Written Answers. - Tax Receipts.

Eric J. Byrne


71 Mr. E. Byrne asked the Minister for Finance the percentage of the combined income tax receipt from the PAYE, farming and self-employed sectors in the tax year 1995/1996; the projected receipts for each of these sectors for the income tax year 1996/1997; the number of random audits completed as of 15 September 1996; the amount of additional tax liability yielded; and if he will make a statement on the matter. [16782/96]

The relevant information available on income tax receipts is in respect of the calendar years 1995 and 1996. The percentage of the combined income tax receipt in 1995 from the PAYE, farming and other self-employed sectors as contributed by each sector was 86.6 per cent from PAYE, 1.7 per cent from farmers and 11.7 per cent from other self-employed. These figures do not take account of receipts of deposit interest retention tax for which a breakdown between particular classes of taxpayers cannot be ascertained. The figure for PAYE covers more than tax on wages and salaries. For example, tax paid by directors of close companies is included, as is the tax on other income of employees such as rent and other investment income. After adjusting for these factors, tax on wages and salaries normally represents about 68 per cent of the take from income tax, excluding deposit interest retention tax. The figure for PAYE also includes the tax paid on the income from employment of farmers and other self-employed individuals.

The figure for other self-employed includes tax paid on income from trades and professions other than farming, together with tax paid on other income such as rent and other investment income. It also includes withholding tax on professional fees. The yield in 1995 from this sector was reduced by approximately £52 million as a result of implementing a High Court ruling to the effect that withholding tax on professional fees should be allowable as a credit against income tax liability on a current year basis. The percentage figures given must be seen in the context of the relative numbers of taxpayers in each of the sectors mentioned, which are estimated for the income tax year 1995/96 to be 864,000 in PAYE, 31,000 farmers and 94,000 other self employed. The Post-Budget estimate of income tax receipts from these sectors in 1996 is £3,719 million from PAYE, £74 million from farmers and £432 million from other self-employed.
The relevant information available on completed random audits relates to the position at 20 September 1996. The random audit programme began in 1992. No new random cases were selected in 1993 for audit due to concentration of resources on work related to the tax amnesty and major restructuring of the audit programme. The total number of random audits of tax returns from all self-employed persons and companies which were initiated in the years 1992, 1994 and 1995 was 370. Some 237 of these have been completed up to 20 September 1996 in respect of all self-employed persons, including farmers, producing an additional tax liability of £478,029. Information on random audits initiated in 1996 is not yet available.
The vast majority of cases selected for audit are selected on the basis of perceived defects in their tax returns or supporting accounts and not on a random basis. The total number of these comprehensive self-assessment audits initiated since inception in 1990 to the end of 1995 — excluding companies — was 12,589. These are in addition to normal PAYE — employers — and VAT audits. The purpose of the random element of the audit programme is to demonstrate to taxpayers that there is a risk of audit for every self assessing taxpayer even where incorrect returns have the appearance of being correct. However, experience suggests that taxpayer behaviour is influenced more by the perception of Revenue's ability to detect suspect tax returns in a systematic way, rather than by the risk of random selection of a return. The Revenue Commissioners have advised me that all their audit programmes, including the random programme, will be kept under review.