I thank the Chairman for giving me the opportunity to make a short opening statement. I propose with his agreement to broadly cover the questions raised in the clerk's letter relating to the local property tax and to leave the detail for further discussion.
It is important to recap that this is a new tax, with new concepts and new language for many of Revenue's customers. It is also a new tax for us in Revenue and the largest extension of the self-assessment system in the history of the State. In approaching the design of the administrative system for local property tax we were very conscious of concerns which had been outlined by taxpayers about payment of the household charge and decided to offer the widest range of payment options we could for customers. We also sent earlier this year to all property owners an individual copy of a booklet explaining the tax and the payment methods.
When I last appeared before the joint committee in May in the context of an attempted credit card fraud, I was able to advise it that our approach was proving to be very successful. It resulted in a compliance rate of 89% by late July, which has now risen to 91%, in other words, returns for 1.6 million properties, plus local authority and social housing.
Property owners can choose from seven payment options. It is important to point out that all of these payment options were successfully used in the first filing period this year. Data showing the range of options chosen by taxpayers were circulated in advance to committee members. For example, over 10% of the tax paid was paid by phased payment by monthly direct debit. Less than 1% was paid by phased payment by deduction at source from salary, pension or certain Government payments. A total of 24% was paid by single debit authority, a mandate to Revenue to debit one's bank account once. Just under 15% was paid by credit card.
Debit cards, which are quite different in nature from credit cards, comprised 36.7%, cheques and postal orders comprised 6% and cash or other methods through service providers comprised 7%.
I have been asked to address the structure, timing and operation of LPT for 2014. The Finance (Local Property Tax) Act 2012 (as amended) sets out how the tax is to be administered. Apart from the half year of 2013, the timing provided for in the law is the same each year. The liability date is 1 November if one is a property owner on that date, the return filing date is 7 November and LPT is payable on or before 1 January. In accordance with our normal practice, Revenue allows extra time for people who file online until 27 November. In accordance with the law, the tax is payable on or before 1 January or an agreed payment arrangement is entered into with Revenue to pay it in 2014. Unless filing is completed in November, Revenue cannot offer the options of phased payments over 12 months or 52 weeks because these need to be set up and instructions have to issue to the employer in time. In our experience, many employers do their January payroll run in the middle of December. We also have to write to all our direct debit customers in December before we can activate the 2014 direct debits, in accordance with the rules governing direct debits.
Beginning on 21 October, Revenue began writing to approximately 988,000 property owners relating to LPT for 2014. In accordance with the law, we did not write to those who had previously claimed exemption or deferral or those who had selected the phased payment options of deduction at source or direct debit. We placed advertisements in national and provincial newspapers, provided a briefing note which was circulated on the Oireachtas intranet system in the week the letters were being received and we provided spokespersons for national and local media, and so on. I think we assumed that people might still have their LPT booklets and that there had been so much printed and said about this tax only five or six months ago, that people would be somewhat familiar with the concepts and language, so we pared the letter back to its absolute basics. Clearly this was a mistaken assumption on our part.
Committee members will be aware that to facilitate people who need some more time to decide on their preferred payment option, we have extended the filing date for paper filing to next Thursday, 14 November. As always, returns postmarked on the closing date will be regarded as being on time. I was asked to address the question of premature payments. By law, this does not arise because the tax is payable on or before 1 January. As a matter of practice it cannot arise because the choice is entirely with the property owner. In this regard, it is important to say that the payment options operate in exactly the same way as they did earlier this year. Generally speaking, with one exception to which I will return, people seemed to understand them and used them, if not happily because paying any tax is unlikely to generate happiness, then certainly without difficulty. In the telephone calls we received last April and May the issues which are suggested to be causing confusion and concern at present hardly arose at all. We did not have issues about credit card dates or the STA. We had no advance warning from the last campaign that these apparent misunderstandings might have existed.
I mentioned that there was one exception. A reasonably small number of people contacted us to say that they did not realise the debit card or credit card options would hit their accounts immediately. We responded to this by adjusting our system to alert them in our communications and in our online LPT system. We did this as a customer service initiative and to highlight the cash flow advantages for them of other payment options which we are making available. In reviewing the papers for this meeting, it occurred to me that if the alert had added “You may wish to pick another option” it would have been more helpful in terms of clarifying the options. The purpose of the option was to alert them to the fact that this would happen because that is how cards work. We suggested implicitly - perhaps we should have made it explicit - that they might like to pick another option.
This brings me to the kernel of the issue it seems to me the committee invited me here to discuss, in which regard I would like to make a number of key points. Our job in Revenue is to collect taxes and duties for the Exchequer in accordance with the law. Our approach to collecting tax is informed by our responsibility to secure revenues for the State effectively and efficiently. Effectiveness includes reducing as far as possible opportunities not to pay. Efficiency includes not imposing unnecessary cost or burden for either the State or the taxpayer.
As a service we are offering seven different payment options for LPT which allow property owners to decide whether to pay now, next year or in phased payments. From a customer service point of view, we wanted to ensure that property owners were fully informed about the implications of their choices when making that decision in a clear and transparent way. As committee members will see from the preliminary data which I have circulated, large numbers of property owners are successfully filing returns and selecting payment options. When this morning’s post is included, returns have now been made in respect of 205,000 properties. When combined with the payment options which are rolled over from 2013, this gives us a compliance rate of 35%, which is very good with three weeks to go to the online filing date.
Nobody has to pay LPT before 1 January 2014, unless he or she chooses to do so. Many taxpayers are telling us that they want this option and the figures support this view. For those who do not, there are five other ways to pay in 2014 providing both phased and single payment options. The choice is with the taxpayer but they have to tell us now.