Efforts to tax rental income‘haphazard and ineffective’

EFFORTS by the tax authorities to verify that landlords are properly declaring rental income have been branded “haphazard and ineffective” by the Government’s financial watchdog.

Comptroller & Auditor General CAG) John Purcell expressed concern that Revenue officials were only able to match 42% of rent supplement payments to the tax records of actual landlords.

He told the Dáil Public Accounts Committee that a Revenue audit of rent supplements paid out by the Department of Social and Family Affairs in 2005 was unable to match almost 53,000 records worth more than €197.4m.

The CAG warned that it would take a concerted effort by the Revenue and various governmentdepartments and agencies that provide it with records to improve the situation.

A total of €295m in tax was collected from rental income declared by individuals in 2004 — the latest year for which figures are available.

However, several TDs said they believed there were loopholes within the tax system that allowed rental income to remain undeclared.

Revenue chairman Frank Daly told the committee that the matching of information was a difficult task as tax officials had to try and find a match of 95,000 records provided by the Department of Social and Family Affairs with almost three million tax records of individuals and companies.

Mr Daly said the situation had improved in the past year as the Finance Act 2007 now allowed the Department of Social and Family Affairs to collect and pass on details to Revenue of PPS (Personal Public Service) numbers of landlords.

He claimed the past inability of the Revenue to access this piece of information had been the big deficiency in their efforts to audit rental income declarations.

Mr Daly said tax officials would also love to be able to have access to all records held by the Private Residential Tenancies Board, but were restricted by legislation to only getting information on a “case-by-case basis”.

However, Mr Daly stressed that the failure of the Revenue to match so many rent supplement payments did not mean landlords were not paying tax on rental income.

The PAC also heard that a Revenue audit carried out on stamp duty payments in 2003 recovered €1.2m in duties, penalties and interest.

It arose from a random sample of 1,000 stamp duty payments in which problems were uncovered in 11% of cases.

Most of the recovered money arose from clawback rules because the property had been rented within five years of purchase.

The Revenue chairman said a national audit of all stamp duty payments began last year.