Committee Reports > List of Committees > Dáil > 1988 > Committee of Public Accounts > Report - Appropriation Accounts 1984

AN COISTE UM CHUNTAIS POIBLÍ

(Committee of public Accounts)

Déardaoin, 8 Deireadh Fómhair, 1987.

Thursday, 8 October, 1987.

The Committee met at 11.30 a.m.

Members Present:

DEPUTY G. MITCHELL in the chair

Mr. P. L. McDonnell (An t-Árd-Reachtaire Cuntas agus Ciste) called and examined.

VOTE 8—OFFICE OF THE REVENUE COMMISSIONERS.

Mr. Philip F. Curran called and examined.

1469. Chairman.—The Committee this morning is examining Mr. Philip Curran, the new Chairman of the Revenue Commissioners. You are very welcome, Mr. Curran.

Mr. Curran.—Thank you very much.

1470. Chairman.—This is your first time before us and it is good to see you here. We have a set agenda in front of us. We will dispose of the alleged cheque fraud first and then go on to deal with the remaining paragraphs which we had not completed with Mr. Paircéir, your predecessor. A two page report which we received from you has just been circulated to the members of the committee. Is there anything you would like to say by way of introduction because there are one or two questions the committee may like to put to you about that report?

Mr. Curran.—The Committee have the information furnished in the note. The main point I would like to make because there may have been some misunderstanding in the media and it is a very important point is that there is no indication or proof as yet that any employee of the Revenue has been implicated. It is very important to make that point because there have been some headlines recently in the media which suggested that there was a fraud by a taxman. I will just say what position the investigations are at. They are in the hands of the Garda and they are ongoing. They are being given due priority and any relevant information is being followed up exhaustively. So far, five people have been formally charged with offences in connection with these cheques and they are due to appear in court. None is a Revenue official. It is most important that I make that clear at the beginning in case of any misunderstanding. Perhaps I should also add in brackets that the investigations are ongoing and I cannot categorically say that no Revenue official will be found in the future as having been involved but as of now we have no indication to that effect.

1471. Chairman.—Does the alleged fraud relate to income tax or value added tax or to both?

Mr. Curran.—It is practically all income tax.

1472. Chairman.—Has there been a tightening up of controls since then? Have you changed some of the procedures and tightened up on some others?

Mr. Curran.—Yes.

1473. Chairman.—Paragraph 3 of your two-page report states that the total amount in cheques was £554,373 but that the Revenue will not be at any loss for cheques to the value of £346,546. Does that mean that the loss is £208,000?

Mr. Curran.—No, what it means is this: from the present state of the investigations the best estimate we can make is that there will be no loss in respect of a figure of roughly £346,000 or maybe a little less. That figure would relate to cases where replacement cheques were issued, to cases where the original cheque was stopped by the drawer, in which case it could not be negotiated, and the cases where someone attempted to cash a cheque but the fraud was spotted by the bank who then stopped it. A number of these cheques have been identified and, as a result, we can say that in that area there will be no loss to the Revenue. There is an amount and in round figures I would put it at £300,000 over which there is a question mark. The Garda are continuing their investigations and some of the cheques are missing. A lot of these are out-of-date but we cannot confidently say that someone will not change the date and try to negotiate one. The best guess we can make is that there is about £300,000 over which there is a question mark. The investigations are ongoing and we are not yet in a position to say whether, in fact, there will be any final loss to the Revenue, and if there is, how much it will be. I do not expect it to be anything like that figure. That is the amount about which we cannot yet be clear.

1474. Chairman.—Approximately how much is collected in taxes by the Collector General each year?

Mr. Curran.—About £6 billion.

1475. Chairman.—Presumably these cheques were made out to the Collector General?

Mr. Curran.—Yes, either to the Collector General or the Revenue Commissioners.

Chairman.—Can you explain to the committee how somebody would be able to lodge a cheque, or somehow transmit it into an account and to benefit from a cheque which would be made out to either the Collector General or the Revenue Commissioners?

Mr. Curran.—That is a difficult question for me to answer because it moves into the area of the fraud and the actual modus operandi. There are two aspects to this. In the first place there is the difficulty that the person perpetrating the fraud gets possession of the cheque. He should not have got possession of the cheque in the first place and this is the thing that we are most worried about. We are trying to identify how this happened. In the second place how can he negotiate it? This is where we move into very difficult territory and I should not try to speculate on this because it relates to the responsibility of banks in the cashing of cheques and not cashing them. I would not like to prejudice any further discussions we may have by elaborating further but as far as we know they tried to negotiate some of the cheques by simply forging or changing the name of the payee on the face of the cheque.

1476. Chairman.—Presumably, that would have involved interference with the post and the misdirecting of cheques meant for the Revenue Commissioners or the Collector General?

Mr. Curran.—It may well have happened in the transmission of the post or it may have happened during the internal transmission of post in our organisation by the internal messenger service.

1477. Chairman.—Let me ask one other question. We will be going into this in detail when we deal with the 1986 accounts and the Comptroller and Auditor General will be keeping us informed. Indeed, the Committee may look for an up-date from time to time. There is no indication that any member of the staff of the Revenue Commissioners to date has been involved but is there any indication that other public servants were involved?

Mr. Curran.—I am sorry, but you have me there, Chairman. I did not ask that question. I only asked a specific question about our staff.

1478. Chairman.—But as far as you are aware no member of the staff in the public service is among those being charged?

Mr. Curran.—With hand on heart, I did not ask that question. I did not ask the Garda. They just said that five people were being charged none of whom was a Revenue official.

1479. Chairman.—To the best of your knowledge, would most of these people be people from outside the public service?

Mr. Curran.—To the best of my knowledge, that is correct.

1480. Deputy Foley.—Mr. Curran, I would like to congratulate you on your appointment and to welcome you here today. I just have a few points to make. At what stage were the Garda Fraud Squad brought into the investigations?

Mr. Curran.—Right away. This came to light about 18 months ago and they were immediately informed. This is standard practice. When we identify or strongly suspect anything in the nature of fraud, fraud being a criminal offence, we immediately notify the Garda.

Deputy Foley.—You seem very confident, Mr. Curran, that no employee is involved. In fact, you point out that at this time there is no proof that an employee or the Revenue Commissioners are involved.

Mr. Curran.—That is right, as of now.

1481. Deputy Foley.—How long more do you anticipate these investigations will take before they can be finalised?

Mr. Curran.—I could not really say. This is a matter for the Garda, for the Fraud Squad. But, as I said in response to the Chairman, I am assured that the cases are being given due priority and all relevant information is being followed up exhaustively.

1482. Deputy Foley.—The Chairman has mentioned that we will certainly be going into the question of this particular item in the 1986 accounts. While there may be no formal loss to the Revenue Commissioners, there is certainly a great embarrassment at this time over the fact that a situation such as this has occurred.

Mr. Curran.—I agree. It is very unsatisfactory and embarrassing.

1483. Deputy Foley.—Have procedures changed in the meantime as a result of this coming to light?

Mr. Curran.—Yes. In one respect we have tightened up on the procedure for the movement of these papers inside the office. For example, if a cheque is moving from office A to office B, office A keeps a copy of an advice note. The duplicate goes with the cheque and the duplicate is supposed to be returned immediately to office A in order to prove that the cheque has arrived at its destination. This is part of the internal control procedures now. What we have done is that we have emphasised to the staff concerned that these things must be returned immediately because time is of the essence. We have tightened up in that procedure. Perhaps I should explain: where a repayment is to be made that has to be authorised by the inspector’s office. The authorisation then goes to the Collector General’s office to issue the payment. Sometimes for various reasons, for legitimate reasons a change can be required after the docket has left the inspector’s office before the cheque is written. We have tightened up there as well to make sure that where changes are required they have to be confirmed in writing. There will be no more telephone or manuscript changes done informally. That will have to be tightened up. So those are two specific changes or improvements which we have made in the procedures. Perhaps I should say also a general thing about our internal controls. I do not know if this is the appropriate point on the agenda—

1484. Chairman.—We will be coming to it, but if you want to make a passing comment you may.

Mr. Curran.—Perhaps I could mention very briefly that we have had an internal audit system operating for the last three or four years in the customs and excise area and we are now strengthening that internal audit unit and extending its remit into the inland revenue income tax area.

1485. Deputy Colley.—I wonder if Mr. Curran could tell the committee when it was noticed how many payments or repayment cheques were missing? Deputy Foley asked how early on in the case were the Garda brought in, and you said immediately it came to light. What interests me is that there were so many payment and repayment cheques. Did they all come to light at once or some of them? If only some of them came to light, over what period did the rest come to light?

Mr. Curran.—I will put it this way. A wave of them hit us suddenly in the middle of 1986. Between May and July 1986 about 70 of the cases suddenly arose without any warning and at that stage immediately it was referred to the Garda. That is about 18 months ago.

1486. Deputy Colley.—You were informed by your various offices that there were cheques not reaching their destinations at that stage?

Mr. Curran.—That is right. It was the normal operation of the internal control mechanisms which brought this to light. As I have said, we have tightened the operations up to try to make sure that we react more quickly.

1487. Deputy Colley.—From there on, after the first wave, how did the others come in? Did they come in in dribs and drabs?

Mr. Curran.—That is right.

1488. Deputy Colley.—Would you be sure that there are no more out there that you do not know about?

Mr. Curran.—I cannot be sure of that. It is an ongoing situation.

1489. Deputy Colley.—That is what I wondered.

Mr. Curran.—If somebody is going to abstract something from the post, it could happen tomorrow. But to the best of our knowledge and belief, the general figures I have given are the up-to-date figures.

1490. Deputy Colley.—I understand what you are saying, that in fact anybody at any point can come along and perpetrate a fraud on the Revenue Commissioners. What I am really concerned about is this particular fraud. Would you be happy that you have got to the extent of it and called a halt to it?

Mr. Curran.—When you say this particular fraud, I am not sure that it is just one. There were certainly different offices involved in it. You may well be right. It is possible that what we are facing here is a highly organised conspiracy, or it is possible that they may be one or two isolated frauds. We cannot say. All we can say is that our internal control mechanisms are sufficient to throw up the occurrence when it happens. In other words, I would be pretty confident that if some cheques have gone missing we know they have gone missing.

1491. Deputy Colley.—You will know they have gone missing in the future. I take your point that you have changed your procedures and they would now more quickly throw up these frauds, if any.

Mr. Curran.—That is right.

1492. Deputy Colley.—Before you introduced the new procedures, it is possible that there are still cheques missing?

Mr. Curran.—I would say we would know about any cheques that were missing. That is to say, we know that cheques are missing. We do not know what has become of them. Some of them may have been torn up as being outof-date, useless or whatever and they may never surface again.

1493. Deputy Colley.—They would be included in these numbers?

Mr. Curran.—They would be included in these numbers and figures, yes.

1494. Chairman.—The year you refer to — you say during a period of over a year — what sort of dates are involved approximately?

Mr. Curran.—There was one in January 1986 but perhaps that may be isolated. If you start in May 1986: they run from May 1986 until June or July of this year.

Chairman.—A year to the middle of this year?

Mr. Curran.—That is correct.

Chairman.—What I do not quite understand is, that while we know what was attempted, we do not know how it was attempted.

Mr. Curran.—That is right.

Chairman.—It did not happen just in Dublin. Presumably there were other districts outside of Dublin involved as well or were they just various districts in Dublin?

Mr. Curran.—They were mainly in Dublin and things went missing mainly in Dublin. I think in some cases remittances were sent in from tax offices outside Dublin, but they did not reach Dublin.

1495. —Chairman.—You know the prepaid envelope to the Collector General? Did it involve someone watching out in the post for those prepaid envelopes and then somehow taking them out of the post? Is that really what it came to or did they get to your office and were they taken out in your office?

Mr. Curran.—That is the problem, we do not really know. This is what the Garda are looking into. I am in a difficulty here because five people have been charged and will appear in court and I would not like to speculate too much on the role of those individuals.

1496. Chairman.—But in relation to the method, you are not quite certain yourself yet?

Mr. Curran.—That is correct.

1497. Deputy M. Ahern.—Up to the middle of 1984 the banks returned the cheques to the drawers. I wonder if the fact that cheques are not being returned now has contributed in some way to this fraud being thought up and perpetrated?

Mr. Curran.—I do not know, that is a matter of speculation. From our point of view, it should not make any difference because our reconciliation procedures inside the office would show that something was missing.

1498. Mr. M. Ahern.—Perhaps if the person paying his tax had got his cheque back and saw that it was changed would then contact the tax office. It could have been a contributory factor to some people dreaming up this scheme.

Mr. Curran.—It is possible.

1499. Deputy Naughten.—What date were the Garda called in?

Mr. Curran.—The summer of 1986.

Deputy Naughten.—Was it June-July?

Mr. Curran.—Yes.

1500. Deputy Naughten.—Is it not possible that there could yet be an amount of cheques outstanding that have not surfaced? For example, people who sent cheques to the Revenue Commissioners may be of the impression that they have paid their tax liability whereas you would not have received those cheques.

Mr. Curran.—This is basically the same sort of question that Deputy Colley had in mind. I can see what you are driving at. My answer would be that if somebody in the last week or month or so has sent in a cheque and we have not received it I am not sure whether anyone would know that it had gone astray. If it gets beyond that the person should obviously be expecting to get a receipt or an acknowledgement. If the taxpayer does not get some sort of acknowledgement, he is going to ask a question. I would expect it to come to light that way.

1501. Deputy Naughten.—There were no receipts or acknowledgements in any of those cases that have surfaced?

Mr. Curran.—No.

1502. Chairman.—In conclusion may I ask if, in so far as you are aware, the banks have tidied up and tightened up on their arrangements? Can we take it that the banks will not cash any cheques made out to the Collector General or the Revenue Commissioners across the counter or have they been requested to be particularly vigilant? Has there been a tightening up from the banks end?

Mr. Curran.—I am not aware of that. As I said, in relation to some of these cheques which were negotiated, we will have ongoing discussions with the banks about their attitude and their role. I would not like to speculate too far about what the outcome would be on that.

1503. Chairman.—This attempted alleged fraud included 92 payments and 23 repayments, that is 115 transactions. How many transactions would the Revenue Commissioners do in a normal tax year approximately? Is it one million?

Mr. Curran.—I do not have that information. I do not know. If it is important I could get it.

1504. Chairman.—It is not but I am trying to find out how sizeable a proportion this is of all the transactions.

Mr. Curran.—There could be 40,000 cheques on hand in the Collector General’s office on a particular day. I am not saying he gets 40,000 on that day. It is of that order of magnitude. The number of cheques we are talking about here is a tiny fraction.

Chairman.—That is the point I am making, to keep it in proportion to the number of transactions.

Mr. Curran.—Yes, exactly. There is a question of charges pending.

1505. Deputy Dempsey.—When were these new procedures introduced to try to counteract the fraud that we have?

Mr. Curran.—The tightening up in the procedures for acknowledging receipts of payment and so on have been done very recently, I would say in the last few months.

1506. Deputy Dempsey.—Can I ask, then, why did it take so long to tighten up the procedures if it has been only done in the last few months when it became fairly obvious in the period May to July of last year that something was going on?

Mr. Curran.—At the beginning people did not quite realise what was going on. First of all, they had to investigate their own systems to pinpoint possible areas of weaknesses. I am not saying that these procedures actually were the things that led to the fraud. They started to review them when these things came to light last year and, as a result of these reviews and investigations, they decided that it would be necessary and very desirable to tighten up these things. It was necessary to do an investigation into the whole system to try to pinpoint where there were possible weaknesses. As I say we still do not know how the thing was done. We are looking around to see where could we possibly improve things or tighten them up. That is why it was not done immediately. They had to review the whole procedure first.

1507. Deputy Dempsey.—Nevertheless it seems an awfully long time for a review to go on into something that was very serious and was acknowledged to be very serious in May 1986.

Mr. Curran.—What was done immediately was that all staff concerned in this process were alerted to the dangers and they were warned to be on the look out. I would not like you to get the impression that nothing was done or that the organisation did not somehow respond to this problem. They did. Staff were warned particularly. They were told what had happened and they were warned to be on the look-out and to be particularly suspicious of anything that looked like a change or an amendment. At the same time, a review was carried out into the various procedures.

1508. Deputy Dempsey.—May I ask then when was the warning issued? That is fairly relevant.

Mr. Curran.—Last summer, in 1986.

1509. Chairman.—There are still some questions in relation to this matter to be determined and obviously there is the question of sub judice so the Committee will not press the case in more detail this morning. We will come back to it at a later stage when the court cases have been completed in relation to the next examination when you are here. We will note the report for now. We will now deal with paragraphs 21 and 22. Paragraph 21 of the Report of the Comptroller and Auditor General reads:

“Collection of Health Contributions, Youth Employment Levy and Income Levy

The Youth Employment Levy and Income Levy became payable from 6 April 1982 and 6 April 1983 respectively. The Collector General is now responsible for collecting these levies together with health contributions from all liable categories of income earners; prior to 6 April 1984 the Health Boards were responsible for their collection from farmers and arrears of approximately £20 million due to the Boards were still outstanding at 31 December 1984. In the case of PAYE taxpayers they are collected as part of their PRSI Contribution and in the case of the self-employed, including farmers, and those with investment income only, they are due and payable on or before 1 October each year.

The amount of levies and health contribution due from each taxpayer is based on the information regarding income held on the income tax computer record, but the Collector General can make an estimate of such income where adequate information is not available in these records.

In the course of audit it was noted that a total of £73 million demanded by the Collector General for the years 1979/80 to 1984/85 from the self-employed and those with investment income only and for 1984/85 from farmers with rateable valuation in excess of £40 was still outstanding at 31 December 1984.

It was also noted that the initial demands for 1984/85 levies and health contributions due on 1 October 1984 were not issued by the Collector General until 30 October 1984 and that when further demands for amounts outstanding were issued in April 1985 they were issued in selected Tax Districts only.

Furthermore, the levies and health contributions for 1984/85 were not demanded from farmers with holdings in the £30 to £39 rateable valuation range until April 1985 and no demands have issued to those farmers with holdings having a rateable valuation of less than £30, since, as stated in the previous paragraph, steps have not been taken to assess them for income tax.

I asked the Accounting Officer why enforcement procedures had not been implemented for the collection of amounts due to the Collector General and I sought his observations regarding the delay in issuing demands for levies and health contributions. I also inquired why estimated amounts were not demanded from those farmers with holdings of less than £30 rateable valuation and whether the assistance of the health boards, which had issued demands to all categories of farmers in earlier years, was sought for this purpose.”

Have you anything to add, Mr. McDonnell?

Mr. McDonnell.—The committee will recall that these two paragraphs were not completed on the last examination of the Accounting Officer for the Revenue Commissioners. What we are concerned with in paragraph 21 is the collection of the youth employment levy, the income levy and the health contributions from persons other than the PAYE taxpayers. The collection from PAYE taxpayers takes place automatically. The Revenue Commissioners became responsible for the collection of the levies and the health contributions from the different categories of non-PAYE taxpayers from various dates. In regard to the self-employed other than farmers, they were responsible for the collection of the levies and the health contributions from the dates they were introduced. They became responsible for collecting them from farmers in April 1984. As I mentioned, the figure of £73 million in the middle of the paragraph includes the amount demanded from the farmers for 1984-85 only, but also includes all sums demanded from the other categories of self-employed up to and including that year. Prior to the take-over of responsibility by the Revenue Commissioners, arrears of approximately £20 million due by the farmers to the health boards had accumulated and they still retain responsibility for collecting that amount. I gave a table to the clerk to circulate to the members which presents that information in a visual form, so perhaps that is some help. Apart from the question of the amounts demanded but not paid, which as you will see from the table I gave you totalled £93 million at the end of 1984, I also refer to the delay in issuing demands and reminders for the amounts due for 1984-85. I also refer to the fact that levies and health contributions have never been demanded by the Revenue Commissioners from farmers with holdings of less than £30 rateable valuation, even though they became responsible for this from 6 April 1984. This is parallel to the selective exclusion of this category from the procedures to determine tax liability. You may recall that you discussed this the last time under paragraph 20.

Chairman.—“Selective exclusion” is a very nice term for it.

Mr. McDonnell.—That is my expression. As you will see from my report I had made some inquiries from the Accounting Officer but subsequent to that the Accounting Officer told me — and I am going to give some statistics — that some 157,000 demands for the year 1984-85 were issued at the end of October 1984 and, as a result, the Collector General received 29,000 payments approximately and some 19,000 inquiries, which he received during the five months to March 1985. In the Revenue Commissioners’ view, it would not have been practicable to issue further demands or reminders for 1984-85 while staff were still dealing with these inquiries. However, repeat demands totalling in all 185,000 cases and covering 1984-85 and earlier years — the 157,000 demands I mentioned were for 1984-85 — were issued between April and June 1985. The Accounting Officer pointed out that the number of demands issued in that period had been swollen, of course, by the inclusion of farmers for the first time, that is to say farmers with a rateable valuation over £40 because they had been previously paying the levies to the health boards. A figure of 36,000 of those farmers was included. He also said there had been a staff problem because they had to reduce the number of staff in the Collector General’s office dealing with the health contributions. He went on to say that it had not been feasible to enforce collection of health contributions and levies because the enforcement facilities available to the Collector General have been inadequate — I will quote from his reply:

… to deal with the vast number of items in default under various tax heads and that this is resulting in deferment of enforcement of substantial amounts of tax compared with which the amounts of health contributions and levies are very small.

It was felt, therefore, that it would be undesirable to curtail enforcement of PAYE, PRSI and VAT and so on for the sake of the much smaller amounts which he said were in question here. In regard to what I described as the selective exclusion of farmers under £30 rateable valuation. he stated that in the situation where farmers with rateable valuations below £30 were not being assessed to income tax by tax inspectors, assessment and collection of levies from this category if it was not being done by the inspectors would have to be done as a special job by the Collector General and would have been done as a manual and costly job. I thought the health boards might have been some help in regard to that category of farmers because they, in fact, had issued demands to all farmers while they had been responsible. The Accounting Officer said that this would have complicated the question and it was not considered advisable to devote resources to that. Finally, the Accounting Officer said:

It had always been Revenue’s view that the best solution to the problem of collection of health contributions and levies would be to raise the equivalent revenue by increasing the rate of income tax.

This he said was supported by one of the recommendations of the Commission on Taxation. That in essence is the Accounting Officer’s reply to the questions which I raised in that paragraph. I hope I have given it fair coverage.

1510. Deputy M. Ahern.—The Comptroller and Auditor General referred to a figure of £93 million. How much of that money has been collected since the report?

Mr. Curran.—The £93 million is the estimate. Most of that would not be collectable at all. For all years up to 1984-85, the amount outstanding on levies likely to be collected is £6 million.

1511. Deputy M. Ahern.—That is out of the £93 million?

Mr. Curran.—For all years up to 1984-85 the net charge would have been £97 million and £33 million would have been paid. Our estimate of the balance likely to be collected is about £6 million.

Chairman.—Does that mean——

Mr. Curran.—What it means in essence is that the way the office went about it by issuing these demands and by not going on to enforcement has led to a situation where we have collected £33 million. Our estimate of the balance which is likely to be collectable is £6 million.

1512. Chairman.—Do you mean collectable or liable for collection?

Mr. Curran.—Liable for collection.

1513. Chairman.—The final liability, in other words?

Mr. Curran.—That is right. An awful lot of this is linked with estimated amounts. Another important thing to remember is many people in the farming area with medical cards would not be liable for it at all.

1514. Deputy M. Ahern.—In the Southern Health Board the outstanding sums are being collected because people are being brought to court. They are paying up and I think people should know that. We are really talking about the Revenue Commissioners side of the collection. At present the health contributions and the levies are charged to the people but to date you do not follow that up by putting it into the hands of the sheriff?

Mr. Curran.—This is something I want to have a look at. I think we are moving into a new situation as more Revenue sheriffs have been appointed all around the country. We are dealing here with 1984 and at that time there was a very great problem about enforcement through the sheriffs. This is something that we will certainly look into.

1515. Deputy Naughten.—Has the Youghal court case with regard to the collection of health contributions made it difficult for your office to pursue the collection of health contributions now?

Mr. Curran.—I am afraid you have me there, Deputy.

1516. Deputy Naughten.—The decision given by the district justice was that in his opinion there was no liability on the person billed by the Southern Health Board to pay the health contribution due to the fact that there was a legal technicality with the legislation when it was introduced.

Mr. Curran.—Is this something which is to be collected by the Southern Health Board?

1517. Deputy Naughten.—Correct, the collection of health contributions.

Mr. Curran.—I do not think that had any effect on our operations. I would have to look into that. I am not aware of it but if this is something that affected enforcement by the health board it would not necessarily have the same implication for us.

1518. Deputy Naughten.—With regard to the selective exclusion of under £30, are you assessing the people with land valuation of £30 or under at present?

Mr. Curran.—The farm profile forms are going out to those people as well and we hope when we get these forms back that we will get the picture. I would imagine that the majority of them would have no net liability. Apart from income, many of them would be medical card holders so they would be outside the scope of these levies.

Deputy Naughten.—Is it true that the profile forms are not being processed at present?

Mr. Curran.—No, they are being sent out.

1519. Deputy Naughten.—But they are not being processed?

Mr. Curran.—Perhaps the Deputy is thinking of the problem with regard to the staff in our office a couple of years ago. That is water under the bridge and we are now in a new situation and these profile forms are being sent out at present.

1520. Deputy Naughten.—That is news to me because I was informed by one of the district tax offices that they were not being handled. I would like to ask the Accounting Officer if he is aware that in view of the new regulations issued by the Department of Health for qualification for a hospital services card a person must have from the Revenue Commissioners his liability for health contribution assessed and paid to the Collector General before he will get a hospital services card and because the profile forms are not being handled now this is holding up that process.

Mr. Curran.—The Deputy has taken me by surprise on that. The farm profile forms are being sent out and we have been assured by the staff unions involved of their full cooperation in this. If the Deputy has been informed by some individual tax officer that that is not being done, all I can say is that some tax officer is either not following his union’s policy or the instructions of the Revenue Commissioners. It may hinge on the word “process” because the forms are only being sent out at present and the processing will not start until they start coming back in.

1521. Deputy Naughten.—I can assure the Accounting Officer that I was told they were not being processed. I came across situations where people who wanted to get hospital services cards had to have their liability assessed by the Revenue Commissioners and I was told that those forms were not being handled.

Chairman.—Perhaps Mr. Curran could check that and sent the Deputy a note on it.

Mr. Curran.—I will.

1522. Deputy Naughten.—I can assure Mr. Curran that the information I have outlined is the information I was given in a tax office, that it was union policy that they were not to be handled.

Mr. Curran.—I see. I will be happy to send the Deputy a note on that.

1523. Deputy Naughten.—The problem to which I referred to with regard to limited eligibility for a hospital services card is causing major problems for many farmers. I would appreciate if steps could be taken by the Accounting Officer’s office to have a temporary certificate issued to those people so that they could qualify for a hospital services card.

Mr. Curran.—I will make a note of that.

1524. Deputy Foley.—I have a few questions based on the figures given by the Comptroller and Auditor General. There were 157,000 demands issued for the 1984-85 period involving the youth employment levy, income levy and health contributions. The Collector General received 29,000 payments and 19,000 enquiries. What has happened to the 19,000 enquiries? Were they followed through?

Mr. Curran.—Yes.

1525. Deputy Foley.—That is a total of 48,000 out of a figure of 157,000. That means that 109,000 people ignored the demands. Was there a follow-up on those people?

Mr. Curran.—The following year there was a repeat demand. In October 1984 we issued 157,000 demands. In April and June we issued 130,000 demands, a repeat demand, and we followed them up in April 1986 when we issued demands again.

Deputy Foley.—I accept that, but it meant that the 109,000 people who did not respond got no further query until the following April to June. That is 130,000 demands——

Mr. Curran.—That is right.

Deputy Foley.—The same applied the following year?

Mr. Curran.—That is right.

Deputy Foley.—Would it have been worthwhile to follow through the people who ignored the first demand? They obviously ignored the second and third demands.

Mr. Curran.—Do you mean, to follow up more quickly?

Deputy Foley.—Not more quickly, but it is obvious that there were people who ignored the demands for the three years.

Mr. Curran.—That gets down to the question of enforcement.

Deputy Foley.—That is right.

Mr. Curran.—We issued the demands and where we did not receive a response or a repayment we issued the demands again. As was explained in the Accounting Officer’s communication to the Comptroller and Auditor General which he has brought to your attention, the question then arose as to whether they should be moved into the enforcement area which in practice meant going to the Sheriffs. The decision was taken that because of the scarce resources and the difficulties which were being experienced at that time in relation to enforcement through the sheriffs, it would not be practicable, without disrupting the other procedures, to follow these through into the enforcement phase. We now have a new situation and we will be looking into that to see whether we can do something about it now.

1526. Deputy Foley.—I accept that but, in fairness to the people who have responded by paying, there is a number of people who have ignored correspondence from the Revenue Commissioners over a period of three years and as a result — and I am not saying they have avoided the situation — they have not been followed through. How did you arrive at an estimate on the demands that were sent out? You have made the point that a share of them would not be liable because they are medical card holders. With regard to the farm profile forms that are now being issued, will there be information on the forms that will quantify the situation in relation to these farmers with regard to the previous three years?

Mr. Curran.—The farm profile forms when received back will be checked against the demands issued and we will find that a large majority of them have no liability. The point I am making is that these figures issued show that there is an amount of £73 million due to the Revenue Commissioners. I accept the figure of £20 million due to the health boards and I understand that they are taking steps to recoup that amount at present. Nonetheless a wrong impression is given through the media to the PAYE section and creates a lot of problems.

1527. Deputy Foley.—Exactly, and that is not real money at all.

Mr. Curran.—No, it is not real money.

1528. Deputy Foley.—That is part of the mythical millions. Certainly, that is a situation which should not be allowed to develop.

Mr. Curran.—That is right. As I mentioned, the amount that we think likely to be collected for all the years up to 1984-85 is £6 million. That is £6 million in addition to the £33 million already paid.

1529. Deputy Foley.—It is £39 million?

Mr. Curran.—That is right. In other words, the system as it has operated has collected £33 million. Our best estimate is that the balance which should be paid is approximately £6 million.

1530. Deputy Foley.—That is £33 million plus £6 million which is £39 million. That would leave approximately £34 million to be struck off out of the £73 million. Is that correct?

Mr. Curran.—The figures I have given are for all years up to 1984-85.

1531. Deputy Foley.—How many farm profile forms have been issued to date?

Mr. Curran.—About 20,000.

1532. Deputy Foley.—How many do you anticipate will be issued?

Mr. Curran.—So far we have issued 20,000. We think the numbers will total about 60,000. We are going through segments gradually, one after another.

1533. Deputy Colley.—Would the accounting officer be able to tell us what proportion of Revenue staff work on the levies and contributions side?

Mr. Curran.—In 1985? In the note given here there were 13 working on that aspect early in 1984 but they had to be reduced to seven in 1985; that is in the Collector-General’s Office.

1534. Deputy Colley.—That is seven staff in total?

Mr. Curran.—That is right, in the Collector-General’s Office.

1536. Deputy Colley.—What strikes me is that, if there are 157,000 demands sent out and there are seven people following up those. am I right in relating the farmer figure to the latter—

Mr. Curran.—157,000 demands were issued — obviously through the computer system — but when the responses were received — the inquiries, the caller and the letters — we had 13 people dealing with those early in 1984. That figure had been reduced to seven early in 1985.

1536. Deputy Colley.—I see. The repeat demands issued — 185,000 of those — would have gone out with seven people following those up?

Mr. Curran.—That is right.

1537. Deputy Colley.—Is the Accounting Officer happy with the method of working in terms of sending out those vast numbers of demands, according to your figures — a great number of which are not relevant. Is the Accounting Officer happy about continuing that system?

Mr. Curran.—Does the Deputy mean the numbers of forms?

1538. Deputy Colley.—I do, yes. Obviously a great number of forms go to people who are not liable?

Mr. Curran.—We do not know that until we get the response. We may very well have an idea. Tax is imposed by law. The law states a certain thing. We send out these demands to everybody we think might conceivably be liable to tax. We know, from experience, that many of them will not be but we cannot be sure until there has been some response from them. That is the problem.

1539. Deputy Colley.—I can understand but is there no way that it can be brought to bear more fruit, to be more productive? I am bearing in mind what the previous Chairman of the Revenue Commissioners was quoted as saying in relation to the possibility of raising the levels of income tax payable as opposed to following up on contributions, levies and so on. Would Revenue have weighted one against the other as a better method of collection?

Mr. Curran.—Yes. We have no difficulty about that — I might emphasise — from the technical point of view. I emphasise that because decisions to do things that way were taken by the Government of the day. But, from the purely technical point of view of collection, the problem is that these levies and contributions go down or relate to the first pound of income. As we are all aware in the PAYE income tax system there is a floor below which there is no liability incurred. These levies do not follow that pattern. Therefore, strictly speaking one is liable for levy and so on the very first pound of income. That takes one into the area in which one is dealing with very low incomes indeed. The tax system is not geared to go down into those areas.

Deputy Colley.—And very large numbers?

Mr. Curran.—Very large numbers, yes.

1540. Deputy Colley.—As you mentioned the collection procedures, are the Revenue Commissioners giving consideration to the suggestion contained in the Fifth Report of the Commission on Taxation to localise collection procedures and to have local collection offices?

Mr. Curran.—Certainly we examined that possibility. At present we do not see that as the way forward. We do not really see what is to be gained by it.

1541. Deputy Dempsey.—In relation to something the Comptroller and Auditor General has said in relation to paragraph 21 and the question of the health board records being used to follow up the categories of farmers, if I understood him correctly, he said that the Accounting Officer stated that it would only have added to the complications. Could the Accounting Officer elaborate on that for me?

Mr. Curran.—The basic point here is that if these people we are talking about were to be pursued, we would know in advance that a very large number would not be liable anyway because of the medical card provision. It would have had to be done by a manual process because the computer programmes and systems are not designed to cater for this. What would have been involved would have been a manual process. If you add then correspondence with all the health boards you will readily see you merely increase the potential for writing letters, moving paper and creating a lot of manual clerical work for which we were not geared.

1542. Deputy Dempsey.—Presumably, if you had 157,000 demands issued, you must have had names, addresses and so on on computer. Health boards would probably have had this on computer as well. Would it not have been comparatively easy to match one list against the other, or would it have been terribly complicated?

Mr. Curran.—To begin with, I am not sure that the health boards have all of these details on computer. If they have they might not have them listed in such a way that the code numbers would be matched. I appreciate the Deputy’s point, that perhaps we could take the two computer programmes, match them and try to do it that way. But that could have been done only if the whole thing had been programmed beforehand. That is not the case. Even if we got computer print-outs they would have to be checked manually.

1543. Deputy Dempsey.—May I ask a further question in relation to the farm profile forms mentioned? Are the Revenue Commissioners satisfied that they have the resources to deal with the farm profile system? In relation to the levies and so on — and I appreciate the difficulties the Accounting Officer has outlined — you appear not to have the resources to follow up on farm profile forms, on inquiries and so on?

Mr. Curran.—Just to explain, we are dealing with two separate areas of the office. When we are talking about the collection of levies that was the Collector General’s office. The farm profiles go through the tax offices. We are satisfied that we have the resources to deal with that. I am assured that the unions, pace Deputy Naughten, have assured us of their co-operation in this.

Deputy Dempsey.—So you are satisfied it can be dealt with?

Mr. Curran.—Yes.

1544. Chairman.—One of the problems we had in the past was that in the Cork region, your predecessor informed the committee, you issued a number of profiles. A number of people ignored the profiles and you then proceeded to pursue the people who had replied. The people who did not reply more or less got away more lightly. That was the generality of the thing at the time. Can I take it from what you are saying here that all of those who were due to make a contribution will be pursued, that that contribution based on their income will be sought from them and that there will be no question of this situation continuing?

Mr. Curran.—These demands are being repeated to the people to whom we have sent them. According as we get information we were able to delete some from the potential list. We will look further into the possibility of going to enforcement. I am bound to say again that there is very little money involved in this and we would perhaps have to devote quite substantial resources which could be better used. The new factor in the situation is the new sheriff system and we will see whether something can be done with that.

1545. Chairman.—But is there not a problem with the levy being low because the incomes are not known? Is there not at least the likelihood that people have substantial incomes in parts of these areas which are not known and, therefore, not only not coming into income tax but because they are not coming into income tax they are not coming into levies?

Mr. Curran.—This is the sort of thing that will emerge if and when we can get the sheriffs out after them.

1546. Deputy M. Ahern.—All farmers came into the tax net from 1983-84 onwards?

Mr. Curran.—Yes.

1547. Deputy Ahern.—So, these profile forms that are going out at the moment to all the farmers who have not been assessed previously will show whether they are making money, whether they are taxable, but it is on their gross income anyhow that the levies are going to be based. Whether there is going to be tax liability or not, there would possibly be a levy liability. My question is really two questions. First of all with regard to the income tax — if this new batch of profiles will show these people having a liability or not, will they be liable to make returns from 1983-84 to date?

Mr. Curran.—The returns would be from the current date. You are talking about the levies.

1548. Deputy Ahern.—I know, that, yes, but under the income tax regulations as the law came into effect all farmers were liable from 1983-84 onwards. Will they be required, even though they are getting the profiles only now. to furnish accounts from 1983-84?

Mr. Curran.—First of all, when we get the profiles back we will see that many of them will not have liability. The remainder, where there will be a liability, will tend to show the scale of operation and the general scale of liability. The inspector certainly will go back — if this is your question — over the previous years and there will be an attempt to come to some estimate of the tax due.

1549. Deputy Ahern.—That would also help you in determining the level of levies that would be due.

Mr. Curran.—Yes, correct.

1550. Deputy Naughten.—Did I hear you correctly there when you said that you would be going back over a period of two to three years?

Mr. Curran.—Yes. In those cases where the circumstances seem to warrant it where the profile forms seem to suggest that there could be substantial liability going back, the inspector certainly will go back.

Deputy Naughten.—The profile form issued is for the current year, is that correct?

Mr. Curran.—That is right.

Deputy Naughten.—It is for income, as far as I can remember, from June 1985 to June 1986.

Mr. Curran.—It would give you an idea of the scale of the operations.

Deputy Naughten.—It does not necessarily mean that you will not be going back for about two, three or four years?

Mr. Curran.—That is correct.

1551. Deputy Dempsey.—I have just one question in relation to what has been said here. This group seem to be hesitant about sending back returns to the Revenue Commissioners. Do you feel that the penalties for not returning these forms, are sufficiently high, or is there anything that can be done in that area that might encourage people — maybe not my means of penalties but by some other suggestion that you might have — to make returns? As you say yourself, undoubtedly quite a number of them will not be liable for anything and if we can get those off the books it would give us a better idea of what we are dealing with. Are there penalties or otherwise you can suggest?

Mr. Curran.—There are penalties but it is the problem of the administrative machinery. If you want to get penalties you have to employ legal staff, go to court and you have to get a fine. That would be more complicated than the earlier matter we were talking about of sending enforcement to the sheriff. It is not a question of whether we are reluctant to look for penalties or whether the penalties are inadequate. In relation to the particular small area, it is a question of allocating resources to follow it up.

1552. Deputy Dempsey.—In relation to a recent advertisement I saw relating to returns of income by various groups — self-employed mainly — I noticed that there is a 10 per cent levy on accounts that are not paid by a particular date. That is law now and can be taken automatically. Is there anything that can be done without recourse to law in these circumstances? Have you any suggestions on that line?

Mr. Curran.—In relation to the 1 per cent levies, these people technically are breaking all sorts of laws and there are penalties, surcharges and so on. But in order to bring them to court, one would have to go through an immense amount of work. Therefore, it is not a question of the inadequacy of the penalties but a question of the inadequacy of the resources to chase many very small individual cases.

1553. Chairman.—That is something that we will return to when we look at the effectiveness and utilisation of staff. There are a number of matters which need to be looked at there. We will note that the committee agrees and will return to it in the next report but we will also be talking about the general problem when we get to the terms of the examination later on.

Paragraph 22 of the Report of the Comptroller and Auditor General reads:

Residential Property Tax

I referred in paragraph 20 of my previous Report to the introduction from April 1983 of a Residential Property Tax. The tax is self assessed and by 31 December 1984, £2.1 million had been received by the Collector General (£1.1 million in 1984). The tax is payable by any person owning and occupying residential property having a market value exceeding £65,000 on 5 April 1983 (£65,622 on 5 April 1984). Exemption from the tax may be claimed in any case where the gross annual income of the household does not exceed £20,000 (£22,030 for 1984/85). The tax is payable at a rate of 1.5 per cent of the amount by which the market value of the property exceeds the prescribed limit.

I note that the initial arrangements made for the assessment and collection of the tax provided that returns showing all residential property and gross household income be sought by the Revenue Commissioners from any person who appeared to be liable on the basis of income tax records or on the basis of having a residential property with a rateable valuation in excess of £30, this being regarded as a measure of market value exceeding £65,000. Returns were to be made by 1 October and persons who assessed themselves as liable to tax were required to remit the declared amount with the returns. From my examination of the procedures in operation to verify the information provided by the returns it appeared that it was not possible to establish whether all residential property, wherever situated, had been declared by the owners and that, where exemption from tax was claimed on income grounds, limited checks only were made on some of the returns to verify that all household earners had been declared.

I have sought the observations of the Accounting Officer as to the adequacy of procedures for ensuring that all assessable persons and taxable property have been identified and that the self-assessment returns are correct.

Have you anything to add, Mr. McDonnell?

Mr. McDonnell.—Paragraph 22 deals with the new residential property tax as it was then which had been in force for about two years at that time. As I said, it is a self-assessed tax and I give information about the amount collected and so on and then proceed to identify persons who might be liable to tax. My concern was that, having required persons in selected income categories or property valuation categories to give information, the Revenue Commissioners would need to establish the accuracy of the information and also to ensure, of course, that all liable persons were making returns. Following my report, the Accounting Officer gave me some details, the numbers and so on. He said that there were 56,000 returns received for 1983 of which 6,000 showed liability to tax and 50,000 claimed exemption. For 1984, the total was 23,700, of which 5,000 showed liability and the rest claimed exemption. He told me about the follow-up action which had been taken in these cases and he said that in May 1985 final notices under threat of High Court proceedings had been issued to just over 16,000 householders who had not made returns for 1983. Following that, in October 1985 he told me that there was no basis which would ensure that completed returns are delivered by every person properly liable to the tax because the income tax records would not necessarily show the total gross income within a household. That was the basis in this case, not the individual income but the total gross income within a household. Also, the information given by the local authorities on valuation was not more than a guide to market value and would not identify residential properties which might be held by the same person in different locations. He also referred to the staff not being adequate to examine each case every year to verify the particulars furnished and the amounts of tax paid but he did say that it was intended to review our returns over a period of three to five years. He said that an investigation unit had been set up, which it was intended to strengthen, and it was collecting information from various sources with a view to ensuring that persons liable to the tax are identified and have made returns. This investigation unit had turned up about 2,000 cases of probable liability and it had also disallowed claims to exemption which had been made by some people. He did say, finally, that having regard again to staff resources and the potential yield, his view was that the procedures were adequate to establish the correctness of the returns.

Chairman.—I do not think we need make a meal of this. Deputy Ahern indicated first and then Deputy Foley.

1554. Deputy M. Ahern.—What was the cost of the residential property tax, vis-à-vis the returns that have come in?

Mr. Curran.—We have approximately 12 staff employed on it and the actual wage costs involved would be about £100,000 annually.

1555. Deputy M. Ahern.—It is a net benefit to the State, but would you consider that the residential property tax was not properly structured or researched before it was put into operation and that it was a mish-mash of a tax that was brought in?

Chairman.—You are getting into the policy area now.

Mr. Curran.—I am not saying that it should not be there, but I am talking about the administrative side of it.

Chairman.—In the absence of Deputy Barry Desmond, I think I will have to rule that question out.

1556. Deputy M. Ahern.—From the administrative side, was it satisfactory from the Revenue point of view?

Mr. Curran.—From the administrative point of view, purely from the point of view of organising the tax and running it, it works.

Deputy Ahern.—Satisfactorily?

Mr. Curran.—Satisfactorily from our point of view. In other words, when you are given certain valuation limits and certain income limits and are told that it is a self-assessment tax, it works. We are getting in whatever there is there, I think.

1557. Chairman.—You have seven people working on collecting levies. If you had these 16 people working on chasing income tax for those who have refused to join the scheme, if you like, would they not be much more efficiently used pursuing a real income tax?

Mr. Curran.—You mean instead of going after the residential property tax?

1558. Chairman.—Are they best utilised doing that? Would they not bring in much more money if they were actually allocated to pursuing other areas of obvious evasion?

Mr. Curran.—That is arguable but we are not completely free to make that decision because—

Chairman.—Because it is on the Statute Book?

Mr. Curran.—Exactly.

Chairman.—You are obliged to collect it.

Mr. Curran.—We have to do something about it. How much we do about it is a matter for some management. But we cannot ignore it.

Chairman.—You have to pursue it because there is a Statute there.

Mr. Curran.—That is right.

Chairman.—Given the number of staff who are allocated, if those people were freed to work in other areas of tax, such as farmer tax, income tax or corporation tax, is it not likely that the return to the State would be much higher?

Mr. Curran.—I think I would have to agree with you, chairman. The return per head of staff would probably be higher if they were sent elsewhere, but it is not open to us to do that.

1559. Deputy Colley.—It seems that if we have already discovered this morning that seven people were allocated — it was 13 but now it is only seven — to the bringing in of levies and contributions which yielded £33 million and could yield another £6 million and 16 people——

Mr. Curran.—Twelve.

1560. Deputy Colley.—Twelve people are working on a scheme which brings in £1 million approximately. Is that right?

Mr. Curran.—In 1986 it brought in the best part of £2 million.

Deputy Colley.—Do you get the drift? The point is that if you have 12 people working on something that brings in substantially less, is that the right way to go about it?

Mr. Curran.—That is not primarily a question for me. It is a policy matter.

1561. Deputy Colley.—I take your point in that if it is on the Statute Book one must pursue it, but it is up to the Revenue Commissioners to decide where they allocate their resources most, and it would seem that the return must have some bearing on that. If you only collect between £1 million and £2 million a year it hardly justifies putting 12 people on it if you have only seven people trying to collect £39 million or more.

Mr. Curran.—There is a question of training and expertise involved, too. Staff are sometimes not immediately available for transfer to other work. The residential property tax is a new tax with new rules and a whole new system had to be worked out. The question of the number of staff to be assigned to it is something on which we keep an eye. I am not saying that at some time we may not take some off and put them elsewhere. We are constantly doing this.

1562. Deputy Colley.—The Accounting Officer said that he thought they had reached the limit of what there is to be collected. Presumably the systems are in place and the work continues?

Mr. Curran.—Yes.

1563. Deputy Colley.—Does the Accounting Officer think that in the future he could take staff off that, because of that?

Mr. Curran.—It is quite possible.

1564. Deputy Foley.—In 1983, when residential property tax was introduced, 56,000 people responded, of whom 6,000 were liable and 50,000 claimed the exemption. Were those 50,000 followed through?

Mr. Curran.—Yes. I can give figures for subsequent years. The cases who claimed exemption were all examined to see whether the claim stood up.

1565. Deputy Foley.—Were all of the 50,000 accepted?

Mr. Curran.—No, not all. There were some queries but, by and large, they stood up. In 1984, 23,700 people responded of whom 5,000 were liable. There was a drop of 1,000 from the previous year, or is it 5,000 on top of 6,000?

1566. Deputy Foley.—You mean the numbers of taxable returns dropping?

Mr. Curran.—Yes, that is true.

1567. Deputy Foley.—It is 5,000 plus 6,000, or is there a drop of 1,000?

Mr. Curran.—For the valuation date April 1983 we had 5,900 taxable returns; for the valuation date April 1984 we had 5,500; for April 1985 we had 5,200; and for April 1986 we had 4,900.

1568. Deputy Foley.—I accept the figures, but has the constant drop each year been as a result of the property market?

Mr. Curran.—It must be. The market value, which is what the tax is based on, is indexed in new house prices and not to the general market level.

1569. Deputy Foley.—But the Act says that where valuation is in excess of £30 that would be taken into account as well.

Mr. Curran.—I am not quite sure what the point there is.

1570. Deputy Foley.—The Commissioner’s valuation in excess of £30 was arrived at as a means of assessment.

Chairman.—The Commissioners have been using the £30 valuation as a yardstick.

Mr. Curran.—For exemption?

1571. Deputy Foley.—For arriving at a valuation of market value.

Mr. Curran.—I see.

1572. Deputy Foley.—So, the numbers have dwindled each year since 1983; is that right?

Mr. Curran.—They have. They have dwindled for two reasons. One is the market value. In other words, the index for new house prices is going up quicker than the general market value. The other reason is the income exemption limit. The income exemption limit is linked to the consumer price index, but then the index may have gone up quicker than the actual incomes went up. There are two things there which tend to explain why the number of taxable returns is going down.

1573. Deputy Foley.—Just to follow up on Deputy Colley’s point. It is obvious that the residential property tax could become a non-event in a few years if that is the case.

Mr. Curran.—If this trend continues, that is true.

1574. Deputy Foley.—It is a waste of the 12 staff assigned to residential property tax at the moment. They would be much better employed elsewhere, where the return would be greater?

Mr. Curran.—Yes, I daresay it is a fair guess that they would bring in more money.

Chairman.—The committee have noted the comments about the allocation of staff. In the light of Deputy Foley’s comments, it has already become something of a non-event unless there is to be some change in the whole thing. We will move on to Vote 8. Since we have a very important motion to deal with perhaps we could dispose of this as quickly as possible. Are there any comments on the vote?

1575. Deputy Foley.—On No. 7, Subhead F—Law Charges, Fees and Rewards—what do rewards cover?

Mr. Curran.—Things like customs seizures. For the people and guards involved there is a system of rewards there.

Deputy Foley.—Does it go beyond the Garda? Does it apply to the private sector?

Mr. Curran.—Very occasionally we can pay a reward for information.

Deputy Foley.—Does it apply to income tax and all aspects of the Revenue Commissioners?

Mr. Curran.—It does, yes.

Deputy Foley.—Of that total, how much approximately will be paid out in rewards?

Mr. Curran.—The figure I have is that £3,800 was spent on rewards for Gardaí in relation to illicit distillation.

1576. Chairman.—Could you say that again?

Mr. Curran.—£3,874 for Gardaí in relation to illicit distillation. There was another amount of £95,568. That is for other general rewards including customs seizures.

Chairman.—Payable to whom?

Mr. Curran.—Customs staff and Gardaí.

Chairman.—As an incentive?

Mr. Curran.—Yes.

Chairman.—Is it taxable?

Mr. Curran.—It is, yes.

1577. Deputy Foley.—What about the private sector?

Mr. Curran.—Rewards are paid to people in the private sector for information.

Deputy Foley.—But of the total figure of £1 million is the total amount paid out for rewards approximately £134,000?

Mr. Curran.—The figure I have is £98,000.

Deputy Foley.—That is the total figure?

Mr. Curran.—Yes.

1578. Deputy Dempsey.—Do the rewards in that case ever involve writing off of tax liability for information?

Mr. Curran.—No.

1579. Chairman.—On the subscriptions to international organisations, the vote was £19,000 and the expenditure was £21,000. What sort of international organisations would that involve?

Mr. Curran.—There are two. One is the Customs Co-operation Council which is a worldwide body. Almost 100 countries around the world are members of it. It publishes a standardised tariff and coding list which is used worldwide and it enables information about international trade to be co-ordinated and compared. It also exchanges information on matters like enforcement and it helps to spread information about drug smuggling. There is another convention which it runs, that is, an international convention about the valuation rules for goods in international trade. This is a very important international group. The other one is an organisation called the International Union for the Publication of Customs Tariffs. This body has its headquarters in Brussels. Its basic functions is that it compares tariffs issued by different countries and translates, compares and issues them to interested parties. These are the two organisations involved.

1580. Deputy Colley.—I would like to ask one question about subhead G — Compensation and Losses. Under this heading a sum of £23,051 was expended more than was granted. Can you explain to us what is involved under this heading?

Mr. Curran.—This would cover accidents involving official cars or personal injury suffered while on official duty. They are the main things. As to why the amount is in excess, each year this subhead is a token subhead. The amount that is actually spent will inevitably be in excess. It is a token subhead.

1581. Chairman.—If there are no other questions on the Vote we will move on to the terms of our examination in general. I will read for the record the following motion passed by the committee:

To consider the effectiveness with which the Revenue Commissioners utilise their staff and other resources in Custom control, in identifying taxpayers, in identifying their income sources and level of income and in the assessment to tax of all such income and the collection of all tax finally assessed including the enforcement of collection in cases of default and the adequacy of control in view of recent developments.

That is a big mouthful, if I might use the term. What we want to do is to assist the Revenue Commissioners in becoming more effective in doing the job which the Oireachtas wants them to do. I do not know if there are any opening comments that you wish to make but I feel that both the Revenue Commissioners and the Committee of Public Accounts have a mutual interest in bringing about the effective use of all our resources. It is my view that this is an area which from both the Revenue Commissioners’ point of view and the Committee of Public Accounts’ point of view needs examining and going into. In recent times, particularly in the Fifth Report of the Commission on Taxation, reference was made to the question of self-assessment. If self-assessment were to come about it would require changes in the way staff are trained and they would need to be orientated more towards auditing rather than tax law etc. Some changes will have to come about and it would be helpful if the Committee were to go into that area. While it is a matter for the Committee, I think we should invite submissions from others concerned, perhaps members of the Commission on Taxation, the Institute of Taxation and Practitioners. Normally officials from Public Service and the Department of Finance are present here. I would not object if that examination were to take place if somebody from the Revenue Commissioners wanted to sit in on it. I do not feel that there is a “them” and “us” situation involved here. A parliamentary job needs to be done to try somehow to free the machinery of State so that these taxes can be assessed and collected more fairly and more evenly. I do not know whether you have any opening comments that you would like to make? I know you have submitted a report to us. Perhaps, other members of the committee have questions they would like to ask you.

1582. Deputy Foley.—Is it fair to Mr. Curran to deal with that matter today? Would it be possible to give him a chance to peruse it and then come back to us?

Chairman.—Mr. Curran has had notice of it.

Mr. Curran.—Perhaps, I could make a general comment. We have the good fortune in this country to live in an open society. We all welcome that. The affairs of the office of the Revenue Commissioners are open to inspection. The most minute detail is paraded publicly here. We welcome, if I may say so, the presence of the Comptroller and Auditor General. If he was not provided for in the Constitution, we would have to invent him because any large organisation must have an independent external audit function so that the top management can be assured that everything is in order. Having said all that, I would welcome any further opportunities we may have to explain the workings of the organisation and to expose it to the public gaze. Naturally, the details of individual taxpayers are confidential but apart from that everything else is on the table. Certainly, we would be more than willing to co-operate with the committee if you feel that this is the proper forum in which to do it. We would welcome the opportunity.

1583. Chairman.—The Committee have already agreed the terms of reference for examination. The examination should be set in a non-sensational atmosphere and carried out in a scientific sort of way. We should not spend too much time over it because we already have the Commission on Taxation report. The committee decided in the past that rather than await the full examination of a year’s accounts that from time to time we may bring special reports to the House. There is a general feeling, and it certainly is a matter of direct concern for this Committee, that there is a problem with the machinery and that it is not the fault of the Revenue Commissioners; it is the manner in which the tax legislation operates. You are the only Department of State—if I can call you a Department of State — which has to put up with an annual Finance Act. I do not think any other Department has an annual Act of such scientific and technical detail. We have not had a Consolidated Act since 1967. This is a very complicated area, it is not an easy area. If we were to look mutually at the question over a short period to try to see if on an all-party basis we can come up with a report in the House which would help the Minister in formulating a policy to try to free the machinery, we would be doing a useful day’s work. We should not approach that matter in a fault-finding way or in an “out to get” anybody way. It is a complicated matter and it would be a good public service if we were to go down that road. We are due to finish at 1.30 p.m. today. I have a meeting with the Comptroller and Auditor General at 2.30 p.m. in relation to the new format of the Estimates, so we will have to finish at 1.30 p.m. in any event.

1584. Deputy M. Ahern.—This may be straying from the general discussion but one point you raised was in relation to self-assessment. Would the Accounting Officer be able to say whether the inspectors are acting at present on this basis?

Mr. Curran.—I think I know what the Deputy is driving at. What we are doing at the moment is moving towards a position of what we call critical examination. That is to say that, in the large majority of cases we will accept accounts, particularly where experience shows that they tend to be reliable, and we will go in detail into a selected number. That is not quite the same thing as self-assessment, but I think that is what the Deputy has in mind. That system is not fully operational everywhere but it is spreading throughout the organisation.

1585. Deputy M. Ahern.—So it is going in the direction of self-assessment?

Mr. Curran.—It is.

1586. Deputy M. Ahern.—Just one other point while I have the floor. I have received some complaints from councils’ offices that they are not getting replies from the Collector General’s office as quickly as they should. Perhaps you could have that looked into.

1587. Deputy Foley.—Am I correct in stating that you have approximately 6,764 staff at the moment?

Mr. Curran.—It is of that order, yes.

1588. Deputy Foley.—Do you believe that is sufficient staffing?

Mr. Curran.—Put it this way, we can run the organisation with that number of staff. Inevitably we have to cut corners here and there. We cannot do things the way they were always done in a traditional manner. For example, I have just explained in response to Deputy Ahern this business of critical examination. This means that we do not have the manpower to examine every account in great detail. A similar thing happens on another side of the House. Traditionally, the system for examining customs entries was that every entry presented to the customs had to be examined in detail and “passed”. We have got away from that in the last three or four years. We now have what we call an acceptance procedure and, if I can use the phrase, we critically examine only a small proportion of them. This is essentially the way to run the organisation. It is done on a sampling or selective basis. Once that is accepted, we can run the office more or less with the numbers we have. If you were to attempt to examine everything in detail I am not sure how many more staff you would need — hundreds — and I am not sure even if it would be possible.

1589. Deputy Foley.—You have 25 assigned to a task force. Do you think that number is sufficient? Is that the total number you have assigned to the task force?

Mr. Curran.—Just to explain the task force, that is a special group of civil servants who are on loan from the Department of Finance. They have been given a particular task which they are pursuing. We do not start from the concept of a task force and say how many people should we have for it. Our starting position is, “Here are 25 people: use them”. That is how there came to be 25 people.

1590. Deputy Foley.—Have the task force been successful to date?

Mr. Curran.—Yes. They were set a target to bring in about £10 million and they are on target.

1591. Deputy Foley.—But the point I am making is, in view of the success of the 25 would it be much more successful if you had two groups of 25?

Mr. Curran.—But we have a few hundred in the Collector General’s Office.

1592. Deputy Foley.—I accept that but since this group have been set a target of £10 million and they are on target, would it be better if they had more assistance or a separate group set up, in view of the amount of money that is outstanding?

Mr. Curran.—I would not like to say that. I think this task force is doing valuable work and it will perform the task assigned to it. But, if you were to set up, say, five more task forces and send them out, they might collect money but it could well be money that would have come in otherwise through the ordinary system of collection. You could not be sure, in fact, that you would actually get more money.

1593. Chairman.—We are going into private session when we conclude with this, but the committee has decided to examine it. I think perhaps the best thing we can do is communicate with you and tell you how we propose to do that. I wonder if you undertake at regular intervals management reviews or internal reviews of the revenue structures and systems?

Mr. Curran.—Yes, we do. We have a management system of accountable management which starts from top. That is to say, the aims and objectives of the office as a whole are spelled out. I have a copy here if it is of interest. Within that there are two separate programmes, the customs and excise service and the inland revenue. These functions and objectives are spelled out in detail.

1594. Chairman.—Perhaps the clerk could get a copy of that from you.

Mr. Curran.—Certainly. That is the start. The management system builds down from that. In other words, the head of each section within this writes out his own functions, his own priorities, he notes what staff and what resources he has. This is an ongoing management system. There are two management committees which meet in our offices, a management committee for the customs and excise and a management committee for the inland revenue. These meet at intervals and they review the functions, aims and objectives of their various areas and they compare their achievements against the targets they were set last year. This is a long way of answering your question which was do we review our own organisation. The answer is, yes we do on an ongoing basis.

1595. Chairman.—But you are aware, for instance, that the Commission on Taxation made a number of recommendations, including one that the Public Accounts Committee should review the procedures to clear arrears of tax by instalments. But also they come down strongly on self-assessment. In the last couple of days I heard one of the tax unions not just coming down in favour of self-assessment but stating that there are £400 million in taxes outstanding to be collected. There are not £400 million in taxes outstanding to be collected. But I would like to see some system of estimate for outstanding taxes so that this sort of figure cannot be bandied around for propaganda purposes or whatever purposes it is used. That is something which we have to bear in mind also. In relation to paragraph 16.7 of the Fifth Report of the Commission on Taxation where they say “We recommend that the Public Accounts Committee should review the procedures to clear arrears of tax by instalments”, have you any comment to make on that and, in particular, are you aware of what the Commission had in mind when they made that recommendation?

Mr. Curran.—No, I do not want to comment on the Commission on Taxation, with respect. We will co-operate fully with your committee in investigating any of these matters which you wish.

1596. Chairman.—You are not aware of what the problem was with that, because it is not clear from the paragraph why they are making the recommendation?

Mr. Curran.—I am tempted to make a comment about the Commission but I would rather not, with respect, Chairman.

1597. Deputy Colley.—I would like to have a couple of pieces of information that are purely numerical. What proportion of the total staff in inland revenue work on the PAYE side, on the self-employment side and on customs and excise?

Mr. Curran.—We have various breakdowns. For example, in the office of the Chief Inspector of Taxes — this covers all the tax offices — there are 3,000 people employed. In the office of the Superintendents of Customs and Excise, which covers the departmental customs and excise staff — mainly the ex-headquarters staff — there are 1,770 employed.

1598. Deputy Colley.—Not to waste our time, I believe that I have this information here somewhere. It is not so much that I want a full breakdown of each area, but I want comparative figures dealing with the PAYE and the self-employed sector.

Mr. Curran.—We will work out something and perhaps we could send it on. Is it the staff in the Collector General’s office and in the tax inspectors office that you want?

1599. Deputy Colley.—What I want to do is to be able to compare the numbers of staff who work on PAYE taxpayers as opposed to the numbers of staff who work on self-employed taxpayers.

Mr. Curran.—Well, that covers different sections in the office as well.

1600. Chairman.—You might relate it to the number of taxpayers in each case so that we can have some idea of the concentration.

Mr. Curran.—Yes, we can do that.

Chairman.—There will be some follow-up points and the clerk of the committee will be in touch with your office about it. Is there anything you want to say before we finish?

Mr. Curran.—No. I would suggest that if you are going to launch yourself into an investigation of effectiveness, efficiency and so on, I hope you will be very careful in setting out the terms of reference and who is going to do the investigation because you could spent a lot of time talking at large but if you specify quite clearly what you want then we will be very happy to co-operate.

Chairman.—Thank you.

The witness withdrew.

The Committee went into private session. The Committee adjourned.