Tax evaders still offending years after detection

TAX evaders were still non-compliant years after they were first detected because of the Revenue Commissioners’ failure to carry out a re-audit programme, a Dáil committee heard yesterday.

Comptroller and Auditor General John Buckley said tax officials faced difficulties in assessing compliance levels and the rate of repeated offenders since re-audit programmes were cancelled back in 2002.

In a recent report, the comptroller& noted that there was a risk that taxpayers with a history of non-compliance would not change their behaviour and continue to under-declare income in the future.

The Dáil Public Accounts Committee heard that 60% of non-complaint taxpayers examined between 1999 and 2002 were still non-compliant when they were subjected to a re-audit programme. A fifth of this group had under-declared even larger amounts than when they were first detected.

Labour TD Roisín Shortall said it was worrying that the absence of a re-audit programme meant one effective deterrent mechanism had not been in place during the boom period when the Exchequer was collecting substantial tax receipts.

However, Revenue chairwoman Josephine Feehily said an average of 2% of all taxpayers were audited each year, which was consistent with international norms.

Ms Feehily said a new re-audit programme was established last year using a risk-analysis system designed to identify the at-risk cases of non-compliance.

She claimed the method used for the previous programme was a manual, out-dated system. “It was pointless to continue with it,” Ms Feehily remarked.

But she admitted the lack of a re-audit programme over the previous six years had been “a weakness”.

Ms Feehily also revealed that Revenue was now using data from cash registers to examine if receipts coincided with income declarations made to the tax authorities by shopkeepers.

Other cash-intensive businesses like security firms and solicitors are also being subject to special scrutiny.

Revenue officials confirmed that e118 million relating to almost 11,200 cases was written off in tax due during 2007.

However, Ms Feehily stressed that the amount represented less than 0.2% of all taxes collected that year.

She claimed 75% of the written-off tax was linked to companies which had been placed in liquidation, receivership or examinership.

“Revenue like every other tax administration or business inevitably experiences some bad debts,” she noted.

Ms Feehily explained that a decision to write off taxes was usually taken where it was assessed that such taxes were either genuinely uncollectable or they were uneconomical to pursue.

The largest single amount written off was e3.2m in respect of a group of companies in the recruitment industry which had gone into receivership. There were 11 other cases involving sums in excess of e1m.

Three-quarters of all cases involved amounts of less than e1,000.

Ms Feehily informed TDs that almost e1.3 billion of taxes due for 2007 were still outstanding by the end of March 2008.

She claimed such monies represented a near historic low of just 1.9% of all tax receipts compared with 10 years ago when outstanding debt stood at 7.4% and as high as 62% in the 1980s.

“It clearly illustrates our continuing success in improving payments compliance in recent years,” commented Ms Feehily.

According to Revenue, there were net tax receipts of e47.3bn in 2007 — up almost e2bn on 2006 figures but over e1.8bn short of original forecasts.

There was a large shortfall across all the major taxes but specifically in stamp duty receipts due to the downturn in the property market.

Tax revenue estimates for 2009, which have been revised twice in recent months, now stand at e36.9bn.