure through its own department or is it done through Revenue or some other department?

Mr. Seamus McCarthy

The IDA itself does it. The IDA is also amenable to the Committee of Public Accounts.

Is it a direct financial measure or is it done through the tax system?

Mr. Seamus McCarthy

There are grant schemes in place, often related to the numbers employed. I do not have the detail as to what regional differences there may be.

It would be an interesting thing for the Comptroller and Auditor General to provide. Perhaps the Minister could provide us with the information.

My understanding is that it is the area of EU regional development. If the IDA has a client relocating to certain regions of the country such as the Border, midlands and west region, the IDA is allowed to pay a higher grant. The amount is different for the BMW region from what it would be for the greater Dublin region.

With a couple of parliamentary questions to the Minister responsible for the IDA, the Deputy would probably get the figure.

It is a fairly topical issue at the moment.

I have a number of questions on the annual report but I will start with fuel laundering. On page 162, paragraph 12.26 of the report, it states:

Revenue does not estimate the loss to the Exchequer as a result of fuel laundering. A report published in May 2016 estimated the loss to be €239 million in 2015.

The report in question was produced by Grant Thornton. Earlier today, Mr. Cody said the tax loss as a result of fuel laundering was not quantifiable. We have gone through the difficulties arising in calculating this but it is not a satisfactory position from the point of view of the Committee of Public Accounts. If it is not estimated and not quantifiable, we are not starting from a good place. The report also mentions that clean-up costs were €6.7 million so, aside from fuel laundering itself, it has knock-on costs. The environment Department had to pick up the tab for that through local authorities. Agriculture sells itself on the basis that it operates in a clean, green, environment so this is damaging to our agricultural process too. Mr. Cody mentioned designer fuel. Can he briefly touch on that? It is another new concept.

Mr. Niall Cody

It is a process whereby different oils and different lubricants are added to oil. Essentially, it is diesel stretching and we are aware that it happens in eastern Europe. The designer fuels come into the State under different customs entry codes. We have come across some recent examples of it and, in conjunction with our colleagues from Northern Ireland, we have intercepted and seized vehicles and tankers in connection with such activity. We have to monitor and control it but we are fairly satisfied that it is a test operation by people who were previously engaged in fuel laundering.

Is this a problem in the UK?

Mr. Niall Cody

It was taken out in the North.

What does Mr. Cody mean by "taken out"?

Mr. Niall Cody

It was detected in the North. It went through Dublin Port and crossed the Border.

It was then cleaned.

Mr. Niall Cody

No. It was not cleaned but diluted.

Was something added or taken out?

Mr. Niall Cody

Something was added.

That is what is known as "diesel stretching".

Mr. Niall Cody

Yes.

We have heard lots of reports from different people whose cars have been damaged as a result of diesel stretching. We cannot quantify the loss to the State but it causes environmental problems. It causes damage to the good, clean name of our agricultural exports and to people's cars. Why do we have this system at all? I cannot understand why we have two separate systems and later I will come to the cost of following it. It is a pointless system. If we had had no additions to it we would not have had any of the problems which have been referred to. The people in business, whether it is construction or farming, should be able to reclaim whatever they can. I have never met a farmer who is afraid to fill out a form if there is money at the other end of it so nobody should suggest that people will not do it.

Mr. Niall Cody

A rebated, marked fuel system is common across the EU and there is a differential as between excise duty, road diesel and agricultural diesel, although approximately one quarter of green diesel is used in agriculture, construction, industry, forklifts, off-road vehicles and home heating oil. I agree that one could design a rebate scheme but the problem we would have is that an all-Ireland solution would be required. If we moved to a rebated scheme we would end up with the worst of all possible worlds. We would be making some level of fraudulent repayments. Diesel would be washed in the North and brought here because it is just a matter of removing the dye. The evidence we have seen since the new marker came in suggests that any sludge-----

How would Revenue lose if it was sold through the pumps here for the full whack?

Mr. Niall Cody

Any repayment system is vulnerable to fraudulent repayments. People would be using diesel sourced in the North. A fuel launderer would launder Northern diesel, bring it across the Border and sell it to hauliers and couriers as clean diesel, not rebated diesel. It concerns us that if we are too successful compared to the North, people would source the rebated fuel in Northern Ireland, pay the 10 pence in excise duty there and sell it down here and we do not even get the excise on the marked fuel. This question comes up regularly and I remember chatting with my predecessor a couple of years ago about it. The system is very traditional and has been around forever and we could go to a rebate system with the technology that is available. It would be very straightforward for a business to do, even if it would be more difficult for home heating oil. There could be all sorts of improvements to fuel grants but the real challenge is that we would need to do it on both sides of the Border.

To deter smuggling across the Border.

Mr. Niall Cody

There is no possibility that, at any time in the near future, the UK will move from rebated fuel. They have done their tax gap analysis and see a problem in Northern Ireland but they believe it is only a problem in Northern Ireland. I personally think they are wrong and do not see how, if people engage in fuel laundering here for the margins they get, they would not do it in the UK too, maybe in Liverpool, Birmingham etc.

Scotland.

Mr. Niall Cody

In Scotland or wherever. We know this because we have detected tankers of laundered fuel leaving Dublin Port. We refer to dangers, but it is being done in a reckless way because it is masked. Putting fuel tankers as masked loads on ferries is lethal. We did not conduct the tax gap analysis, but we took a post-development view and carried out random sampling. I would be comfortable undertaking a tax gap analysis in terms of fuel in future, but the amount is small.

Mr. Cody cannot answer my next question, but Brexit and the Border could have an impact on this matter. The essence of Mr. Cody's answer is that the criminals will beat us. Fuel will be laundered in the North, it will be brought into the South and we will lose revenue. We have moved into the area of criminal justice. We are all satisfied that Revenue cannot quantify that loss. The system is causing damage to the environment and cars and problems for our agricultural sector's good name. The only reason proffered for us potentially not dealing with it is that the criminals might beat us. I am not happy to be in that space. That is essentially the smugglers and criminals-----

Mr. Niall Cody

No, that is not what I am saying.

I drew that conclusion. Mr. Cody did not say it.

Mr. Niall Cody

It was the wrong conclusion. I stated that this was something that we have defeated. We have successfully tackled fuel laundering. We have eliminated it south of the Border. In conjunction with HMRC, we have practically eliminated it on the island. I am confident that, if we conducted a tax gap analysis of the fuel situation in 2017, we would see a low figure. I am open to doing that. One can conduct a good tax gap analysis in terms of fuel because it all comes into Dublin and Cork ports.

Or wherever.

Mr. Niall Cody

That is where it starts, which means that we control the top of the chain. In our supply chain analysis, we are working on improving the IT systems because we want to visualise the fuel starting in the tanker and being tracked to its final destination. Previously, fuel used to get diverted to some barn or other, get washed and then be returned to the chain. We have a reckless trading provision as well as co-operation and feedback from the legitimate trade. In 2011 and 2012, legitimate traders were concerned about what was happening and were forced to provide marked fuel to people whom they were not comfortable supplying because business was being lost. We have defeated the fuel laundering problem and that is the result of the Comptroller and Auditor General's review.

I wish to raise a few other points about the annual report. Mr. Cody will send to the committee the memo on the double Irish from which he read. Regarding aggressive tax planning, many of those companies that used the section 110 provisions bought properties from NAMA - I am not referring to any individual company - and, according to Mr. Cody, used the charity trust mechanism to have a small or zero tax rate. Would he not consider this aggressive tax planning? Can Revenue do anything about it?

Mr. Niall Cody

The charity trust mechanism is not about tax planning. The two issues are being conflated. The issue of concern, and one that is being addressed in the context of the Bill, relates to Irish property-based funds where loans have been transferred. This House is undertaking that process. In his pronouncement, the Minister invited those Deputies who had majored on this issue to feed into that process. That is happening. The Bill is to be published next Thursday.

Is that separate legislation from the Finance Bill or will it be covered in that Bill?

Mr. Niall Cody

The Finance Bill is to be published next Thursday-----

We will await it.

Mr. Niall Cody

-----and will include provisions. It will go through Committee Stage. It would be inappropriate for me to comment on policy issues.

Fine. We will wait for when it is before the Oireachtas.

I wish to pick up on a few points from page 10 of the annual report. I do not know whether it is a part of the committee's documentation. The Panama papers are referred to on page 10.

Mr. Niall Cody

Yes.

They came to light on 16 April just as Revenue issued this report. Revenue stated that it would take the same approach to the data being released as it had done to all offshore asset investigations. A heading on page 29 reads: "Challenging Offshore Evasion". I will link the two paragraphs together. What has Revenue done since publishing its report six months ago? Has there been any development on foot of the information that came from the Panama papers? If the answer is lengthy, I would be happy for Mr. Cody to forward a note on it to the committee because I do not want to delay people unnecessarily.

Mr. Niall Cody

The Panama papers became another major public issue about data. The International Consortium of Investigative Journalists, ICIJ, released them and The Irish Times dealt with matters pertaining to the Irish information. We wrote to both asking for access. Unsurprisingly, we did not get it.

Revenue looked for access from journalists? Good try.

Mr. Niall Cody

We might as well ask. If we did not, the committee would probably ask why we did not.

Mr. Niall Cody

In fairness to The Irish Times, it has written about how we asked it and it had not given us access. Certain elements have been placed on the ICIJ's website. We are analysing named Irish persons and entities. Our preliminary assessment of the Panama papers is that Panama was not a destination of major interest for Irish people. We are also involved in the Joint International Taskforce on Shared Intelligence and Collaboration, JITSIC. We have acronyms coming out of our ears.

BEPS and JITSIC.

Mr. Niall Cody

JITSIC is an OECD-based project of co-operation between tax authorities that was established at the meeting of the Forum on Tax Administration, FTA, in Dublin in 2014. We are one of its members. JITSIC has a dedicated project surrounding the Panama papers and we are involved in that.

The major issue is that, after the Panama papers were released, the Minister wrote to me and asked whether I believed that we needed new powers in the context of what had been exposed. Deputy Pearse Doherty also wrote to me about the issue. We submitted a proposal for the Finance Bill concerning offshore tax evasion.

We will see that on Thursday.

Mr. Niall Cody

Members will see that in detail on Thursday. We have been active on the offshore matter. Since 1999, we have collected more than €2.6 billion. There probably are not many Irish cases involved in the Panama papers, but the consequences of not coming forward before 1 May are serious. Instead of giving people an opportunity, we are removing the long-term opportunity to make a disclosure in the context of what-----

The Minister mentioned that on budget day. Will Mr. Cody spell out the implications? It is a matter that did not receive much public comment. If a taxpayer makes a disclosure, he or she can limit interest and penalties. The Minister is now proposing that this option would not be available. Is that in respect of offshore assets only? It is a mini-amnesty.

Mr. Niall Cody

No.

It is the opposite of an amnesty.

Mr. Niall Cody

Yes. We were trying to come up with a word for it because we in the tax world do not like to use the term "amnesty".

What we came up with is that it is an anti-amnesty. Currently, if one comes to us voluntarily to make a disclosure about serious tax evasion involving an offshore matter, one can get the penalty mitigated down to 10%. Subject to legislation and it being passed by the Oireachtas, our proposal is that this mitigation of the penalty will be gone.

Will there be publication of the names or cases?

Mr. Niall Cody

There will be guaranteed publication. The proposal also involves, one at which our colleagues in the UK are also looking, that there will be a strict liability offence. Both of my two predecessors have been asked here why Revenue did not prosecute people from the Ansbacher cases. We have always said proof mens rea from collaborative witnesses is nearly impossible in an international context. However, having an offshore account and having been involved in serious tax evasion will now be a criminal offence.

Is it a new offence?

Mr. Niall Cody

It will be a new offence. We will not have to prove one's intent. In cases of serious money, having it, will be it. If the Bill is published next Thursday, we will have what it would mean on our website on Thursday.

We have an illustrative example because we took it that it might arise here. Take the case of somebody with a liability in 2009 of €114,800. If he or she came in voluntarily under the current regime, he or she would pay a penalty of €11,480 and interest of €61,000, giving a total of €187,000. His or her name would also not be published. After the implementation of this proposal, the penalty would go up to €114,800 and the total would be €290,646. The name would be published and we may take steps to initiate a prosecution.

The penalty will be 100%. Will Mr. Niall Cody send a note about that to the committee?

What is defined as a serious offence?

Will €100,000 be the minimum figure?

Mr. Niall Cody

We have not put a figure on it.

Will it be in the finance Bill?

Mr. Niall Cody

We have not put a figure on it in the context of the proposal right now. We tend to take it at that level. Generally, our prosecutions for significant cases tend to involve six-figure sums. There will be summary prosecution for smaller amounts but, generally in such cases, the individuals will probably not be engaged in foreign bank accounts and using offshore structures. We do not want to catch people who had a small account they opened in the United States when they were students over there and forgot about it.

Or in England.

Mr. Niall Cody

We know there were people between 2005 and 2007, the really good times, who bought apartments and all sorts of things, whether in Florida or Bulgaria. They opened bank accounts and stuff is over there. The issue is reporting coming down the tracks. If we do not find a person in the first tranche, some of the additional resources around IT will enable matching. There is a footprint and if the footprint is found, these are the consequences.

The Minister asked us what we wanted, we put forward our proposal. I expect to see it in the Bill as published.

We have touched on two items, namely, section 110 and this issue, which will be in the finance Bill. Is Brazil part of this international group examining these issues? I presume it is because it is a large economy. I saw in a newspaper the other day that Brazil has put Ireland on a list as a tax haven. How does the Chairman of the Revenue Commissioner's respond to one of the world's largest economies calling Ireland a tax haven?

Mr. Niall Cody

Primarily, it is a matter for various Departments and Ministers. Obviously, we do not accept it. I cannot control what other countries do.

Has Revenue responded or passed information on to the Minister to rebut it?

Mr. Niall Cody

I can safely tell the Chairman that there has been a response. There are 37 countries in the Joint International Taskforce on Shared Intelligence and Collaboration but I do not think Brazil is a member of it. Member states tend to be from the OECD primarily.

Yes, but it is a significant economy.

Mr. Niall Cody

It is a significant country.

The annual report contains a table of the amounts collected in gross receipts, income tax, capital acquisitions, local property tax and so forth which comes to €62 billion. Will the Revenue Commissioners send a detailed chart with the breakdown as to how many of these were paid electronically versus manually?

Mr. Niall Cody

The question came up earlier about the proportion of income tax paid through PAYE and Schedule D. Up to 88% of income tax is paid through the PAYE system.

Is that by employers?

Mr. Niall Cody

Yes, on behalf of their employees.

The annual report stated 377 settlements of non-compliance were published. Is that up or down from the previous year?

Mr. Niall Cody

It is actually addressed in the Comptroller and Auditor General's report on the level of publications. The level of publications runs at about 400 every year. They jump a little bit. It is approximately 400.

The annual report, on local property tax compliance, stated:

As a first step, reminder letters issued to 324,000 property owners. Continued failure to comply resulted in further actions including, mandatory deductions from salaries and occupational pensions, the application of LPT surcharges, the refusal of tax clearance certification and the referral of cases to the sheriff [and solicitor for collection.] ... Enforcement was initiated in 2,655 cases.

How many cases have gone to the sheriff?

Mr. Niall Cody

It is a very small number in this context. On Tuesday, we published up-to-date statistics on local property tax for 2016 which have the details.

Why would Revenue call in the sheriff?

Mr. Niall Cody

It was because somebody refused to engage with us.

Would that person have had other issues?

Mr. Niall Cody

Generally, they would have had a liability in excess of whatever the figure was. One has multiple property owners over multiple years who refused to engage.

Did Revenue go after old age pensioners who never got the form or did not understand it?

Mr. Niall Cody

We did not engage in any mandatory action on people whose sole income was social welfare because they would qualify for deferral. The first year we referred cases to the sheriff or solicitor was in 2014. The number of cases was 2,000. I recall from discussing this with the Collector General that the first 400 cases which went to the sheriff had immediate compliance activity. There has been one case where the sheriff had to use his enforcement powers, which worked.

Will Revenue send me a note on this? I had a parliamentary question the other day for a person whose house-----

Mr. Niall Cody

We answered it.

Yes. I was told who I should contact. The query was on behalf of an elderly woman who is in a nursing home. I would like to be able to help the woman. I did not realise Mr. Cody was watching my PQs so closely.

Mr. Niall Cody

The Revenue Commissioners take parliamentary questions very seriously. I cannot lie - I knew I was coming before the committee.

It was not connected.

Mr. Niall Cody

I know that. I made inquiries on the matter with the Collector General's office. Sometimes we know the details of a case.

I do not have permission to pass on the person's name.

Mr. Niall Cody

We will contact-----

Perhaps Mr. Cody would give me an estimate of liability for an elderly person who is in a nursing home. This woman is in a nursing home but because she does not have a local property tax payment receipt, she cannot get a grant from the local authority to have work done on her house which would allow her to return home.

Mr. Niall Cody

We talked earlier about the percentage of cases that are missing.

This is one of them.

Mr. Niall Cody

Yes, this is one of those cases.

Has the recently established tax appeals commission had any impact on the activities of the Revenue Commissioners?

Mr. Niall Cody

The commission has been fully in place since January. This reform of the process is one of the serious improvements of the tax administration system. The tax appeals commission is fully responsible for current cases. One of the most interesting initiatives of the commission is that it publishes case decisions on its website. That is a big improvement. We are in a process of transferring all the old cases to the commission.

Turning to page 30 of the annual report and suspicious transactions, Mr. Cody might tell us about Revenue's contact with the Criminal Assets Bureau and the level of exchange between it and other public bodies. I do not expect Mr. Cody to go into any great detail in that regard. Are there public bodies in respect of which the Revenue Commissioners does not have access to information under data protection but would like to have access or has Revenue got everything it would like to have in that regard?

Mr. Niall Cody

We have a lot of access to data. We look across the system to see where there would be information that would be useful to us in our business and we then seek to ensure that legislation is enacted to permit the exchange of that data. We treat data protection very seriously and in any exchange we engage with the Data Protection Commissioner and whatever body with which we are engaged.

Suspicious transaction reports come from financial institutions. We are one of the designated bodies they are required to report to. We analyse the reports and build them into our recording systems. In regard to the Criminal Assets Bureau, there are Revenue officials who are members of the Criminal Assets Bureau. We have people working as part of the Criminal Assets Bureau.

On page 36 of the annual report serious tax duty evasions is mentioned. Deputy Connolly referred earlier to the topic covered in this regard. There were 11 convictions for a serious duty offence and custodial sentences of 18 were imposed in two cases, with the final six months in one case having been suspended on appeal. A custodial sentence of 18 months was reduced to time served in a further case. Seven cases resulted in suspended custodial sentences ranging from three months to two years. Chart 22 on page 80, which is related to this item, is a summary of criminal convictions in 2015. Was there any conviction for income tax offences? There was a conviction for non-filing of tax returns in respect of a mineral oil tax; convictions in respect of VAT, cigarette selling and cigarette smuggling but there is no mention of any conviction in respect of income tax?

Mr. Niall Cody

The table above, table 21, relates to prosecutions for serious offences. Table 22 deals with summary offences. Table 21 deals with indictable offences which involve serious income tax and VAT prosecutions. They are the big investigations and criminal prosecutions that we have.

There were 28 convictions in 2015.

Mr. Niall Cody

Yes.

Perhaps Mr. Cody would forward a note to the committee on the tax heads in respect of the 28 convictions so that we know the categories involved. Table 13 on page 77 deals with collection enforcement programmes, which involves solicitors, the Sheriff and attachment orders. The value of referrals to solicitors was €126 million and the yield was €36 million, which is a 29% yield. The value of referrals to the Sheriff was €254 million and the yield was €142 million, which is a 56% yield. The value for attachment orders was €145 million but only €26 million was collected, which is a yield of 18%. I know the sheriff is probably a bit more brutal but why is the attachment order yield so low? Given the value of referrals to the solicitors, the Sheriff and the attachment orders versus the yield is so high perhaps Mr. Cody would send a note to the committee on the amount outstanding in that regard. That information is not provided in the table.

Mr. Niall Cody

There are different effects. Obviously, if there is an enforcement by the Sheriff that will be more immediate. The solicitor cases usually involve going to court, getting judgment mortgages and so on, which is a protection that we will be able to collect the money eventually. Attachment orders usually trigger a response. We would see it as a serious and carefully applied enforcement option because it has an immediate affect on the banking relationship, if it is a bank we are attaching the order to.

It could be a company.

Mr. Niall Cody

It raises a significant flag. What we get out of attachment orders is only part of the issue. Proper engagement often follows and the case moves into a different process. I will forward a detailed note to the committee.

We would welcome a detailed breakdown. When the Revenue engages with a bank in respect of an attachment order in regard to Mr. Bloggs how many days does it take for Revenue to get its money?

Mr. Niall Cody

It depends on whether the person or company involved had money.

If they had money, would Revenue get the money in, say, 48 hours?

Mr. Niall Cody

We would get it fairly quickly.

The Department of Social Protection gets it in 48 hours.

Mr. Niall Cody

There is a comprehensive set of data in the 2016 Comptroller and Auditor General's report on this area.

Perhaps Mr. Cody would provide the committee with a summary in relation to that table. The final item dealt with on page 83 is donations of heritage items.

Mr. Niall Cody

We probably should not have included that page.

Mr. Cody mentioned not being able to identify taxpayers. In regard to the €2 million, €200,000 and €1.750 million, to whom or what do those figures refer?

Mr. Niall Cody

They refer to paintings. The scheme in the legislation requires us to publish this detail in our annual report.

Is the taxpayer identifiable as a result of that?

Mr. Niall Cody

No, we do not identify anybody.

You hope not.

Mr. Niall Cody

Maybe. The section requires the publication of the information annually.

In regard to the Apple judgment and the reference to whether it got a special arrangement, was the arrangement it got - I do not intend to get into the merits or otherwise of it - available to other companies and, if so, did other companies utilise or avail of it?

Mr. Niall Cody

To the extent that the same circumstances or similar-type circumstances would apply it was available.

It was not exclusively available. That was the high-profile company that availed of it, but can Mr. Cody say for the record-----

Mr. Niall Cody

It was not a special arrangement.

Some people are portraying it that way.

Mr. Niall Cody

It was not a special arrangement. We were agreeing a basis for attributing the profits to the Irish branch, having regard to the facts and circumstances of what was taking place in the Irish branch. Another Irish branch of a multinational company would have the facility to get exactly the same arrangement to calculate the profits attributable to its Irish branch, having regard to the facts and circumstances of that case.

I am aware no two cases will be identical, but did any other organisations avail of that similar approach or was it just the one? I am not asking Mr. Cody for figures. I want to know was its use of it unique to it?

Mr. Niall Cody

It is a matter of public record that we provided the European Commission with details relating to approximately 300 opinions. Some would have involved the same case on a number of issues, and that would have included branch attribution cases and profit attribution to the company cases. All of those were given to the Commission. The Commission has stated on the record that it is not currently investigating any others. The Commissioner engaged in a process of getting opinions on multiple countries and companies. That is on the record.

I have one or two more questions, one of which I had asked but Mr. Cody did not have a chance to answer it. It was about the nature of the financial account information being shared. I believe that only began in September 2015. What is the nature of what is being shared?

The other question relates to nursing homes. Does the Revenue Commissioners collect for nursing homes? I believe it involves a transfer of €12 million to the Department of Finance. Will Mr. Cody explain that to me and how that is monitored?

With regard to Apple and the issue the Chairman raised, the Commission judgment stated it breached competition laws and that this company, in particular, got state aid as opposed to any other company. Is that not right? That is the essence of what it has breached. If other companies got the same assistance, then there is no breach of the competition law. That is the end of that judgment. If that is the case, the appeal should succeed, but it raises a different question for us as to the number of companies that have that deal, which is an even more serious problem. I do not expect Mr. Cody to comment on it. I am just highlighting it, but I would like answers to the other questions. I also asked about counterfeit goods. There were three practical questions with regard to nursing homes, the sharing of the information, and the counterfeit goods Revenue has seized and set out. How does that fit into the overall percentage of those goods?

Mr. Niall Cody

What I tried to do with regard to the counterfeit goods is to use the cigarette example. We have estimated the tax gap in cigarettes from illicit trade-----

As €190 million.

Mr. Niall Cody

-----as just €194 million. That is the context. In terms of the overall counterfeit, some of our role on the counterfeit side is limited to Customs controls. We also have a role on behalf of what used to be called the Irish Medicines Board. It has a new name now but I cannot recall it. We conduct exercises in the mail centres for medication.

When the Deputy asked me the question, she had the list but the Foreign Account Tax Compliance Act, FATCA, was the one question we skipped over, and I was hoping we would get back to it. I touched upon it with regard to what is in the offshore proposal. The FATCA is the first of a suite of measures to do with international exchange of financial information between countries. The US brought in the FATCA in 2012, and we were one of the first countries to sign an agreement with the US to exchange information. We send the IRS information on US citizens with financial information we receive from Irish financial institutions.

It is only on US citizens.

Mr. Niall Cody

That is what we exchange out. They exchange to us details of Irish citizens with US financial account information. September was the first reporting of it. We are in a very early stage of testing it. We have received nearly 250,000 records from 785 financial institutions in the US.

Two hundred and fifty thousand records?

Mr. Niall Cody

Yes.

From how many institutions?

Mr. Niall Cody

That relates to dividend payments and interest payments. The vast majority of them are very low. I spoke earlier about somebody receiving a very small US dividend from whatever company, for whatever reason. Most of the 250,000 are below the figure of 100. Most of them are perfectly legitimate. We talk about businesses. We have many US businesses in Ireland, so-----

What is the purpose of the exchange? Does Revenue go through it methodically to see if there is something wrong?

Mr. Niall Cody

This is part of the exchange of information on taxpayers, and it fills in all the background information on offshore accounts.

Has any useful information come out in the short period it has been operating, which is a year?

Mr. Niall Cody

No. This September was the first exchange.

I beg your pardon, it was this September.

Mr. Niall Cody

What has come out that is useful is that it allows us develop our IT systems because next year, information will be coming from a range of other countries, and from more countries the following year. We will be getting financial information on Irish citizens from something like 100 countries. I spoke earlier about the offshore disclosure regime. We will have a load of information. We will have to slice and dice it, match it but, ultimately, there will be gems, from a taxman's perspective, in it.

And the nursing homes question?

Mr. Niall Cody

I have a note on the nursing homes, which I can give the Deputy. Essentially, we act as a collection agency for the Health Service Executive, HSE. The HSE agreed a liability out of the nursing homes scheme and it gives us-----

Is that under the fair deal scheme?

Mr. Niall Cody

Yes, the fair deal scheme, where people essentially sign over a proportion of their assets. We are the collection agency for the HSE. I have a note on it. We collected €12 million in 2015. So far this year, we have collected €9.85 million. Most of it is collected by agreement. If somebody is in the scheme, they have pledged some proportion of their property and, ultimately, it is collected out of the estate.

Revenue has no role in the enforcement of that. That is passed on to the Department of Finance.

Mr. Niall Cody

No. We are the collection agent.

But in terms of the house, is there not a percentage of up to 22% on the house-----

Mr. Niall Cody

It will be up to us to collect the money.

The sheriff will be coming in.

It is the sale of the property.

Mr. Seamus McCarthy

It is to do with estates, where people are deceased.

Mr. Niall Cody

It is settled out of the estate.

Only out of the estate, after the person dies.

Mr. Niall Cody

Yes. Executors do that. We are just the collection agent because we have the machinery.

We will conclude, as this has been a long session. On behalf of the Committee of Public Accounts, I thank all the witnesses for participating in this part of the meeting and for the material they supplied to the committee. I ask for the specific items of information requested to be sent to us as promptly as possible.

I propose that we agree to dispose of the following items: the 2014 Appropriation Accounts - Vote 9; the 2015 Appropriation Accounts - Vote 9; the Revenue Account 2015; and the following Chapters of the 2015 Comptroller and Auditor General report - Chapter 12: Tackling Fuel Laundering and Chapter 15: Taxpayer Compliance.

Is it agreed to dispose of those items? Agreed. We will meet briefly in private session when we resume at 2.30 p.m.

Sitting suspended at 1.10 p.m. and resumed at 2.35 p.m.
The committee met in private session and resumed in public session at 2.55 p.m.
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