Revenue gains €315m in penalties and interest

Revenue has collected €315m in penalties and interest over the past three years as part of a crackdown on non-compliance since the economic downturn.

Revenue gains €315m in penalties and interest

A windfall of close to €71m has been collected in penalties alone since 2012, €30m of which relates to last year.

That figure pales in significance to the level of interest payments over the same period, however.

Last year the interest bill, which totalled €87.5m, came in at almost three times the amount garnered from penalties.

Over the three years of figures released to Fianna Fáil finance spokesperson Michael McGrath, Revenue took in €242.9m in interest payments.

While acknowledging Revenue’s duty to impose penalties on businesses which fail to make timely payments, Mr McGrath described the interest as “crippling”.

“The rate of interest applying to late payment of taxes is certainly punitive and can have a crippling effect on businesses. It is staggering that over €300m has been paid to the Revenue in the 2012 to 2014 period by way of interest and penalty charges, with penalties increasing by 76% and interest by 39%.

“A functioning banking system that allows firms to access working capital at a reasonable interest rate would facilitate them to pay their taxes on time and help them avoid them incurring hefty interest and penalties. An effective tax system is one that is robust, fair and where the penalties are proportionate,” Mr McGrath said.

Interest liabilities can arise from audit, tax investigations, late or phased payments and enforcement activity while the areas that generate penalties include audit, tax investigations and late filing or non-filing of tax returns.

Interest on income tax, corporation tax, capital gains tax, capital acquisitions tax, the local property tax and stamp duty is applied at a rate of 8% per annum while the rate for all other taxes including VAT and Paye stands at 10%.

According to taxation analyst Christine Keily of taxback.com, people are being caught unaware by spiralling interest bills arising from their failure to make payments.

While the penalties Revenue can dole out are capped, there are no such restrictions on the amount of interest that can be charged, as the figures show.

“It’s interesting to see the level of interest charged compared to the penalties. The interest Revenue can charge on unpaid tax is significant.

“It’s important to realise that there are no limitations on the amount of interest that can be charged,” Ms Keily said.

The growth in the level of interest and penalty payments on income and corporation tax over the period is likely to reflect not only a renewed focus on Revenue’s behalf but the economic reality that many struggled to meet their tax commitments as the recession persisted.

Income tax from the self-employed and Vat were the two biggest contributors to the interest total at €69m and €56.1m. The figure in for the self-employed is likely to include Revenue investigations of cash businesses where income has been undeclared as well as rental income for landlords, according to Grant Thornton tax partner Peter Vale.

Vat is an ongoing area of focus as it is a turnover based tax so an error in that regard could lead to a significant liability, Mr Vale added.

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