Revenue criticised for leniency on defaults

The Revenue Commissioners were taken to task for possible undue leniency in settling cases with a number of defaulters and failing to apply sufficient penalties and interest.

In one case, Revenue estimated a taxpayer could owe as much as €54m in unpaid capital gains tax plus interest and penalties but accepted a settlement offer of €15m with no penalties applied.

The Comptroller and Auditor General, Seamus McCarthy, said it was a matter of concern that there was no evidence that Revenue had looked for a higher settlement offer or had sought advice from specialists on such a complex transaction.

He noted Revenue’s concerns that, if the case went to court, it might lose and get nothing, but said: “There is no detailed analysis, based on specialist knowledge or advice, of the likely outcome of litigation and of the costs involved.”

He said a settlement approval committee should be formed to review cases where there was a significant difference between Revenue’s estimate of a liability and the amount offered for settlement by the taxpayer.

In another case, involving unpaid corporation tax, Revenue accepted a settlement of €8m, despite the taxpayer lodging €11m on account pending the outcome of an intended challenge. The remaining €3m was returned to the taxpayer, no penalties were applied, and the details were not published.

In a third sample case, a taxpayer was assessed as owing €7.3m in Vat, which they paid, but all of it was paid late, and about half of it was paid a full year past deadline. The C&AG found Revenue failed to charge interest of €570,00 despite a clear requirement to do so.

The C&AG also looked at settlements in general since 2007, finding that the agreed sums were not always paid. Of 167 settlements, valued at total of €512m, a total of €428m was paid and a further €8m written off. However, €18m was categorised as ‘outstanding’ and a further €58m categorised as ‘not known’. The cases relating to the ‘not known’ figure are being reviewed by Revenue.

The C&AG also found that, in 18% of cases, there was insufficient documentation on file to show how the tax liability had been quantified and that interest was not applied in 7% of cases.

The level of penalties applied was lower than the files indicated it should be in 33% of cases, and larger cases were also significantly less likely to have interest and penalties applied than lower value cases.

In addition to saying a settlement approval committee be established, the C&AG also recommended a quality assurance system should be put in place “to provide assurance that taxpayers are treated equitably”.