State loses out on €100m in unpaid taxes

THE state lost out on more than €100 million in unpaid taxes so far this year as a result of companies going out of business who were unable to settle their revenue bills.

This is part of a total bill of €1.8 billion in unpaid tax owed to the state which has gathered over a number of years and is still “collectable” according to the spending watchdog, the Comptroller and Auditor General (C&AG).

The Revenue Commissioner yesterday admitted it has become more lenient on companies attempting to stay afloat in the current economic crisis. It has written off €151m in taxes owed by businesses up to September this year, including €100m in companies that go into liquidation – compared with €129m written off in the whole of 2008. The tax office is attempting to “strike a very fine balance” between enforcing compliance and ensuring businesses do not collapse under the pressure of tax bills, according to the Revenue’s accounting officer Josephine Feehily.

“The number of businesses failing or going into liquidation is growing on a weekly basis,” she told the Dáil’s Public Accounts Committee (PAC).

“We have to be careful about moving in to enforce too quickly in the current climate,” she said.

Labour’s Róisín Shortall said it is a “huge figure and huge loss to the state”. She blamed the Department of Enterprise, Trade and Employment for its rejection of a number of proposals put forward by the PAC on tax compliance. “There continues to be a significant loss of public money because of the failure of the department to tighten the laws,” she said.

The committee heard that Ireland has a tax compliance rate of around 90% which is broadly in line with other jurisdictions. “I think this year we can except considerable slippage,” said Ms Feehily. She said tax administrations around the world are facing the same difficulties in enforcing tax compliance and putting businesses and jobs at risk “when countries want their economy to recover and equally their coffers need funds”.

The committee heard that deciding which companies to assist is “a balance and a dilemma” that the Revenue “struggle with every day”.

Ms Feehily said they are under installment arrangements in relation to around €138m in tax owed: “Businesses are coming in and saying they can’t pay and we are securing arrangements with them to spread out that payment into the future,” she said. “It’s a very fine balance. We have to be careful that the assistance we give doesn’t create a competitive advantage for non-compliance businesses, even if there are jobs.

“We take a view about the viability of the business and their track record of compliance and we are giving them a longer time to pay. That, we believe, is the sensible response at the minute. I don’t think anyone would thank us if we put otherwise viable businesses, out of business at the moment,” she said.