Deputy Crotty has been given permission to raise on the Adjournment the subject matter of Questions Nos. 79, 80 and 81 on yesterday's Order Paper.
Adjournment Debate. - Tax Arrears.
The matter in question is the collection of three taxes which are payable by employers, namely VAT, PRSI and PAYE. Since these taxes are collected by employers they should in the majority of cases be available to the Revenue Commissioners. There are a number of reasons for believing that the Minister should take a very serious look at this question with a view to improving the collection rate.
We are all aware of the reductions in finance available to all Departments. When any sector experience a cutback they immediately raise a cry about collecting the outstanding taxes due to the State, which it is commonly believed run into hundreds of millions. We all know that in the main these figures are estimates and that a large number of taxes are not collectable anyway. For that reason alone we should be realistic. The ordinary punter in the street is given the impression by media hype that there are hundreds of millions out there which the Minister is not prepared to collect. This leads to non-compliance with the taxation laws and in the longer term it will lead to anarchy.
I am more concerned with putting another point of view. Companies, whether private or public, should be required to pay their taxes when due. This would be of great benefit to the State in that the Revenue Commissioners would be able to gather the funds due. More important, it would be of great benefit to firms. Unfortunately these moneys are being used to bolster ailing companies. We are all human and when we meet a bad patch we are inclined to hold back on payments of VAT, PRSI and PAYE and use the money to fund the company. This is an ongoing situation. When the Revenue Commissioners eventually bring pressure for payment, the bill and the interest have escalated to such an extent that the business is not in a position to make the funds available and the Revenue Commissioners cannot collect them. This is a pity.
If the Revenue Commissioners had a local taxman who could approach firms locally, firms that normally return their taxes but in a particular instance have opted not to do that, it would be of enormous assistance. Usually there is something wrong when they do not pay and it would be of great benefit if the Revenue Commissioners could approach them at that stage requesting a discussion with them of their problems rather than allowing the arrears to continue. I am aware of firms who have continued to trade for anything between four to six years after the receipt of the usual circular from the Revenue Commissioners. I do not consider that to be helpful to such firms because, in the long term, it puts them out of business. There are other aspects to this matter as well, such as the fact that firms who retain these moneys are being subsidised by the State in order to remain competitive. That is not fair to competition and should not be allowed to continue.
The Revenue Commissioners have been questioned on this matter on a number of occasions. They have always replied that they must draw a very narrow demarcation line between insistence on collection of arrears, on the one hand, and putting firms out of business on the other. Assistance at the right time from the Revenue Commissioners would ensure that more firms remained in business. However, over a long period the Revenue Commissioners have tended to engage in the practice of non-collection. A number of firms have pointed out that the non-collection of outstanding taxes is of no benefit to them whatsoever and that they should be collected. There was a sad case recently of an unfortunate family businessman troubled by his taxation position. However, I do not want to be come involved in emotional cases.
It should be remembered also that the State is losing substantial amounts of money on account of the fact that firms who do not pay their PRSI, VAT and PAYE contributions are going into liquidation, when usually it is discovered that the largest portion of the money they owe is due to the Revenue Commissioners. It has been the case also that many such firms start up in the same premises, with the same directors, in the weeks following their liquidation, when it is the State that suffers. This practice should not be allowed to continue. A cursory glance at Stubbs Gazette or any of the other publications giving court judgments against firms will show that the largest number of judgments given now are in favour of the Revenue Commissioners, through the Collector-General, for outstanding taxes. This is very serious and should not be allowed to continue. Firms should make it known that they are trading down for the benefit of other traders, thus declaring their interest.
When a firm does not pay its rightful VAT, PRSI and PAYE contributions the alarm bells should be sounded immediately because there must be something wrong when a firm that has paid its contributions over the years suddenly ceases to do so. In those circumstances the Revenue Commissioners should do more than issue a letter. They should consult them, ask what is wrong, requesting that they talk about the problem, particularly if it is a persistent one. If it is the case that the firm is no longer a viable trading concern they should not be allowed to continue in business. In turn, this means that suppliers are supplying goods to a non-viable concern and but for the fact that the firm concerned is being kept buoyant by the utilisation of those outstanding taxes which have not been collected by the Revenue Commissioners they would have gone out of business. If such action were taken and assistance given to them at the right time they would not incur the debt that is usually disclosed when the final shake-up occurs. It should be remembered also that this has a knock-on effect. If firms are owed large amounts of money by one that goes into liquidation, in turn, it can lead to their liquidation, having a knock-on or domino effect of firm after firm going out of business.
I make an earnest appeal to the Minister to carry out a close examination of this problem. I suggest that he makes extra staff available for collection and local consultation because it is my contention that such consultation could have kept in business many a firm that went into liquidation. I might suggest also that the Minister examines the cost effectiveness of employing additional staff for the collection of taxes. There have been such studies conducted in other countries, particularly in England, which have shown quite clearly that the exercise is very much weighted in favour of the Revenue Commissioners.
I am aware that the Minister is familiar with the problem of which I speak but voices need to be raised continuously. This matter warrants the attention of all people in public places so that, first, the State is seen to be fair to everyone, second, the State is seen to be helpful and, third, that the allegations that the State has these millions of pounds awaiting collection about which it is doing nothing be refuted. I ask the Minister to give the matter his urgent consideration.
I want to thank Deputy Crotty for his helpful contribution in relation to this problem which I agree fully is a major one. Over the years we have encountered the same sort of problem about the amount of arrears outstanding. This has been demonstrated in the three questions to which the Deputy referred and others in my time in this House, almost 20 years now.
To put the matter in perspective, I will give the House some figures. I do not know exactly to which years they related but, in this period there were £31.6 billion tax paid and £693 million collectable. Therefore, it will be seen that while there is a number of defaulters there is a huge number of people who do comply, who pay their taxes, who make their contribution to the running of the State. We must say to the latter group, "a job well done". We all know paying tax is a painful exercise, that nobody likes it. However, while the great majority of people pay their taxes, there are others who do not. This Government and previous Governments have taken a number of measures to eliminate evasion and avoidance of tax. It is good advice for an individual or a company to pay their taxes when they are due, because they can run into sizeable sums, especially when they are the vehicle for collecting PAYE or PRSI. I remember talking to a hotelier one time whose two monthly VAT returns amounted to £50,000 so that if he missed one payment he could never catch up again; his main ambition was to try to keep up with payments. Every company and individual would be well advised to do this in their own interests and in the long term interests of their company. Not paying leads to difficulties. Some companies close down and open up under a different name across the road. But the new Companies (No. 2) Bill, and the recommendations of the Law Reform Commission arising from their examination of debt collection and the role of the sheriff and so on, should help to eliminate those abuses.
Turning to the issues we dealt with immediately we came into office, carrying through what the previous Government did in appointing sheriffs throughout the country we appointed the task force and operated a 10 per cent surcharge where returns were not made, and this comes into effect at the end of this month. There are many factors hitting defaulters so hard that there is not a Deputy in this House who has not been making representations on behalf of those who feel they are under undue pressure. If they are under pressure it is because they themselves defaulted over a number of years and allowed themselves to be in this situation. In dealing with these matters the Revenue Commissioners are, as the Deputy said, walking a tightrope between enforcement and collection and trying to avoid putting institutions or individuals out of business. At the end of the day the Revenue Commissioners have no alternative but to operate the laws passed by this House.
We dealt with staffing yesterday under other questions, and it is under review. The Deputy suggested that we should look seriously at implementing improvements in collecting and that is an ongoing exercise. The Deputy has been very helpful and all I can do is agree with most of what he said. I and the Government are committed to dealing with this question of collection and enforcement, stamping out arrears and ensuring prompt payment of tax liabilities as they arise. This will be given priority. Any changes considered necessary, administrative or legislative, will be made. Greater equity in the collection effort must be achieved. Staff levels in the office of the Revenue Commissioners are already equivalent to about one head of staff for every 150 taxpayers. Nevertheless, additional resources will be made available as necessary to achieve improved results. The Revenue Commissioners are drawing up, as a matter of priority, a programme and timetable for reduction and elimination of arrears. I am taking a keen interest in ensuring that that timetable is realistic and achievable.
The Government are committed to the introduction of self-assessment for corporation tax and income tax for the selfemployed. Effective auditing procedures and appropriate penalties must play a major part. Conditions must be such as to guarantee a significant improvement in compliance. The range of enforcement powers available to the Revenue Commissioners and the sheriffs is being considered by the Law Reform Commission. The Commission have been asked to make their report on improvements in debt collection generally as soon as is possible. The requirement to have a tax clearance certificate as a precondition for securing public contracts over £10,000 is being stringently applied and a similar system is being introduced for all grant payments.
The introduction of improved identification systems to allow better co-ordination and control is under detailed discussion by the Revenue Commissioners and the Department of Social Welfare. I felt it was necessary to use this opportunity to emphasise the Government's commitment in this whole area. For too long the impression has been created that, because of taxation measures and savings made on particular Votes, if we only got in the extra taxes we would not have to do certain things. If we get in taxes which are overdue it will help the overall scene, but obviously that will just reduce borrowing and not necessarily lead to a situation where it will not be necessary to have whatever tax levels are required to meet the expenditure commitments of the Government. We have all accepted that taxation levels are high under almost all headings but the base is too narrow. We have to look at all those factors and ensure that where taxes are due they are paid.
I thank the Chair for giving us the opportunity to discuss this and I thank the Deputy for his co-operation in the matter.
The Minister did not refer to the main reason for my question on the Adjournment. Will the Minister consider making local officers available to consult with firms that have been returning taxes when they run into problems with a view to ironing out their problems?
I can see the point the Deputy is making.
It would save a lot of firms from getting into this overload position which eventually puts them out of business.
I agree fully. I am glad the Deputy reminded me. If this is not being done it should be encouraged. I do not think there is any tax inspector or official working in the regions who is not prepared to be available for consultation with any company that finds that difficulties are beginning to emerge.
They have not the time.
That may be said but I have had no such complaints. I will have that matter checked out and communicate directly with the Deputy.
The Dáil adjourned at 5.40 p.m. until 10.30 a.m. on Friday, 11 December 1987.