The Revenue Powers Group was established in March 2003 to review Revenue's main powers and recommend changes. The group reported in late 2003 and its report was published in February 2004. At the time of publication of the report, the then Minister for Finance indicated his intention to allow a period for public debate and reflection on many of the wide-ranging issues raised by the recommendations.
I have now considered the various recommendations and, in this year's Finance Bill, initiated the first measures in a process of reforms in the area of Revenue powers. The measures contained in the Bill represent a balanced package which includes some of the recommendations of the Revenue Powers Group. I intend to return to some of the remaining recommendations, which require further consultation and careful consideration, for future implementation. In this context, the recent report of the Law Reform Commission on a fiscal prosecutor and a revenue court is also relevant.
One of the measures proposed in the Finance Bill 2005 as a result of the Revenue Powers Group report is the increase in the publication limit for settlements with tax defaulters from €12,700 to €30,000. The limit of €12,700 has not been changed since it was first enacted in 1983 and if indexed according to the CPI would be of the order of €26,000. The RPG recommended a limit of €50,000 while the Law Reform Commission recommended a limit of €25,000. The amendment provides that the limit be automatically revised every five years in line with the CPI to a rounded figure of the next €1,000.
The interest rate on underpaid tax will be reduced to a daily simple interest rate equivalent to 10% per annum for non-fiduciary taxes while retaining the 11.75% rate for fiduciary taxes, which are collected and remitted on behalf of others, for example, VAT and PAYE. The Bill also provides for the repeal of the 2% per month interest charge for ‘fraud and neglect' and the 200% tax-geared penalty for fraud from a current date. However, both will remain on the Statute Book for historical "legacy" cases.
Other recommendations of the group will also be administratively implemented or have already been implemented by the Revenue Commissioners. The Revenue Powers Group had concerns regarding the modalities of exchange of information between Revenue and other agencies, especially the Office of the Director of Corporate Enforcement. Revenue and the ODCE have recently concluded negotiations and signed a memorandum of understanding which will govern this information exchange and largely meets the group's concerns.
The targeting of audits will be continually improved through greater focus on risk. Regional "powers officers" have been appointed within Revenue to manage the use of powers in the new regions. Compliance costs will be reduced wherever possible and the cost of compliance will continue to be weighed up when considering the introduction of new powers. Revenue will aim to examine records at the taxpayer's premises where the removal of records would prevent the business carrying on in an orderly manner. In addition, Revenue will give more prominence to the external reviewers and in future will have them appointed using the Civil Service and Local Appointments Commission.
I have also addressed a number of other issues within the general area of Revenue powers which did not arise from the recommendations of the Revenue Powers Group.