Dáil Éireann - Volume 412 - 12 November, 1991

Written Answers. - Dublin Park Directional Signs.

38. Mr. G. O'Sullivan asked the Minister for Finance if he proposes, in consultation with the relevant authorities, to have erected within the vicinity of the Phoenix Park, new directional signs to indicate the location of the Cara Cheshire Home; and if he will make a statement on the matter.

Minister for Finance (The Taoiseach): The Commissioners of Public Works have received no requests from either the public or the management of the Cara Cheshire Home for new directional signs in the Phoenix Park. If, however, the management of the home consider that additional signs are necessary, the commissioners will be willing to meet with them to discuss the matter.

[1039] 39. Mr. Stagg asked the Minister for Finance if his attention has been drawn to the fact that less than one in 25 self-employed taxpayers, including married couples, are willing to declare incomes of more than £25,000 a year according to the Revenue Commissioners Annual Report; if he will introduce a graduated system of random audits to effectively tackle under-reporting of income; and if he will make a statement on the matter.

54. Mr. Spring asked the Minister for Finance if he will outline the steps taken by the Revenue Commissioners to move against the remaining entrenched sources of non-compliance and evasion as stated in the 1990 Annual Report of the Revenue Commissioners.

Minister for Finance (The Taoiseach): I propose to take Questions Nos. 39 and 54 together.

I assume that Deputy Stagg is referring to the figures published in tables 37 and 38 of the Statistical Report of the Revenue Commissioners for 1990 which show, inter alia, that the number of cases with total income in excess of £25,000 which were assessed to tax under Schedule D for the income tax year 1988-89 was 5,105, or 4 per cent of the total.

I would draw the Deputy's attention to the fact that the figures in question are some considerable number of years out of date. Because Schedule D cases were, at the time to which the figures relate, taxed on the basis of previous year's income, the figures appertain to income arising in accounting years ending in the year up to 5 April 1988. In most cases of businesses, this relates to earnings in the calendar year 1987. The self-employed are now taxed on a current year basis.

There are other important qualifications. The technical income definition used in the relevant tables of the report does not fully reflect a taxpayer's basic income since it allows for deductions in respect of such items as capital allowances, interest paid in full and retirement [1040] annuities. Moreover, the published figures do not include proprietary directors of incorporated family businesses who are akin to the self-employed but are taxed under PAYE. If these factors are taken into account the proportion of the total number of self-employed taxpayers with gross incomes in excess of £25,000 for the 1988-89 tax year came to 16,000, or 9 per cent of the total. For the same tax year, the equivalent proportion for PAYE taxpayers was 5 per cent.

It is estimated that the proportion of self-employed taxpayers, including proprietary directors, with gross incomes above £25,000 for the 1991-92 tax year will be some 28,000 or 14 per cent of the total compared with a corresponding figure of 8 per cent in respect of PAYE taxpayers.

It should be borne in mind that not all the self-employed have large incomes; there would be a large proportion of individuals in this class with low incomes e.g. smaller farmers, small shopkeepers, low investment incomes and so on.

The phased development of the new self assessment system involved initially the encouragement of voluntary compliance by taxpayers. This has been very successful with returns now being filed by over 90 per cent of taxpayers. An integral part of the development of the new system is, of course, the audit programme under which taxpayers' returns and accounts are examined to ensure proper declaration of income and deductions. The audit phase got under way last year when some 35 inspectors were assigned to audit work following special training. This number will have risen to 100 by the end of 1991 and to 160 by the end of 1992. This switch of resources to audits should enable a rate of audit in this area of about 1.5 per cent of the taxpayer base to be achieved in 1991 and up to 2 per cent in later years — a level more than comparable to that in other self assessment jurisdictions. This is apart altogether from the very large number of audits which have as their primary focus VAT and PAYE compliance, of which there were some 22,000 carried out in 1990.

[1041] For the most part, audits are not initiated at random but rather are targeted on the basis of perceived defects in tax returns or supporting accounts. The additional amounts of tax being collected as a result of audits are a reflection of the careful selection of target cases. I recognise however that random audits, under which every taxpayer has a possibility of being selected for audit, are essential, because such audits encourage compliance by increasing the perceived possibility of an audit. I understand that a higher proportion of cases to be selected for audit in 1992 will be chosen on a random basis.

Because of their concern to ensure that all sectors of the community pay their fair share of tax, the Government have since 1987, in addition to the introduction of the self assessment system, introduced significant other changes in the direct tax code which are designed to: improve collection and recovery of tax due; release resources away from the routine surveillance of compliant taxpayers to programmes designed to deal with noncompliers; and increase the resources specifically applied to countering tax evasion and avoidance.

These changes have been facilitated by the introduction of a wide range of collection and enforcement measures which include: withholding tax on professional fees; extension of tax clearance procedures for public sector contracts; improvements in the Sheriff system; the power to attach assets of tax defaulters; and a new collection initiative, for which I made available £1 million in the 1991 budget, which facilitates, amongst other things, rapid pursuit of interest due on late payment of tax bills and more intensive monitoring of bigger cases.

All these measures are contributing to better collection and enforcement of tax obligations.

With regard to the question raised by Deputy Spring I should add that as well as the general measures which I have outlined, a specific programme to review tax arrears which had not been discharged under the 1988 tax amnesty was launched soon after the effects of the [1042] amnesty were analysed. The objectives of that programme were to agree or finalise the amount of liability, determine the most appropriate form of enforcement for collectible arrears and confirm any circumstances which would suggest that the arrears might be uncollectible, such as where businesses were defunct or where a taxpayer's whereabouts were unknown. The programme involved: extended co-operation between the tax assessment and collection arms of Revenue, and, direct personal contact with the taxpayer or taxpayer's agent.

The extra resources provided in the 1991 budget have enabled Revenue to build on and develop the original postamnesty review of arrears. Since its inception in 1989 some £165 million of entrenched arrears has been collected under this programme.

The effects of all these measures will be kept under review and I will not hesitate to take whatever further action may be needed to ensure that all sections of the community pay a fair share of tax.