Committee Reports > List of Committees > Dáil > 1979 > Committee of Public Accounts > Interim and Final Report - Appropriation Accounts 1977

MIONTUAIRISC NA FINNEACHTA

(Minutes of Evidence)

Déardaoin, 17 Bealtaine, 1979

Thursday, 17th May, 1979

The Committee met at 11 a.m.

DEPUTY O’TOOLE in the chair.

Mr. S. Mac Gearailt (An tArd-Reachtaire Cuntas agus Ciste) called and examined.

VOTE 15—STATIONERY OFFICE

Mr. J. F. Harman called and examined.

66. Chairman.—You mentioned when you last appeared before the Committee that you were moving into new offices. What progress can you report at this stage?

—It is going ahead but these things take a good deal of time. The Board of Works are working on it. The position at the moment is that most of the staff, and soon all the office staff, will be in the new office building on Waterloo Road. The warehouse will stay in Beggars Bush until we get the new premises which are at the back part of Jacob’s factory. It is about 15 years old and has very good warehouse facilities and an office block. It needs to be renovated and the Board of Works are trying to work that out for us. It will be very central for offices and for deliveries around town. Meanwhile, we have the problems of minor break-ins and so on in Beggar’s Bush but, naturally, the Board of Works do not want to spend too much money on adaptations and so forth at this stage.

67. We appreciate that. On the question of stock, on page 38 of the Appropriation Accounts 1977 is shown the value of stock in hand on 31 December 1977, paper and miscellaneous stores, and a note underneath states: “This statement does not include the value of publications in stock or of paper in the hands of contractors for printing or binding.” What is the value of stock held by contractors for those purposes?

—It is about £8,000 and of that about £7,000 is held by our main parliamentary contractor, that is Cahills. The rest is held by three other firms which are very small. The total is £8,000 and it is regularly checked and very stringent control kept on it. If a job goes out they are allowed so much paper, so much for overs and so on, but it is very tightly controlled.

68. Do you have a review of its volume from time to time.

—Regularly throughout the year.

Annually?

—Twice yearly.

69. Deputy Woods.—Under Subhead D— Printing and Binding—the expenditure was more than granted by £291,151. Total expenditure was £1.891 million. Could you tell us something about the method of tendering for these jobs?

—Group contracts are advertised in the papers. When special jobs are wanted in a hurry a number of firms who can do the work quickly are asked to quote. In other words, we distinguish between two main categories. Work under the group contracts is not wanted so quickly and the printers are allowed up to eight weeks or ten weeks where proofs are required. This means that the printers can do them between rush jobs. In that way we get the cheapest prices. We have special arrangements for Departmental jobs of one kind or another which are wanted in a hurry. Small jobs are printed overnight. Special arrangements are also made for some reports.

70. The group contracts are advertised in the papers?

—That is right.

71. What is the breakdown between group contracts and specials?

—Expenditure between groups and specials is roughly 50:50. In 1977 the group contracts were £965,000 and the specials were £836,000.

72. Is the method of dealing with specials known to people who have worked with you previously?

—On the specials, there are 66 different firms providing the work. In 1970 a report was done on the printing industry. At that time the number of firms with more than ten employees was only 87.

73. Is it widespread among small firms?

—Among all firms. Our only criterion is that they have the equipment and the personnel and comply with the fair wages requirements. If a firm want to do any work they write in and we get them to fill up a form. If necessary one of our trained printers looks at the place to ensure that the equipment is OK and that they can handle the jobs. If they meet our requirements we give them a small job and build them up in that way.

74. Have you a list of firms who are capable of doing specials in a hurry?

—Yes. If we know that a printer has a big job on hand we do not approach him.

75. Is the work fairly distributed among the printers on your list?

—Only certain firms are able to take certain types of work.

76. Do firms apply for inclusion on the list?

—They would write to us and we would ask them to complete a form, giving details of equipment, manpower and so on. If necessary, we send one of our printers to vet them.

77. It is open to them to become involved?

—We always welcome new firms. The more competition the better. The figure of £291,000 is more than granted. Last year I explained that competition was very tough in 1976 because it was at the bottom of the depression. Things changed very quickly in industry. In 1977 there was more prosperity in the industry and prices rose very quickly.

Chairman.—Thank you Accounting Officer.

The witness withdrew.

VOTE 27—CHARITABLE DONATIONS AND BEQUESTS

Miss A. Tormey called and examined.

78. Chairman.—What is your current staffing position?

—At the moment we have our full complement. As well as that we have someone on loan to help with arrears of work. He was sent to us for one year and is now into his second year.

79. Deputy Woods.—What staff do you have?

—I am sorry, I should be able to answer you exactly off the top of my head, but I cannot. There are about 11 or 12.

80. I notice there is some small additional expenditure for overtime?

—Usually when the annual account is being prepared we have overtime.

Only at that time?

—That is the busiest time.

81. Deputy Belton.—On subhead D— Appropriations in Aid—what kind of receipts make up the figure of £122?

—This is money which comes from a very old fund set up in the 1800s by the Archbishop of Cashel and Tuam. It was called the Embezzled Charities Fund. It was founded to help charities who were having trouble. Subsequently it was handed over to the old Board of Commissioners and they used it to pay their legal costs and expenses. Back in the 1800s it was handed over to the Exchequer and became part of the Vote money. The arrangement, as I understand it, since 1944 with the Department of Finance is that this small sum which is realised every year out of some securities we have, is appropriated to the Vote and, in turn, we are allowed pay any solicitors’ fees we have out of subhead B, or if the Commissioners institute proceedings, which rarely happens, and had to pay costs.

You have estimated very accurately.

Chairman.—Thank you Accounting Officer.

The witness withdrew.

VOTE 41—LABOUR

Mr. T. Ó Cearbhaill called and examined.

82. Chairman.—On subhead R—Employment Incentive Scheme—there is a big saving which is explained by a note that the take-up under the scheme was less than provided for. Could you expand on that?

—This scheme was intended to encourage employers to take on additional workers over a base date. The scheme has been modified since and it is still in operation. In order to qualify, employers had to establish that those in respect of whom they were applying were genuinely additional to their work force. The Scheme was widely advertised. It will be seen that in both our advertising subhead and our travelling subhead we had substantial expenditure, partly attributed to the efforts made to get this scheme off the ground. One is dependent for success on the response of employers. This is the real explanation. The response of employers was not as great as we had provided for, but the funds were in the Vote and the conditions were laid down and widely advertised.

83. Deputy V. Brady.—I understand that at times there are great delays in making payment to employers under this scheme. Would this have contributed towards the saving during that year?

—If so, this would have happened also in the previous year and in subsequent years. This was not the first year of the Scheme, so it would not be much of an explanation because any delays would tend to even out. People have to be in employment for a minimum number of weeks before payment is made.

84. Are there any undue delays in making payments to employers?

—No, we have had no real complaints apart from one or two individual ones where there was difficulty in complying with the rules. The instructions to the officers are that the priority is to bring about an increase in employment and the regulations are interpreted as liberally as is possible, consistent with proper control.

85. Deputy Woods.—Is the uptake better since then?

—Yes. Some of the applicants have grants from the Industrial Development Authority also and it is necessary for us to avoid paying double money for the numbers involved. But there has been an improvement, certainly.

86. Are small firms able to avail of this? My own experience with a couple of small firms was that they were frustrated and did not try any more. To some extent—Deputy Brady possibly has had experience of the same sort of thing—this may have been more the case in the earlier stages. To what extent are they applied to small firms in practice now?

—There is a big number of small firms who are benefiting. When these schemes began they were confined to manufacturing industry. The view taken at that time was that it would be sufficient, as far as the expenditure of public money was concerned, to try to stimulate an increase in manufacturing industry, that other employment such as services should automatically follow and that it should not be necessary to expend public money to induce it. The view now is that there are other occupations where employment can be generated independently of industry, such as services.

87. From an administrative point of view, my experience has been that a large firm normally has an accountant or somebody who can deal with schemes and deal with the technicalities in a very competent way and, consequently, get the most out of them. I would be interested to see if that actually happens in practice. Because small businesses are not well organised they do not benefit. Initially it is their own fault, but if you look at it in broader terms it could mean that, when schemes are introduced, administrative arrangements should be built in. Has any research been done on that subject?

—It is the responsibility of our officers to assist claimants who are genuine in preparing claims, and this is done. We will note this point and see whether smaller firms lack advice.

88. It is a built-in situation. Small firms do not have a spread of expertise.

—We have a lot of literature explaining the terms of the scheme and there is no failure in information. We have exceeded our provision in that regard.

89. On subhead G—Research, I notice that expenditure is small in relation to the amount granted. What is the reason for this?

—When the Employment Incentive Scheme was introduced the idea was that the recession was coming to an end and that employment would increase. Some persuasion was used to get employers to accept the conclusion that employment would improve in six or eight months’ time and that they might as well employ workers immediately.

90. I was trying to link research with that question on the grounds that many smaller firms could benefit from having additional staff. One way of discovering whether this is good for them is to participate in the Employment Incentive Scheme or any other scheme. It could be beneficial to study the way in which these might be availed of and how the research funds might be used to probe that area.

—It occurs to me that we might cooperate more with the Small Industries Unit in the IDA. There is also a small business advisory programme in the IPC. We will explore whether we can improve the services to small businesses.

91. I do not like to see £30,000 down for research and only £7,000 used. There must be more scope there, even in administrative research and in research in relation to administration on the adoption of the schemes.

—Last year I had to explain to the Committee that I was not happy about the way we have been under-using this, although we exceeded it a number of times in the past ten years. If the Committee are interested, I can give an indication of the type of projects that were in hand in 1977, the year covered by this report. Work was completed on four projects in 1977. One related to work done by a university professor in Galway for which the sum paid was £1,511. There was a project on young persons in Dublin inner city, for which the amount paid was £1,904. There was a study of national wage agreements by the ESRI for which we paid £1,000, and a school leavers’ survey at £1,138, making a total of £5,553. All this work was completed in 1977. There could have been earlier payments in respect of these projects in previous years. In addition, there were three other projects in hands. One was on the role of women, for which we paid £500. There was one on wage bargaining by an academic in UCD for which no payment was made in the year. There was a third dealing with variations in unemployment rates by an academic in UCC for which we paid £1,150. Expenditure on those three projects came to £1,650. If that figure is added to the earlier figure it makes up the total of £7,203. The projects I mentioned earlier would still be going on. Our experience is that this work is terribly slow. Finally, there are projects on which we were having negotiations in 1977 and for which an estimate of more than £31,000 has been made. It could be argued that if this work had proceeded faster we would have a better showing as regards expenditure in the year. We are associated with the council of the ESRI and have the opportunity of influencing the projects at no cost to ourselves. This is quite beneficial. When staff of the Department are involved, such as in school leavers’ surveys, the staff expenditure is charged to subhead A.1. If the project had been passed to somebody outside, the staff charges would have been put down to the projects. These are the factual explanations as to why we are underspending to such a significant degree.

92. Chairman.—You mentioned the IPC and the IDA having schemes to aid smaller industries with advice on expansion. You are accepting the point that this matter should be looked into under the heading of research. What liaison exists between yourselves, the IPC and the IDA in this field? Would they have data on this area of activity which you could use?

—Yes. The IDA’s main job is the promotion of new industries. There is a Small Industries Division within the IDA for promoting small industries. We have relations with them. For instance, when they are examining manpower supply in a particular locality they consult us. They consult us also about wage rates and so on. In the case of the IPC, that is funded from the Vote for Industry, Commerce and Energy. We have an officer of the Department on the controlling council of this in an advisory capacity, partly because it is concerned with worker participation studies as well as productivity. There is some liaison already but it would be our intention to see how we could now improve it.

93. Deputy Woods.—There are a couple of major items here like the question of the semi-State body, An Chomhairle Oiliúna. For An Chomhairle Oiliúna the total grant is £9.5 million and the expenditure is £9.5 million, which is a very neat and tidy situation. It does not leave us much scope for knowing what happened to anything there. First, how is this grant released? Is it released in a phased way? Secondly, are you satisfied with the accounting procedures and the arrangements to ensure the proper administration of such a substantial grant-in-aid?

—This is a very general issue which the Deputy has raised and which is the subject of discussion in the Dáil. The grant-in-aid is issued in a phased way. Long before the year begins we get an estimate from AnCO of what they would require. They take account of their other sources of income as well, especially the European Social Fund and the receipts from levies which they collect from industry. We discuss very fully with them, on the basis of a written submission by them, what we should put to the Department of Finance. Eventually it goes to the Department of Finance and a figure is approved by the Government in due course. There may, in the Budget, be changes; there may be additions in the Budget. Ultimately, when the whole sum of money which they are to get from the Exchequer is approved, I write to the Director-General of AnCO formally conveying this to him, stating that it is based on the documentation which has gone before, subject to whatever decisions the Government may have taken. The documentation would mention the various programmes which AnCO were intending to finance under the allocation. There is a problem in that the moneys coming from the European Social Fund tend to be slow in arriving. AnCO are pressing the Department quite early in the year for a release of the grant so as to avoid their borrowing money on which they would have to pay interest. One could never be wholly satisfied and the Department are always exploring opportunities of improving supervision over the expenditure of voted moneys of this kind. At the same time one must bear in mind that there is a statutory Council in AnCO, and also that the accounts are being audited by the Comptroller and Auditor General, and that there is a very fine distinction between ensuring that funds are spent as intended by the Oireachtas and avoiding interference with the Council in their operations for which they have statutory responsibility.

94. This situation is awkward from the point of view of the Committee of Public Accounts because you would seem to have a fair deal of responsibility in relation to the estimate in detail which is not, in effect, considered by the Public Accounts Committee. For instance, we can look through your report here and see the breakdown on different sectors and the stocks and the acquisitions of various kinds, whereas you, obviously, must have this kind of information yourself in relation to the estimate and, to some extent, that comes up in the annual reports. But these are a separate question and the Joint Committee on State-Sponsored Bodies will, perhaps, look into that in detail. The principles which are involved can vary a great deal from those which would apply to the rest of the money here and to the normal way in which it would be expended. For instance, there can be the question of the number of cars used by staff, whether they were supplied free or whatever, and this would come up in the kind of stock or assets which would be shown in accounts. None of this detail appears here. I accept what you say, but it seems hardly to be worthwhile considering it at all here. It is just a figure which comes in and a figure which goes out. It is unlikely that it will not be totally expended.

—A body like AnCO are fully conscious of, and sometimes extremely jealous of, their autonomy, especially as they are set up under statute. They represent trade unions and employers and education interests as well as persons nominated by the Minister, and the accounts are submitted to the Comptroller and Auditor General for auditing. They also need to be free to respond to particular situations. For instance, in local situations where they would want to take more people in to training than they had intended, they must be free to do this. We would like them to be free to do it without questioning them unnecessarily hard. We are aware of developments in Britain where the people from organisations like that in fact give evidence before the Public Accounts Committee.

95. Chairman.—Is it not the position that the expenditure of sums issued from a grant-in-aid is not necessarily accounted for in detail to the Comptroller and Auditor General but that he may do a scrutiny on the accounts of the grantee?

—Yes.

Mr. Mac Gearailt.—Only where there is provision for scrutiny by the Comptroller and Auditor General would he do it. On the point raised by Deputy Woods, these accounts are simply on a cash basis whereas AnCO accounts would be kept strictly on a commercial basis. Grants-in-aid are in a special category, they are not subject to the normal requirements of accountability. In other words, if the money goes out and is not spent at the end of the year it will not have to be surrendered. Some years ago the Committee made recommendations to have control of grant-in-aid moneys tightened up. In the case of AnCO, for instance, we would watch to see that AnCO were not getting the money too fast. We hold the view that what they would get from the banks would not meet the cost to the Exchequer of raising those funds. We keep an eye on the situation to ensure that the grantees are not holding large balances unnecessarily.

—I regard my main responsibility as trying to ensure that the moneys voted by the Dáil are applied for the purpose for which they were voted. For that reason we get information from the organisation on the different programmes, for example for youth schemes, for adult training, and so on. The European Social Fund receipts complicate the situation. They are also tied to particular programmes and money for them may not be received until well after the event. The receipts which AnCO received in 1977 from the European Social Fund related to operations in 1975 and 1976.

Deputy Woods.—The norms introduced in the internal administration of the funds do not seem to come under public scrutiny. This ultimately reflects on the public sector as a whole. This is a point which is not catered for currently in the system.

96. Deputy V. Brady.—On subhead I— Career Information—a £2,000 grant is shown. Only £1,744 was spent. Career information has become more relevant and more important today than ever before. Of course, the amount of the grant is outside the scope of this Committee. How was this money spent?

—The Minister explained in the Dáil that the amount of money spent on career information was far greater than the amount shown in this subhead. The subhead relates to the production of information leaflets covering the main occupations. In addition, the staff costs, which were estimated in 1977 for the purpose of a Dáil question, were £40,000. Travel costs were £900. There was a certain amount of postal work; so there was a substantial expenditure in addition to this amount. There was also the Stationery Office cost in the production of the leaflets.

97. It is purely administrative?

—We estimate that the overall total spent on career information, when everything that might possibly be charged to it was taken into account, would be slightly over £100,000 in the year.

98. Deputy Woods.—On subhead B.1.— Travelling and Incidental Expenses—in view of the energy crisis would special attention be given to the possibility of train travel as distinct from car travel for long journeys?

—The general instructions provide for the use of public transport where adequate and convenient. The regulations are administered fairly strictly. Claims can be disallowed where people have used private cars when they could have used public transport.

99. I assume that, in administrative terms, that would be a normal criterion. I was wondering if there might be a new approach to the matter. It may require other administrative changes because people may have to use a car every so often in their work. The system which rewarded them may have led to the first few thousand miles at the high rate going towards the overheads of the car. As a public representative I hear a lot of things on the ground. In the light of the new circumstances it might be worth looking at to see what the approach might be. The norms which are established under a more free oil situation would probably differ from those which might apply under the new circumstances?

—In the case of some services, such as the conciliation officers or factory inspectors going to the scene of accidents, there are compulsions. It is possible for routine visits to be planned. There is a general relaxation of certain regulations with regard to sharing cars.

100. It could mean that overnight allowances should be improved. I appreciate that there are inter-reactions between these things because, to some extent, there may have been compensations between them. I would not like to labour the point but I think it could be relevant. Is there a substantial proportion of this sort of travel within the grant-in-aid, the estimates for which would come before you as Accounting officer?

—Yes; especially in the case of schemes such as the Employment Incentive Scheme. Before the oil crisis our officers in the field were instructed to visit employers and encourage them to take advantage of the scheme. Any changes in the general regulations would, of course, be for the Minister for the Public Service.

I am in favour of officers going out to do business with people. In a general administrative sense, there could be scope for alteration.

Chairman.—What Deputy Woods said applies not only to your Department but to the public service in general. In that case Finance and Public Service would be directly involved.

101. Deputy V. Brady.—On subhead A.1 —Salaries, Wages and Allowances—there is a saving of £135,000. There is also overtime payments of over £13,000. Under the explanation I see that the saving was due to a time-lag in filling staff vacancies. Are there difficulties in this respect? Are you satisfied that at this time you are fully staffed?

—We have never been fully satisfied, and measures have been taken in recent years such as speeding up the procedures of the Civil Service Commission which, by their nature, cannot be as quick as those of private agencies because it is necessary to have persons cleared before they are passed for the public service. There has been quite an improvement here. It is sometimes difficult to get professional and technical officers. Their staff unions complain that it is because the pay is not enough and sometimes the pay might have to be improved. In the case of clerical workers, shorthand typists and grades of that kind, there is a continuous drain from the public service into outside employment. There seems to be a number of vacancies all the time on the establishment.

102. A point that keeps raising its head at Committee meetings is the difficulty of recruiting staff to the Civil Service at different levels. I think we should direct our attention to this matter.

Chairman.—Yes.

—In the case of overtime, the overtime is to meet quite sudden, unexpected situations, in particular late night working in conciliation conferences and so on.

Thank you, Accounting Officer.

The witness withdrew.

VOTE 40—FISHERIES

Mr. A. W. Duggan called and examined.

103. Deputy V. Brady.—Under heading A.2—Consultancy Services—expenditure is very much in excess of the grant, the explanation being that it was due to an outside consultant being employed. Was it not possible to obtain the services of a consultant at home?

—There are certain skills and knowledge of course amongst our fishery staff but the opinion of our legal advisers was that it would be better to get evidence from an outside and independent source. That was the reason for this expenditure.

104. Chairman.—Under C.2—Fishery School—you have a saving of over 50 per cent of the amount granted. The note on that says that saving was due to a delay in supplying equipment ordered for the National Fishery School. Could you elaborate on this?

—This was some electronic demonstration equipment which was included in the Estimate and was not delivered during the year.

105. The same thing applies to C.5— Miscellaneous Marine Schemes. Unforeseen delays usually arise in the commencement of works. What kind of delays were they? Practically the whole grant was unspent because of these unforeseen delays.

—These are very small works involving lights, channel markers and that kind of thing. Costs are broadly estimated at the beginning of the year and usually it is because of difficulty in getting engineering reports that you fail to spend. They are perhaps the least significant and least important. I do not suggest that navigation lights are regarded as less important than bigger works but it is largely the absence of engineering reports that gives rise to this kind of money not being spent.

106. Deputy Woods.—You have a similar situation under C.3—Main Fishery Harbour Works—where the works were delayed again. From recollection, I think we had this problem on the previous year’s accounts. Does the present position represent an improvement?

—It is slightly better. The matter is largely in the hands of the Board of Works. We are waiting for them to spend the money and they are short of engineers on the marine side. It is a perpetual shortage.

107. While there tends to be a perpetual shortage, there must be some sort of a solution to it?

—With respect, it is not in my hands.

108. I appreciate that. It certainly would suggest that either the Vote should be reduced to allow for perpetual situations which keep arising or, preferably, something should be done to stimulate the work.

—I would love to be able to say that the situation is improving but in fact it is recurring. You know yourself that with the major works which are going on at Howth at the moment, there are delays in placing the contract and engineering difficulties. We are behind there also.

109. I appreciate that it is very difficult because of the nature of some of the works and because some of them are very substantial undertakings.

—You cannot put new engineers in on marine works which are exceptionally difficult. Experienced staff are needed and you cannot fill up the engineering deficiencies there just overnight.

110. Chairman.—I would like to ask you a general question which you may or may not be able to reply to. It is on the general question of construction of marine craft in the boatyards in this country as against foreign-manufactured boats. What is the general position there at the moment? Is there a shift away from home-manufactured boats to try to meet the demands of clients in respect of wood versus steel? What is the position?

—There is some shifting towards foreign-manufactured boats and there has also been a move towards steel boats in the bigger sizes. The tendency is for fishermen to look for improved power and bigger boats. Generally, they are looking for steel construction. They are now getting a number of boats at home but most of the steel boats are imported. BIM are not in a position to influence fishermen to confine their choice to boats manufactured here.

111. Deputy Woods.—The grants-in-aid to BIM form a substantial portion of the total Vote. How is the money released to this body and do they submit detailed estimates in advance? Does the Comptroller and Auditor General vet the expenditure of the grants-in-aid?

—The Comptroller and Auditor General audits their accounts. We make issues against estimates furnished by BIM which are approved by the Department of Finance.

112. What is the frequency?

—Generally, we make one issue during the year.

113. One issue which is drawn as needed during the year?

—Yes.

114. Do you receive the estimates which are agreed with Finance?

—Yes.

VOTE 37—FORESTRY

Mr. A. W. Duggan further examined.

115. Deputy Belton.—On subhead A.2— Consultancy Services—none of the £20,000 provided was spent. On what was the estimate based?

—The estimate was provided in expectation that we would be carrying out a survey of the timber industry in conjunction with the IDA. In the event the work was commissioned and was carried out entirely from IDA funds.

116. So the grant was not necessary?

—Yes, that is right.

117. Chairman.—When did you discover that the whole of the consultancy service was to be taken up by the IDA? If you had known it prior to the commencement of the year there would have been no need to provide a figure for consultancy services?

—It was only during the year. The consultancy was intended to cover various aspects of the timber industry. There were sectors that might have fallen to us to fund. It was only established during the course of the year that the entire cost would be met by the IDA.

118. Deputy Belton.—On your assumption of a £20,000 involvement, what was the estimated expenditure between the Department and the IDA?

—I recall a previous survey of this nature which was done quite a number of years ago when we worked with the IDA on a 50:50 basis.

119. This was on the assumption of a 50:50 basis?

—Yes.

120. Deputy V. Brady.—On subhead A.1 —Salaries, Wages and Allowances—again, there is a saving due to staff vacancies. Are there difficulties in filling vacancies?

—Our complement is filled at present and we are not carrying many vacancies. In one area there is a delay in getting staff but this is due to postal difficulties. It is a matter of clearing references and so on before we take people in, but there is not a major discrepancy.

121. They have to be cleared?

—Yes.

122. Chairman.—On subhead E—Forestry Education—there is a substantial saving. According to the note there has been a problem with recruitment of trainees. To what extent do you advertise for trainees, or how do you go about recruiting trainees?

—We have never experienced difficulty recruiting an adequate number. We deliberately reduced the number during the course of that year because our forester establishment was adequate to cope with the work. We used to recruit about 30 trainees each year but the number has been gradually reduced. The latest figure that I saw was eight trainees. There has been a reduction in recruitment which is the source of the saving. At the time the estimate was made we had not foreseen that we would be reducing recruitment to that extent.

123. Is the estimate being adjusted downwards to take account of the number being recruited?

—We are now at the end of that phase and recruitment will rise over the next few years.

124. Deputy Woods.—On subhead A.2.— Consultancy Services—I presume it would contain a nominal figure, even if it was only £10, for contingencies?

—We would retain a contingency figure.

125. On subhead C.2.—Forest Development and Management—there is a considerable saving, whereas under subhead J —Appropriations-in-Aid—the realisation was considerably higher than the estimate. Between them these two items mainly account for the saving on the Vote. On the other hand, the increased realisation under Appropriations-in-Aid accounts for a great percentage of the £1.7 million, which was the surplus surrendered to the Exchequer. The one that you seem to make a lot of money on is the one you do less of, so obviously there are reasons for that. Looking at the Appropriations-in-Aid in detail, sales of timber account for the biggest increase over the estimate. Was that due to an increase in output or to an increase in price?

—We can estimate our timber output fairly accurately. Where one is liable to go wrong is in estimating the level of market prices during that period and, of course, buoyancy in the market will produce a good result here in income. It is a fall or depression in market that will run against you. We do estimate our overall output pretty accurately.

126. In effect, is the variation mainly due to improved prices?

—Mainly due to improved prices.

127. On the other end, what is the reason for the lower input in forestry development?

—There are a few major factors here. Mainly it is the elimination of wage expenditure through improved techniques in regard to use of herbicides, better machinery and more intelligent use of it. These are the big factors that are working for us.

128. Would that allow scope for greater development then?

—We have not fallen behind in development in regard to either planting or maintenance. We are quite happy with the performance there. There is no inadequacy there.

129. In other words, you would not feel that there is scope for the use of the savings if you are getting savings through increased efficiency? These savings would be turning up in further development?

—No, we would not.

130. Might it happen where the appropriations-in-aid on the commercial side were going the right way and the savings were being built in to increase efficiency and new technology, that development would be greater?

—There is no scope for that. The one area in which expansion would be possible would be in regard to new planting. You could have investment there if it were possible in a commercial organisation to do that but we are limited there by the land availability.

131. The allocation of land?

—Precisely.

132. Deputy V. Brady.—On this subhead, under miscellaneous expenditure, there are costs of £17,571 in settlement of two claims arising out of accidents to employees. First of all, what was the nature of the accidents and, secondly, what type of safety measures are demanded in order to try to eliminate this type of risk which is obviously of a serious nature?

—One of these accidents was settled at a cost of £10,000 and the other cost in the region of £7,000. That makes up the total. The £10,000 was paid to a forestry worker who was injured while felling trees and £7,571, including costs, was paid to a forestry worker who was injured while working as a plough helper. This is a man who generally goes ahead of the ploughman and sees that impediments to the plough are removed or guides him around boulders and so on that have to be avoided. We have people on our technical side who sit as a committee on the question of safety. We try to get all our men to wear safety helmets when they are engaged in any work involving felling operations.

133. When you say you try to get them to wear safety helmets and safety equipment, are they not obliged to wear this type of equipment?

—Not obliged. It is very difficult to get some workmen to obey safety instructions. This is common experience. A lot of them dislike the hindrance of wearing a helmet or wearing ear-muffs to reduce noise. Constant vigilance is required of the forester who is not always there. One of their own men would be supervising in the ordinary way. You look for certain standards but you will always find it difficult to achieve them.

134. It would be important to pursue this and try to ensure as much as possible that safety regulations imposed by you be kept fully.

—I would certainly agree to that. I would like to see greater observance of these safety requirements.

135. Deputy Woods.—Would a man weaken any claim he may have if he is not complying with the safety standards and safety requirements which are properly displayed round about the work area?

—It would weaken his case.

136. Deputy V. Brady.—Following Deputy Woods’s comment, regarding payment of the £10,000 to the worker felling timber, was he wearing a helmet at that time?

—I do not know if I have that information.

Chairman.—I do not think we should pursue this particular issue in depth as it comes within the competence of the judicial process.

Deputy V. Brady.—The point I am making is that the cost of claims in the forestry sector can be very expensive. Every step should be taken to eliminate risk.

137. Deputy Woods.—That is agreed surely, but a court would certainly take into consideration in any claim the fact that any employee was infringing the regulations which were clearly laid down and clearly displayed?

—None of these claims is settled without full legal advice.

Deputy V. Brady.—I accept that fully.

—We generally do not let these matters go to court. Those cases were settled out of court.

Chairman.—Thank you, Accounting Officer.

The witness withdrew.

VOTE 8—OFFICE OF THE REVENUE COMMISSIONERS

Mr. J. F. Richardson called and examined.

138. Chairman.—Paragraphs 7 to 11 of the Report of the Comptroller and Auditor General read:

“Revenue Account

A test examination of the Revenue Account has been carried out with generally satisfactory results.

The net yield of Revenue for the years 1977 and 1976 under its main heads is shown in the following statement:—

£1,446,033,000 was paid into the Exchequer during the year leaving a balance of £1,861,273 as compared with £2,973,410

at the end of the previous financial year.

I have been furnished with the following analysis or amounts of income tax, sur-tax, corporation profits tax, corporation tax, capital gains tax, wealth tax and capital acquisitions tax outstanding:—

Comparative totals for the previous year are Income tax, £136,513,580; Sur-tax, £4,600,119; Corporation Profits tax, £21,323,912; Capital Gains tax, £115,280; Wealth tax, £60,634; Capital Acquisitions tax, £43,133.

Extra-Statutory Repayments

Extra-statutory repayments of Customs duties, £11,860, Excise duties, £42,685, Estate etc., duties, £1,526, Value-Added tax, £26,147 and Stamp duties, £3,841, were made during the year.

Remissions and Amounts Irrecoverable I have been furnished with schedules of the cases involving a loss of £100 or upwards in which claims for duty under the Revenue Acts were remitted without statutory authority or passed as irrecoverable during the year ended 31 December 1977. The total amount of the items included in the schedules, £183,749, is made up as follows:—

The distribution according to the grounds of remission or write-off is:—

I have made a test examination of the items included in the schedules with satisfactory results.”

Mr. Mac Gearailt.—These are the usual paragraphs concerning the collection of revenue and certain repayments, remissions and amounts written off. They are included each year for the information of the Committee.

139. Chairman.—Paragraph 12 of the Report of the Comptroller and Auditor General reads:

“Income Tax

Under Section 162 of the Income Tax Act, 1967 the Collector General of Revenue is required to collect and levy income tax charged in assessments notified to him by the tax inspectors. For this purpose he maintains on computer a file record showing for each taxpayer such matters as assessments made, appeals against assessments, the results of such appeals, tax payments made and balances outstanding. In the course of a limited test check it was noted that the file record did not include the up-to-date information relating to some taxpayers. The Accounting Officer informed me that when an inspector wishes to raise a PAYE estimate he forwards to the Collector General’s Office an input document which is processed to record the estimate on the computer file so that collection can be pursued. Any amendment to an inspector’s estimate or any other action taken after the hearing of an appeal requires the authorisation of the inspector in the form of a further input document. The Accounting Officer stated that there was no trace of an amending input document having been received in any of the cases referred to in my query and that the inspector was being requested to review these cases and to forward input documents in respect of any adjustments he wished to make. The Accounting Officer added that the inspectors were also being notified at regular intervals of all cases where appeal stops were still on record so that the position could be reviewed.”

Mr. Mac Gearailt.—The Collector General of Revenue maintains a computer file record containing particulars in regard to the collection status of persons liable for income tax. Failure to update these particulars in any case could result in the non-pursuit of tax payable. A limited test check carried out by my officers revealed cases where the particulars appeared to be in need of updating and I asked the Accounting Officer for his observations. His reply is included in the paragraph.

140. Chairman.—Could the Accounting Officer explain briefly the difference between “non-pursuit” and “non-collection”? What is the difference between the approach in these cases?

—Generally speaking, non-pursuit would arise at an earlier stage than noncollection. Non-pursuit could arise for a number of reasons, one of them being a failure in the system of the kind which was properly pointed out by the Comptroller and Auditor General. Because of some failure at the procedural stage a case does not get to the point where it is pursued. That is one form of non-pursuit. There is another form of non-pursuit where it would be apparent from the facts of the case that there would be no point in continuing official action because it would result in no return. Non-collection would arise at a later stage when the tax had been ascertained and sent out for collection. At that stage it might become apparent that there were no assets or that the person had gone out of the jurisdiction and that there was no point in pursuing collection. That is non-collection as distinct from non-pursuit.

141. What is the present position with regard to updating the record referred to by the Comptroller and Auditor General?

—The position is that we had changed our procedure in the interests of economy. Where two documents had been used we introduced one document which, theoretically, should have done the work of both. All inspectors were not familiar with the procedure. Having used one document, they were awaiting an occasion to arise for the second document to be used. They are all familiar with the procedure now and we are satisfied that this thing is not happening and will not happen again.

142. Paragraph 13 of the Report of the Comptroller and Auditor General reads:

“Income Tax (PAYE)

The Income Tax (Employments) Regulations, 1960 prescribe that income tax deducted under the PAYE system is payable to the Revenue Commissioners in the income tax month following that in which the tax was withheld from the remuneration of employees. Overdue tax is subject to a statutory interest charge. Statistics relating to income tax collectible under the PAYE system are produced periodically from the computer file record. As these statistics seemed to suggest that considerable sums of tax assessed and interest on overdue tax remain unpaid I have communicated with the Accounting Officer in the matter.”

Mr. Mac Gearailt.—Statistics relating to tax collectible under the PAYE system seem to suggest that considerable sums of tax assessed and interest on overdue tax remain unpaid and I communicated with the Accounting Officer in the matter. In a rather detailed reply he indicated that the outstanding balances of tax and interest consist of actual and estimated underpayments. The actual underpayments arise where the year-end documentation indicates that the tax remitted by an employer is less than the amount that should have been remitted.

Estimated underpayments arise where the year-end documents are not received in the Collector General’s office or where the inspector considers that PAYE has not been operated properly by an employer.

The Accounting Officer points out that. while the raising of estimates is an essential and very effective method of forcing registered employers to submit the prescribed returns, it does not necessarily mean that there is a liability and, in fact, many estimates are vacated when the outstanding documents are submitted.

Tables furnished by the Accounting Officer indicate that the total balances outstanding on the PAYE employers’ annual file at 7 June 1978 for the years from 1960/61 to 1977/78 were £51.4 million in tax in some 55,000 cases and £6.5 million in interest in some 33,000 cases. Of the £51.4 million tax shown as outstanding, some £40.6 million consisted of estimates comprising £8.5 million in Collector General’s estimates and £32.1 million in Inspectors’ estimates. This leaves a balance of some £10.8 million actual underpayments which related to some 8,600 cases. Those statistics may be a bit complicated and the Accounting Officer might like to elaborate on them.

There is one further point which I would like to make. The Accounting Officer’s reply indicates that the arrears of PAYE tax with which we are concerned here are not included in the figures of income tax outstanding which are supplied annually to me and which form the basis of paragraph 9 of this report. The Revenue Commissioners consider that PAYE arrears are not relevant in this connection, the bulk of such arrears consisting of estimates which, as distinct from income tax and corporation tax estimates, are only made where there is a default in remittances and/or returns at the end of the year.

143. Deputy Woods.—Am I right in assuming that the figure of £51.4 million is income tax other than PAYE?

Mr. Mac Gearailt.—It is PAYE.

144. Chairman.—Before the Accounting Officer comments on the Comptroller and Auditor General’s statement, I should like to ask why the PAYE estimated assessment is treated differently from other estimated assessments. In other words, it is excluded from the table of outstanding tax.

—The reasons are historical and statutory. The word “assessment” in relation to schedule D tax income tax has a different meaning from the word “assessment” in relation to PAYE tax. One could say if one were being very technical that one should not use the word “assessment” about PAYE tax, because it is not the subject of any statutory form of assessment. In the case of Schedule D tax the statutory procedure is that returns are furnished, an assessment is made, and what is payable to the Revenue is the amount of the assessment unless it is displaced. In PAYE there is no process of assessment. It is a system whereby the employer deducts an amount of tax from an employee without any assessment and he remits that amount to the Exchequer. Therefore, the process of statutory assessment does not arise either in relation to PAYE or, if I may bring in another tax, in relation to VAT. When we are speaking about PAYE a better word could be “estimates” rather than “assessments”, because if the tax has been paid and is correct according to the figures and the check we have made, no further process is needed. If it is not correct or is unpaid, in order to recover an amount from the defaulting employer we must arrive at a figure by reference to which proceedings can be taken against him, and that procedure is called assessment. It is not at all the same kind of assessment as is used in Schedule D. That is something which arises from an examination of accounts prior to payment, prior to demand, prior to liability. Using the historical basis of giving information in relation to Schedule D and in Schedule E before PAYE was introduced, one would have a statutory figure for assessed tax and a statutory figure for collected tax. That is shown in paragraph 9 of the Report of the Comptroller and Auditor General. There is no corresponding figure at all in relation to PAYE or VAT. That is the reason why we have not got a figure in the accounts. I touched on this at our last meeting. It is a question for consideration by the Comptroller and Auditor General and the Committee with any assistance we can give as to what should go in if the Committee think it necessary. Whatever it would be, it could not be the same figure or a figure of the same character as appears under the headings relating to Schedule D tax, because— I am labouring this a bit—the procedure of assessment in relation to PAYE does not exist.

145. Deputy Woods.—To come back to the figures, the figure of £51.4 million is strictly a PAYE figure?

—Absolutely.

Is it made up from estimates and actual?

—Estimates and actual.

146. What would be the figure for Schedule D?

—That is set out in paragraph 9 in some detail. The figure shown there as income tax is almost entirely Schedule D tax. It is broken down under three headings: tax under appeal or under inquiry, tax not in dispute but where collection is held up, and tax which is due for collection, which means that the amount has been ascertained and has been released to the Collector-General to collect it by whatever means are available to him. In the first column, as it stands here, one can see the figure £44 million. That seems to represent a great improvement on the previous year. The reason for that apparent improvement, and it is only apparent, is that this year covers the period in which corporation tax was introduced. A part of the figure which would have appeared previously as income tax is now transferred to the fourth heading, corporation tax, so that the position is not nearly as good as it looks. The figures in those columns again consist largely of estimated assessments. The assessments are statutorily there but, because accounts come in much later than the date on which assessments have to be made for the purposes of collection, the assessments in about 90 per cent of the cases are based on estimates derived from previous years’ figures and, in practice, the estimates turn out to be very much larger than the actual amount of tax collectible. Without the comparision of previous years this could very well give a worse impression than is justified. I will try to explain that by saying that what we have here is, as it were, a snapshot of the books at a certain point which would seem to indicate that there is a very large amount of tax which is uncollected. We are acting under this constraint very necessarily. We are dealing with a point in a particular financial year at a particular time, whereas the process of collection starts with the submission of accounts and ends up sometimes over a three-year cycle with the actual collection. I would be glad of an opportunity to mention the figures showing the percentage amount which remains uncollected after the processes have been finished. If one were to take the figure of £44 million shown in paragraph 9 as income tax for 1976-77 under appeal or enquiry it represents 27 per cent of the total charge raised for that year. As the years progress the amount remaining uncollected keeps on dropping— for example the amount of tax under appeal or enquiry as at 1 June, 1977 in respect of 1974-75 and earlier years was 3.8 per cent of the total charge for these years. One year later as at 1 June 1978 the amount of tax still under appeal or enquiry in respect of 1975-76 and earlier years was 5.5 per cent of the total charge for those years. Those figures are more encouraging than the figures arrived at by the Deputy.

147. What amount does the 5.5 per cent represent?

—In paragraph 9 there is a figure of £64 million representing tax under appeal or enquiry for 1975-76 and earlier years. That £64 million is 5.5 per cent of the assessments which were raised and processed for those years.

148. Is there a system whereby an estimated amount of tax is due and is paid in those cases?

—We have such a system. The taxpayer may appeal against the amount estimated. If he wishes to avoid interest he may nominate an amount which he estimates as being proper. If he pays up to 80 per cent of that amount he escapes an interest charge.

149. Does that system gather more tax in a shorter time?

—It is beginning to but the increase is not appreciable. We have got a slightly higher percentage in but it is still of the order of 1 per cent.

150. When was that system introduced?

—It was introduced at the same time as the corporation tax in 1975-76.

151. Chairman.—In paragraph 9 you sought our views on what might be included in the table. You gave valid reasons for the exclusion of outstanding PAYE tax, referred to as “estimated assessments”. It has been established that at least £10.8 million is outstanding. Could that figure be included in the table in paragraph 9?

—I think that it should be included but it might be confusing to include it in that table. As it is a different kind of tax it should be included in a separate table.

152. Do you agree that it should be shown elsewhere under a separate heading as an outstanding under-payment?

—Yes. If that is what the Committee wish I will discuss the matter with the Comptroller and Auditor General.

153. I mentioned it to cover the non-appearance of this figure. If the Committee agree I suggest that you consult the Comptroller and Auditor General on the matter.

—We might also try to elaborate the table in paragraph 9 a little although too much elaboration is something none of us wants—so that it would show the actual amount of tax uncollected over, say, a three-year cycle rather than a one-year cycle.

It would be appreciated by the Committee.

154. Paragraph 14 of the Report of the Comptroller and Auditor General reads:

“In the course of a test examination of cases in which interest was statutorily due in respect of late payment of tax under the PAYE system, it was noted that interest relating to the years from 1969-70 onwards remained uncollected in some cases and I sought the observations of the Accounting Officer. He informed me that as a general rule enforcement action is not taken to recover interest alone mainly because the referral of such cases to the enforcement agencies would cause serious overloading in those agencies and so interfere with their capability to deal with the more important cases involving arrears of tax and interest. In selected cases, e.g. where the tax involved is significant, outstanding interest is associated with the collection of tax which may be slipping into arrears. The Accounting Officer also stated that the inclusion of interest already accrued on previous late payments in applications to have payment of tax brought up to date is generally very effective and the threat to include all outstanding interest in legal proceedings has become a very successful deterrent against default in the payment of current tax.”

Mr. Mac Gearailt.—Paragraph 14 relates to non-collection of statutory interest in respect of tax which, though collected, had been overdue in certain specific cases which came to light in the course of the audit. We are concerned here with the reasons for non-collection of the interest only. The general comments of the Accounting Officer are included in the paragraph.

The cases which we raised cover concerns in the private and in the public sector. In regard to the non-collection of interest from statutory bodies, the Accounting Officer expressed the view that the enforcement of payment of interest on its own in such cases would involve merely the recycling of State funds.

155. Chairman.—Have the Commissioners discretion in the remission of interest?

—We have no precise discretion in the actual statutory provisions which impose interest, but we regard ourselves as having general discretion under the “Care and Management” provisions. We feel that the Oireachtas would not wish us to pursue payments where the cost of pursuing the payment would be greater than the amount recovered. Even in a wider context than the one which has been mentioned by the Comptroller and Auditor General, that is, where the recycling of public moneys would be involved, we would regard the expression “care and management” as covering that kind of situation generally. We feel that taking the overall picture into account it would not be the desire of the Oireachtas that this should be done. I will elaborate a little on the recycling. In the case of, say, Government agencies which are dependent for their receipts on grants from other Government Departments, if those other Government Departments are slow in making the grants, an interest charge could on that account arise between the Revenue Commissioners and the agency. If the Revenue Commissioners raise the interest charge and recover it, the agency will feel themselves entitled to go back to the other Department saying, “We incurred this charge because you were slow in paying us the money to pay the Revenue Commissioners”. That Department might say that the reason they were slow was that there were difficulties with another Department. It would not be common-sense to embark on that kind of procedure.

156. Deputy Woods.—That is the very point I am interested in. The way in which it is handled may be a different matter, but there is the danger of encouraging administrative inefficiency. With a commercial or practical situation there is pressure on down along the line to get it done for some reason. If there is no pressure along the line it is easy to give reasons and excuses as to why something did not happen in practice. There is no point in having a recycling and creating additional administration through this recycling, but at the same time there would seem to be a need to have some means of highlighting the fact and some administrative disincentive or at least reporting procedure which highlights the fact that such inefficiencies are being carried through the system, perhaps at times for very good reasons but also quite possibly at other times not for good reasons. So, the performance of the whole model could be slow because of the lack of such pressures and strictures. In that sense the Comptroller and Auditor General is quite right to highlight it here for this Committee. You may deal with it in your own way from the point of view of cash administration, which is fair and reasonable; nevertheless there should be some procedure to ensure that this inefficiency does not build into the system. Under commercial circumstances there are various strictures which make people concerned when they are not getting something. This is one of the differences between the commercial concern on the one hand and the public service one on the other hand. I appreciate what you say about the recycling but I would certainly like to know that somebody is thinking further on it so as to provide the means of ensuring that this will not lead to inefficiencies in the whole structure.

Mr. Mac Gearailt.—I would like to make one or two points on this matter. If there were grants going out to all those bodies every year there might be some point, but some of the bodies that I have queried do not get grants. They are expected to generate their own finances and some of them probably live on borrowing. They are not in receipt of annual grants. To that extent you cannot talk about recycling of State funds. The second point is a more fundamental one from our point of view. Where Parliament votes a stated sum in aid—where there is an annual grant—failure to collect interest at the expense of the Exchequer could suggest that there is a hidden subsidy of which Parliament might not be aware.

—I need hardly say that we would at all times regard ourselves as bound by any direction given to us by the Committee of Public Accounts or by the Comptroller and Auditor General. The Comptroller and Auditor General has indicated that he sees a difference between one kind of body and another and perhaps if we were to have discussions about this with a view to providing such information as he would regard as necessary in a particular class of case, we would regard it as our absolute duty to set that information out, to raise the charges and to report them in whatever way he would wish us to do it.

157. Chairman.—Do you calculate the interest due even if not collected?

—We do.

158. Can you give us some idea of what amount is involved in that case?

—The Comptroller and Auditor General said that our reply was very detailed. In the reply we dealt with each case which he reported and we did not total them. In the biggest individual case there was a sum of £89,000-odd and some of the other cases went down as low as £120. The £89,000 was in relation to one body. We tend generally not to name the bodies concerned. As we understand the position, this body with the large amount are very much dependent on a fluctuating source of income from non-Government sources and a voted sum from Government sources. They are always in bad trouble.

159. You obviously cannot write off these sums but at what stage do you finalise them?

—We do not write them off, we keep them open, I am afraid, as a threat. We say, “We will not pursue collection of the interest in this case if you behave yourself in the future. If you do not behave we will collect not merely the current interest but this as well”, so we never write it off.

160. Is there a statutory obligation with regard to the collection of interest on overdue payments? You mentioned a while ago that your discretion is limited and that it is in the case of “Care and Management” only that you exercise discretion. You mentioned the sum of £89,000. Are you suggesting the “Care and Management” would come to the rescue in that case and justify non-pursuit?

—Both considerations would operate in that case. Our inquiries show that the money is not there. If it were to be provided it would have to be provided from money voted by the Dáil for that purpose.

161. Deputy Woods.—Are we talking about PAYE?

—Yes. The interest on PAYE.

162. The late payment of PAYE. The PAYE in that case is being used as part of the cash flow of the firm.

—That is so.

163. That is a very serious situation in terms of maladministration, perhaps on the part of the Oireachtas, but it is certainly something that should be known. It would be a very bad practice to develop. The means of funding should be above board rather than secondary. As PAYE is deducted from salaries the money must be there for the salaries. It suggests that the total money for the salaries is not actually there at the time. In other words, the PAYE deductions are being used for the payment of salaries until more money is available. The management of cash flows seems to be the problem?

—That is so. In some cases this is done in good faith because the due date for payment of PAYE is subsequent to the actual collection. Let us take the case of an organisation which pays its wages weekly. The first amount withheld will be in the first week of a month and the due date for payment will not occur until some time in the following month. Now, if that organisation genuinely believes that by the due date it will have received its grant which is due, I cannot see anything culpable in its taking that into account. There is no statutory obligation on employers to put their PAYE money into a separate account. Therefore, this arrangement may have been made in good faith.

I accept that.

—The matter is much more serious when it is known that the money will not be available and the delay is deliberate. If the Committee and the Comptroller and Auditor General wish a specified amount to appear in the Report we will show it. While it may be improper to express a preference in this matter, I would prefer it if the responsibility of instituting proceedings were not enjoined on the Revenue Commissioners in a way which would not allow the use of discretion.

Chairman.—We are not giving a formal direction in the matter. I think that you must use discretion.

164. Deputy Woods.—From the point of view of the Oireachtas and the Committee, I think it is a question of knowing exactly what is happening. In other words, if one of the organisations is having this difficulty on a continuing basis there should be an administrative procedure to meet the difficulty. It is the duty of management to meet the situation. What has been seen is a very practical means of meeting the situation. I am very much in favour of discretion and a practical approach on the part of the Revenue Commissioners to such situations. Nevertheless, from the point of view of responsibility to the Oireachtas and the avoidance of a hidden subsidy, it would be better to show what is happening. Some other measures should be taken in cases where substantial funds are continually used in this way?

—We are constantly looking for guide-lines in these matters because, at times, they raise difficult points of principle. We look at the reports of the Comptroller and Auditor General for guidance in various fields. I trust he will not mind my recalling his disapproval of a battle involving legal costs being fought between two semi-State bodies. He thought the matter could have been settled between them, thus avoiding the legal costs. The Comptroller and Auditor General may be able to help me in my recollection.

Mr. Mac Gearailt.—I will not specify the semi-State body but I think that Deputy Woods had an interest in it at one time. It was a long drawn out case and my staff wasted a lot of time on it. At that time the organisation was being funded by an annual grant. I could not see any sense in incurring legal expenses when the money for both organisations was coming from the same pocket. There is a problem here. It worries me occasionally to see PAYE due to the Revenue Commissioners coming up invariably on the creditors’ lists in these semi-State bodies’ accounts, not in all cases but in a big number. As Deputy Woods said, they are obviously using deductions from PAYE to augment their cash flow. I do not know why the Revenue Commissioners should be put at the end of the line if these bodies can pay other people. The second point I would like to make is that I would have more sympathy with you if you were not arguing on the case of the £89,000. With regard to that particular body, their accounts last year showed a sizeable surplus and they could easily have paid their “ounce of flesh” to the Revenue Commissioners.

—After all, we are looking at a year prior to the one now under review. It is possible that a much better and healthier position might be shown in the following year because I would not like to give the impression that we accept the situation in an easy way. We bring a great deal of pressure to bear and make threats to bring all the pressure we can.

165. Deputy Woods.—We are all familiar with the kind of threat. This does raise the question of guidelines in relation to procedure, and management procedure in particular. It would certainly be a hidden subsidy in certain cases and this decision should be in the hands of the Minister for Finance. If the system is working properly the whole model is working in all its parts; then the output should be at his end and he should be free to put it back in. He should know what he is doing and what is happening in effect and therefore a slightly more perfect model in that case should be administratively more efficient.

—In the year subsequent to this and subsequent to the raising of the queries, in this case, all but two of the monthly payments were made on time and the interest on the two late payments for the tax year 1977-78 amounted to only £296. So we probably need not worry, they will pull themselves together. Perhaps we should have some discussion about how we should present this aspect.

166. Chairman.—We have been talking about recycling and hidden subsidies and so on where in effect there is no loss to the Exchequer overall in the event of nonpayment by them of interest. I presume there are companies who are not in receipt of Exchequer funds, private commercial companies who might find themselves in the same position. Do I take it that you would apply the same pressure to semi-State or State bodies as you would to private commercial firms? If you do not you are treating the people in receipt of Exchequer funds, and in a more advantageous position, better than you would the private commercial firms who may have genuine difficulties too.

—So far as pressure is concerned, as distinct from enforcement, we would make no difference at all at that stage between the semi-State sector and the private sector. In the semi-State sector we would begin to think of the circumstances before we would start an enforcement action. In the private sector again we would put on the pressure and put ourselves in an enforcement position, but then the ordinary principles that would guide us on these matters would come into operation. Is the money there, and if we insist on its payment immediately will it dry up that organisation as a source of revenue? But we will not write it off. To the extent that we do not collect it we will always use it as a whip to enforce prompt payment from then on.

167. Paragraph 15 of the Report of the Comptroller and Auditor-General reads:

“Value-Added Tax

Section 19 (3) of the Value-Added Tax Act, 1972 provides that tax collected by accountable persons should be paid to the Collector General of Revenue within a prescribed period. Section 21 of the Act provides that tax not paid within that period is subject to an interest charge. In the course of audit it was noted that certain administrative procedures were being applied in the Office of the Collector General which indicated that the collection of interest on overdue value-added tax was not being pursued in all cases. As the collection of this interest appears to be mandatory I communicated with the Accounting Officer. He informed me that the standard procedures which are applied in relation to non-pursuit of interest on late payments of income tax and PAYE tax are also applied to interest on late payments of VAT. He stated that there would be considerable difficulties if the interest provisions were rigidly applied in every instance and that the goodwill of employers, on which the collection of these taxes so much depends, would be put at risk by such action.

It was considered that the interest provisions should be regarded as a means to achieving the prompt payment of the tax itself by utilising them to ensure that the larger employers do not become unpunctual in payment of tax and by adopting an approach whereby applications to have interest charges dropped are dealt with on their merits. The Commissioners accordingly are of the opinion that, in the exercise of their care and management powers, they are justified in not pursuing interest charges in cases where the circumstances outlined apply. In pursuance of this policy firm guide-lines have been handed down to the staff involved in order that there should be a uniform approach in dealing with applications from traders not to have interest pursued. If a case merits sympathetic consideration pursuit of the interest is deferred but it becomes a condition of deferment that future returns are received in time. Where a trader does not comply with this condition it is then possible to pursue that interest again.

The Accounting Officer also informed me that there was a further difficulty relating specifically to VAT in that a computerised system to automate the various enforcement stages for collection of arrears of interest charges arising on late payments is not yet available due to a continuing shortage of trained computer personnel and the necessity to give priority to catering for taxation changes. He added that a manual operation would, therefore, be required to enforce payment of outstanding VAT interest but that it was not practical to provide this with the limited staff resources available, except in selected areas, usually the bigger traders and the more serious default cases.”

Mr. Mac Gearailt.—As stated in the paragraph, section 21 of the Value-Added Tax Act, 1972, provides that tax not paid within the prescribed period is subject to an interest charge but the collection of such interest was not being pursued in all cases. As there is no statutory power to waive, remit or reduce interest chargeable on late payments of tax I communicated with the Accounting Officer in regard to the non-pursuit of such interest and his reply is included in the paragraph.

168. Chairman.—What about the interest on value-added tax?

—It is a somewhat similar problem to the interest on PAYE. Pressure is brought and if we find that the withholding of VAT is a deliberate policy we adopt a very tough line indeed. If it happens occasionally and almost by way of a mistake or a slip-up on accounting procedures, then we would tend to deal with that more leniently, not in the sense of discharging it because we accept that we have not the power to discharge it, but of holding it in abeyance and if the company bring all their payments up to date and so on, we would not seek to use it otherwise than as a threat as to what will happen if they do not toe the line. There are a number of variations on that, one of them being in times of problems of liquidity. Taking the broad view, it would not be in the interest of the Exchequer to put a source from which we derive revenue out of business, if there is some way which is not in breach of the statutes of avoiding that.

169. On the question of the collection of the VAT itself, would the same consideration apply?

—No. The only circumstances in which you would give any consideration at all to the VAT itself would be in a case of a pending liquidation or receivership. All we would ever give is time to enable the company to pay the tax on the basis that they had not got the money at the time.

170. Paragraph 16 of the Report of the Comptroller and Auditor General reads:

“Pay-Related Social Insurance Contributions

The Social Welfare (Pay-Related Contributions) Regulations, 1973 (S.I. No. 354 of 1973) assign responsibility for the collection of pay-related contributions under Section 5 of the Social Welfare (Pay-Related Benefit) Act, 1973 to the Collector General of Revenue. The Act applies the provisions of any enactment relating to the recovery of income tax to the recovery of pay-related contributions. Interest is accordingly leviable on overdue contributions. I have been informed by the Accounting Officer that the balances of pay-related contributions and interest outstanding at 18 January, 1978 were as follows:—

The Accounting Officer stated that these balances are a combination of actual and estimated amounts. The £6.6 million contributions outstanding included estimated amounts of £5 million and accordingly the actual contribution arrears were probably substantially below the figure of £6.6 million.”

Mr. Mac Gearailt.—Paragraph 16 is for information. The figure of £6.6 million in respect of contributions outstanding in January 1978 relates to some 30,000 cases and the interest figure of £.67 million to some 12,500 cases.

171. Chairman.—That is a substantial sum outstanding. Will the Accounting Officer comment on the size of the amount?

—In the interests of economic administration the aim has been to integrate the pay-related social welfare insurance collection completely with the PAYE collection. What we are seeing here is a part of the picture of a total PAYE collection system. Everything I said about estimates of the amounts which should be coming to us would apply in this context. If I can project myself forward a little from 6 April this year, the figures under this heading will become massive compared with what they are now.

I thank Mr. Richardson for his cooperation and for his very comprehensive replies.

The witness withdrew.

The Committee adjourned.

*Includes £429,524 duty deferred under EEC Regulations(1976 £810,661).

†Includes £533,081 tax deferred under EEC Regulations (1976 £282,223).

‡Includes £73,160 levies deferred under EEC Regulations (1976 £199,850).