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, 11 Nollaig, 1986

Thursday, 11 December, 1986

The Committee met at 10 a.m.

Members Present:

DEPUTY FOLEY in the chair

Mr. P.L. McDonnell (An tArd Reachtaire Cuntas Agus Ciste) called and examined.

VOTE 8—OFFICE OF THE REVENUE COMMISSIONERS.

Mr. Séamas Páircéir called and examined.

575. Chairman.—Paragraphs 14 to 17, inclusive, of the Report of the Comptroller and Auditor General read:

Revenue Account

is shown in the following statement:—

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

15. The net yield of Revenue for the years 1984 and 1983 under its main headings is shown in the following statement:—

Extra-Statutory Repayments

16. Extra-statutory repayments of Customs duties, £54, Excise duties, £111,876, Value-Added tax, £277,377 and Stamp duties, £27,809 were made during the year.

Remissions and Amounts Irrecoverable

17. I have been furnished with schedules of cases involving a loss of £100 or upwards in which claims under the Revenue Acts were remitted without statutory authority or passed as irrecoverable during the year ended 31 December 1984.

The total amount of the items included. in the schedules, £1,307,265, 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.

Comptroller and Auditor General (Mr. McDonnell).—The usual practice is to take paragraphs 14 to 17 of my report together because these give the standard type of information to the committee. They refer to my audit of the revenue and they give details of the net yield in paragraph 15 under its main headings, the extra statutory repayments in paragraph 16 and the amounts written off in paragraph 17 analysed under the tax heads and under the grounds of remission or write off.

576. Deputy G. Mitchell.—Given the Minister’s announcement last night, the Public Accounts Committee should meet more often with the chairman of the Revenue Commissioners. Could the chairman tell me how many Revenue Commissioners there are?

Mr. S. Páircéir.—Three.

577. Deputy G. Mitchell.—What is the salary of a Revenue Commissioner?

Mr. Páircéir.—Two Commissioners have the same salary as a Secretary of a Department and that is about £35,000. The chairman has the same salary as the Secretary of the Department of the Public Service and the Department of Agriculture and that is about £38,000.

578. Deputy G. Mitchell.—Could I ask the Accounting Officer if he is aware that the Commission on Taxation reported that the administration of the tax system has almost broken down and that the Public Accounts Committee should review payment of tax by instalments and what plans he has to improve the administration of the tax system?

Mr. Páircéir.—I am aware of the reports and the recommendations. I do not honestly see how within the scope of this report of the Comptroller and Auditor General I am going to accommodate the last question.

579. Deputy G. Mitchell.—I do not expect you to accommodate, Mr. Páircéir; I expect you to answer the questions that are put to you. You are aware that the administration of tax has almost broken down, according to the Commission on Taxation, and that the Public Accounts Committee should review the payment of tax by instalments. What have you done to improve the collection of tax and administration of the tax system?

Mr. Páircéir.—My main task, at which I spend all my time, is dealing with the administration of the tax system. The way that I have to go about that is that I have the organisation under the Board of the Revenue so structured that there are specialists dealing with the various tax heads as well as with the customs and excise duties. In relation to the Commission on Taxation, which said that the administration of the tax had virtually broken down, I, first of all, do not agree with that for the reason that we have succeeded year after year in bringing in within reasonable limits of error the amount of tax which was required for budgetary considerations. The figures in paragraph 15 for 1984 do not support the idea of a broken down system of tax collection. Income Tax, including PAYE, has yielded about £2 billion, Value-Added-Tax, £1.3 billion; and the overall revenue for the year is £5 billion. I think that the Commission on Taxation were talking about certain areas of tax enforcement and tax compliance. Some of that was mentioned at various times by various Ministers for Finance, about improving enforcement and about trying to do something about compliance. The latest thing — the one you mentioned — is the Minister’s statement this morning. Last year on 23 October the Taoiseach announced that it was the Government’s intention to appoint new Sheriffs. That was in recognition of the fact that enforcement through the agency of the County Registrars was unsatisfactory; in fact, it is dealt with in the report of the Comptroller and Auditor General at a later paragraph. At the moment we are co-operating and working in harness with the representatives of the IMF to consider whether we should have self-assessing, but that is a matter for policy. Apart from that, you can take it that it is the business of the Revenue — and they apply themselves to it — to try to get in the money.

580. Deputy G. Mitchell.—Could I ask finally on these paragraphs: it seems ironic that the statement coming from the Minister should come on the eve of the meeting of this committee with the chairman of the Revenue Commissioners. I do not think that played any small part in the announcement being made at this time. Could I ask the Accounting Officer finally, under paragraph 15 regarding customs duties and excise, if he is aware that in the view of the Wine and Spirit Association of Ireland they claim that 150,000 cases of spirits are being smuggled across the Border annually, sometimes in consignments of 30,000 bottles a time, and if he is further aware that they are concerned, and have expressed their concern to the select Committee on Crime, Lawlessness and Vandalism, that the penalty for smuggling, which is sometimes, I understand three times the value of the smuggled goods plus the confiscation of the vehicle, is not sufficient because there is no publicity given. Not only is the smuggling organised but when the Army were out searching for Don Tidey they found a bridge which had been built across the Border to facilitate this large scale smuggling. Would the Accounting Officer feel that in large-scale smuggling of that kind giving publicity to the event might be a greater deterrent than simply settling where there is large scale smuggling involved?

Mr. Páircéir.—I would agree that publicity in the area of customs seizures is almost as important as the seizure itself. That is very often difficult to organise.

581. Deputy McGahon.—Would you accept that horrific amounts of money have gone across the Border in recent years and are you aware that the Belfast Chamber of Commerce in 1984 said that £500 million was spent in the North of Ireland? Do you accept my charge that the customs authorities’ arrangements are totally inadequate to prevent large scale smuggling of the type that we have in the Border area? Are you aware that up to last year the customs personnel in Dundalk had one car which was used by four crews throughout the day and do you accept that one car is totally inadequate to prevent large scale smuggling? Can you also tell me how many people are engaged along the Border in customs detection?

Mr. Páircéir.—First of all, about the amount of money that is crossing the Border and being spent north of the Border, a great deal of this arises legitimately through our membership of the EC. If we are, as I am this morning, being referred to a wide range of matters of which I should be aware of as a citizen of this country, I am also aware that we are dealing with the Single European Bill and that it is a matter of policy to go down the road towards the internal market. Part of the internal market is that each individual can spend £252 in goods which he can bring south across the frontier. I would suggest that in the ordinary course there are not many shopping days in which people spend £252 per head of the family. There is an enormous amount of legitimate trade crossing over the frontier. At the moment we are mounting exercises on the frontier where virtually every car that passes through the authorised channels is being stopped. We are making a record number of seizures. I may comment, too, on the fact that we are also in receipt of a record number of representations from public representatives asking us to alleviate the hard lot of these people who are in excess of even the £252 worth of goods that they can bring across the frontier. With regard to the smuggling and to the bigger exercises, part of that is that we have a 300-mile frontier. I have said on another occasion and I will say it here again today, there is no authorised number of people adequate to patrol the desire on the part of people to smuggle across the Border. If you talk about some of these large exercises in smuggling, these must all be going to some commercial outlets. They are not going into somebody’s back pocket to be consumed at the side of a barn or something like that. Some of these are quite sizeable and we have made sizeable seizures in the liquor area and in the grain area and in the cattle area. However, an enormous number of people would be required and the total number that we have engaged in various activities in Customs and Excise in just about 2,000 people. A great deal of our energies is in fact concentrated on the frontier and we have a system whereby, seasonally, additional numbers are sent up there. I do not think I would ever have a situation where, as I will repeat, the surveillance cannot be but a deterrent, that we could stop the smuggling. In regard to the cars the position is that there are 30 cars on the land frontier.

582. Deputy McGahon.—How many were there in 1984?

Mr. Páircéir.—Give or take one or two, 30.

583. Deputy McGahon.—I can tell you there was only one car in Dundalk. This underlines the ineffective measures. I realise, having lived there, it is not easy to combat this matter. I am not talking about the people who avail of their EC requirement to go down and purchase goods in the promised land. I am talking about the commercial smuggler who is certainly undermining the economy of this country, particularly, as you say, in the cattle area, the liquor area and the petrol area. I feel that the numbers which you have on the ground are totally unable to combat what in many cases is carried out by highly organised professional gangs of smugglers. I am sure you are aware that many of your own men are actually in physical danger. Some of them have been assaulted in recent years and cars have been rammed very dangerously at high speed. You are aware of that.

Mr. Páircéir.—Yes.

584. Deputy McGahon.—I believe some other measures must be introduced in the fight against large scale smuggling. Would you accept that the law of the diminishing returns exists in the Border region in relation to the extent of excise duties and taxes? Would you agree that it would be more beneficial to the economy of this country if the taxes were reduced and harmonised with those pertaining in the North of Ireland?

Mr. Páircéir.—I cannot answer that.

Deputy McGahon.— Why not?

Chairman.—That is right, it is a policy matter, a matter for the Government.

Mr. Páircéir.—I can answer it this way, that it would be perceived that in fact such must be the long term intention in view of the requirements for the creation of an internal market.

585. Deputy McGahon.—And you are aware of the extent of the liquor smuggling which goes into every county in this country? You are aware of the extent of the amount of spirits that are smuggled?

Mr. Páircéir.—I am aware that it is of serious extent but I do not really know its exact extent.

586. Deputy M. Ahern.—Just two questions — one on paragraph 15 and one on paragraph 17. On paragraph 15, I note that the agricultural levies have fallen in 1984 from 1983. Can you give any particular reason for that? The second question is in regard to the irrecoverables. What is the trend from 1984 to date with regard to remissions and amounts irrecoverable, has it been increasing?

Mr. Páircéir.—The answer to the first question about the agricultural levies is that although we do the collecting for that, really the estimate and explanation are supplied by the Department of Agriculture, so I would have to let you have a note about that. I do not honestly know. With regard to the second question, paragraph 17, the 314 items passed as irrecoverable are really only a reflection of the capacity that the organisation had to deal with this particular problem and it should not be taken as an indication of the amount of potential for passing as irrecoverable that there is. In general, I think in the next few years we will see that there is an increasing tendency in that direction, under the heading of the analysis in paragraph 17, but that has more to do with the fact that we are getting around to it and trying to get on with it. As you can imagine, where we have had to deploy staff on those things that have the greatest cost benefit, this business of getting rid of deadwood was not very high in the priorities. I think it is not an indicator of the potential for passing.

587. Chairman.—I would like to make an observation. For the past number of years many firms have got into problems with regard to VAT and PRSI and in many cases they were behind, but you must have made much progress this year because it has come to my notice that this year already people who owe VAT for May and June have been issued with civil bills. I take it that is a step in the right direction. I am making the point that you have come on top of the situation in many cases?

Mr. Páircéir.—On practically all fronts we have advanced the period in respect of which we are now taking action, but that still leaves us with problems in relation to amounts we have with Sheriffs and County Registrars that have not been collected.

588. Chairman.—At the same time you must have improved your situation to be able to say that you are able to get on top of a situation where people are outstanding and that you have moved already for the current year?

Mr. Páircéir.—We have a two-speed system and, obviously, the bigger cases are in a fast lane.

Chairman.—It is also obvious that that must have improved your collection as well for the current year?

Mr. Páircéir.—Yes, I think it has.

589. Deputy G. Mitchell.—Could I just ask one general question before we move on? Does Mr. Páircéir keep in touch with international trends? Is there an international body of chairmen of revenue commissioners or some equivalent body, which keeps Mr. Páircéir in touch with international trends in tax collection?

Mr. Páircéir.—Not exactly that, but there are committees on taxation that meet under the aegis of the EC and there are also OECD taxation groups. We are constantly represented on all of these committees and the officers who are representatives then report to me.

590. Chairman.—Paragraphs 18 and 19 on the Comptroller and Auditor General read:

18.—The Revenue Commissioners have furnished me with the following schedules and footnotes thereon relating to the assessment and collection of taxes and the collection of pay-related social insurance contributions, health contributions, youth employment levy and income levy.

In reading these tables particular attention should be paid to the footnotes, especially to note (b) on Schedule 1.

Tax shown in Schedules 1 and 4 as under appeal does not become due until final determination of the appeal provided an amount specified by the taxpayer has been paid. With regard to the year of account 1984/85, much of the tax shown as outstanding is the subject of appeals made within the normal time limits following the making of assessments.

Schedule 1 — Income Tax (as at 31 May 1985)

(excluding PAYE)

(a) *While the amounts shown here were not, at 31 May 1985, disputed, it is likely that a significant proportion will be subject to claims for admission of late appeals.

(b) † While, as the schedule shows, the proportion of tax already collected in respect of earlier years is approximately 35% of the original charge, experience indicates that the proportion which is likely to be collected ultimately in respect of tax still outstanding for those years ranges from 1/8th to 1/10th of the balance, tending more towards 1/10th. The amount likely to be collected in respect of the years of account up to and including 1982/83 is £61 million. A somewhat higher percentage of the balance outstanding will be collected in respect of the more recent years 1983/84 and 1984/85 and the yield in respect of these two years will probably reach £140 million.

Schedule 1—PAYE Income Tax

(Tax Due from Employers)

Income Tax collected under the PAYE system and included in the amount of income tax collected as shown in paragraph 15 amounted to £1,682 million. Arrears outstanding at 31 May 1985 amounted to some £64 million representing only actual underpayments established and not including demands made on the basis of amounts estimated to be due.

As end-of-year returns from employers were not due to be furnished until 30 April 1985, there was no significant underpayment established for the year 1984/85 as at 31 May 1985.

Schedule 3—Pay-Related Social Insurance

(Amounts due from Employers)

The collection of Pay-Related Social Insurance (which includes the Youth Employment Levy, Income Levy and the Health Contribution), for PAYE employees is integrated into the tax collection system and £1,075 million was collected during 1984. Arrears outstanding at 31 May 1985 amounted to some £76 million representing only actual underpayments established and not including demands made on the basis of amounts estimated to be due.

As end-of-year returns from employers were not due to be furnished until 30 April 1985, there was no significant underpayment established for the year 1984/85, as at 31 May 1985.

Schedule 4—Corporation Tax as at 31 May 1985)

Schedule 5—Capital Gains Tax (as at 31 May 1985)

Schedule 6—Capital Acquisitions Tax (as at 31 May 1985)

Schedule 7—Surtax, Corporation Profits Tax and Wealth Tax (as at 31 May 1985)

The taxes referred to in this schedule have been abolished.

Schedule 8—Health Contributions, Youth Employment Levy and Income Levy (as at 31 May 1985)—(self-employed individuals and individuals with investment income only.)

Schedule 9—Value Added Tax (as at 31 May 1985)

(a) The following schedule shows the position as at 31 May 1985 of VAT liabilities declared and payments made on foot of returns submitted by taxable persons.

(b) Section 23 of the Value-Added Tax Act, 1972, as amended, provides that where the Revenue Commissioners have reason to believe that a person when submitting his return understates his VAT liability or obtains an excess VAT repayment or where a person fails to register for VAT they may estimate the amount of VAT due. The following schedule shows the position of such estimates as at 31 May 1985.

Notes:

(a)Estimates: Estimates raised by the Inspectors of Taxes represent gross liability and will therefore include amounts accounted for on any return already submitted for the period covered by such estimate.

(b)Paid: Includes tax paid before the estimate was raised as well as amounts paid subsequently.

(c) The following schedule shows the position as at 31 May 1985 in respect of estimates raised by the Collector General under section 22 of the Value Added Tax Act, 1972, where taxable persons have failed to furnish statutory returns by that date. The amounts paid represent estimates paid without submission of returns. The balances outstanding are not a measure of equitable liability and cannot, therefore, be taken as a measure of arrears of tax. Many of the outstanding returns may show little or no liability when furnished. Some may prove to be claims to repayment. While the returns remain outstanding it is not possible to quantify the liability other than by the process of making estimates.

Schedule 10—Residential Property Tax (as at 31 May 1985)

The following schedule shows the amount outstanding at 31 May 1985, in respect of cases where returns have been made or assessments made in the absence of returns.

Collection of Outstanding Taxes

19. In previous Reports reference was made to the enforcement procedure whereby cases in which tax is overdue are referred to the Sheriffs/County Registrars for collection. These reports noted that this method of enforcement was far from satisfactory and, as the following statistics show, the position has not improved during 1984.

TABLE 1

TABLE 2

Analysis under tax heads of cases on hand

Enforcements by Sheriffs and County Registrars realised £21.4 million and £10.7 million, respectively, during 1984.

Mr. McDonnell.—Paragraph 18 is quite a long paragraph because it comprises a series of tables. In fact, they run through pages of the report. These are tables supplied to me by the Revenue Commissioners which show the assessment and collection of the various taxes, PRSI, health contributions, levies and so on. The figures, as you will see, are expressed in rounded millions and the tables show the amount outstanding under each head of tax. I want to emphasise that that is shown on the basis of assessments made including estimated assessments. At the bottom of each table you will see the Revenue Commissioners’ estimate of how much of the amount outstanding is likely to be collected. In the light of what the Accounting Officer said in the course of the last discussion, perhaps you might like to take paragraph 19 with paragraph 18. Paragraph 19, which again is a table supplied to me by the Revenue Commissioners, deals with enforcement. The enforcement process, I think everyone will accept, is a vital part of the tax collection system. Unfortunately, as you will see in paragraph 19, the system — the Accounting Officer was just referring to this — is not as effective as it might be and there was not any great improvement over the 1983 position. Perhaps I am pre-empting the Accounting Officer in saying that the Sheriffs and County Registrars are subject to the Department of Justice, not the Revenue Commissioners. There is also the fact that, more recently, additional Sheriffs and County Registrars were appointed. He also referred to that. The situation, as I said, in that year had not improved greatly. I do not think it had improved at all, in fact, but whether it will improve in the future is another question.

591. Deputy G. Mitchell.—On paragraph 18, the charge for all years to 1982-83 is £4,312 million and the balance figure is £614 million. The figure of £1,522 was paid and in the final analysis of the balance of £614 million only £61 million is the estimate of the amount likely to be collected. Likewise, in 1984-85, £90 million out of a total of £695 million is the amount likely to be collected. Approximately 35 per cent of the original charge becomes liable and somewhere between one-eighth and one-tenth of the balance, tending more towards one-tenth according to the Comptroller and Auditor General’s report, falls due. In other words, if the Minister for Finance answers a question in the Dáil at any given time and says there is, say, £700 million estimated tax outstanding, in effect would it be correct to say that it is more likely that only one-eighth or one-tenth of that will actually fall due for collection?

Mr. Páircéir.—I do not quite follow where you get the £700 million.

592. Deputy G. Mitchell.—It was just a figure I took. Let us take the figure of the balance of £695 million for 1984-85. Is it correct to say that the estimated amount likely to be collected on that balance is £90 million?

Mr. Páircéir.—Yes.

593. Deputy G. Mitchell.—At the end of a year, when we see these big figures printed in the paper of taxes outstanding, in effect they only estimate the taxes outstanding and what is likely to be become due for collection is more likely to be one-eight or one-tenth of that figure?

Mr. Páircéir.—Taking the first question about what the Minister would say, I think it would be unlikely that the Minister would refer to 1984-85 and say there was £700 million outstanding and just leave it at that. In fact, you referred yourself to the statement the Minister made yesterday to the papers and he has rather been emphasising the contrary. In general, the answer to the question is yes.

594. Deputy G. Mitchell.—In the knowledge that the estimates your Office sends out are always inflated because that puts the person on the defensive and he or she has to come in and defend the estimate, are your estimates not inflated to such a degree that they give a false view to those taxpayers who are up to date of the amounts outstanding by errant taxpayers?

Mr. Páircéir.—I suppose they do, yes. After all, much of the questioning that has gone on here with me for the last couple of years and many of the comments in the papers have to do with an incorrect perception of the situation. I would accept that.

595. Deputy G. Mitchell.—The revenue under the main headings for the 1984 was £5,114 million. Is £5,114 million the correct figure? There was £90 million or thereabouts outstanding at the end of that year, which is a little over 1½ per cent. Is that the normal order of taxes which are outstanding at the end of each year?

Mr. Páircéir.—Well, if you take the £90 million for 1984-85 which is treated in these tables—

596. Chairman.—I am sorry Mr. Páircéir, it is £90 million plus £50 million plus £61 million.

Mr. Páircéir.—I think he is speaking about 1984-85. That is £90 million of £695 million. For the year 1984-85 — first of all I have explained here many times how the system works and the Comptroller and Auditor General reported a few years ago about the way the system works, so I assume that we all understand that — by 1 October ——

597. Deputy G. Mitchell.—I do not think that you can assume that we all understand it. Members have not been on this committee continually.

Mr. Páircéir.—Is that a request that I would explain it?

Deputy G. Mitchell.—You cannot assume that we all understand it.

Chairman.—Does anybody wish to have it clarified?

598. Deputy G. Mitchell.—Maybe the Accounting Office could proceed and if somebody does not understand he can intervene.

Mr. Páircéir.—For the year 1984.85, the first payment which must be made by the taxpayers is on 1 October. By reason of the way the system works, that now is usually the specified amount. The specified amount is where the Revenue have, in the absence of a return, and the return has not been sent in because it would be virtually impossible for anybody to do so within the time span, we rely on the taxpayers estimating what is 90 per cent of their liability and paying that to Revenue. Usually they also appeal the tax and the balance of the tax does not become payable until the appeal has been determined. If you look at the figures in Schedule 1 of the paragraph you will notice that of the £695 million, £516 million is under appeal, so that a very large balance of the tax is at that time under appeal. By the time the returns are brought in and the appeals are processed three, four or six months, or even two years, may elapse. At 31 May 1985 it is really an estimate to say that we were likely to get in £90 million but it would not be true to say that it should have been paid before 31 May 1985. Therefore, you cannot derive from the figure of £90 million any kind of an estimate of the shortfall of collection. Similarily with Corporation Tax, which is another significant one, the same pattern exists. Part of this has to do, as the Comptroller and Auditor General has mentioned, with the presentation of the figures. Under Schedule 4, £135 million is estimated to be collected. A great bulk of the amount for the last year will be paid in the period subsequent to 31 May 1985, as will be reflected in the Report of the Comptroller and Auditor General which I think is about to be published.

599. Deputy G. Mitchell.—Could we just determine that of the charge in 1984-85 of £1,023 million, what will be collected in that year and become liable for collection in that year is £190 million plus £90 million, in your best estimate?

Mr. Páircéir.—No.

600. Deputy G. Mitchell.—Where am I going wrong? Would you explain that?

Mr. Páircéir.—Our best estimate is that is what will be collected but not in that year.

Deputy G. Mitchell.—Is that your best estimate of what will be finally liable for that year?

Mr. Páircéir.—Yes.

Deputy G. Mitchell.—That is the same thing.

Mr. Páircéir.—No, it is not.

Deputy G. Mitchell.—It is the same as I was saying originally, that you over-estimate the taxes—

Mr. Páircéir.—But it is not.

601. Deputy G. Mitchell.—Your office caused a strike in this city by providing information to the Dáil which gave people to understand that there was £1,023 million outstanding when in fact what you were liable to claim for that year was only £190 million, which you were paid, and £90 million which would become liable and due for that year — about 1½ per cent of the total income tax figure for that year. It would be higher than 1½ per cent but it would not be a great deal higher.

Why is it not possible to state clearly the actual amount of taxes which fall liable for collection rather than saying that the charge figure is £1,023 million, giving the impression that £1,023 million falls due? It does not fall due and liable.

Mr. Páircéir.—Is that a question?

Deputy G. Mitchell.—Yes, it is a question.

Mr. Páircéir.—I do not give that impression.

602. Deputy G. Mitchell.—You might have the impression that you do not give that impression but the Revenue Commissioners are constantly turning out figures which give the taxpayer — the person who is paying tax — the view that there are hundreds and hundreds of millions of pounds of tax outstanding when in effect that of a balance of £695 million in 1984-85 only £90 million will become liable, and that is a fact. Is that a fact?

Mr. Páircéir.—I will not dispute what you assert.

Deputy G. Mitchell.—Thank you.

603. Deputy McGahon.—I would like to support the Deputy. The practice of misleading, the use —

Mr. Páircéir.—I deny that.

604. Deputy McGahon.—Well, for whatever reason, it is not conducive to the public good. It fuels the belief of the PAYE worker that the self-employed and other sections are not paying their full taxes. In fairness, while I realise that you have a difficult job and you have to get your money in, that is a wrong approach. The figures you release annually, as Deputy Mitchell said, are totally misleading and cause a lot of friction among the various working sectors of the community. It puts undue pressure on the self-employed people. I think the figures are released for that purpose and they generally appear before the budget and, therefore, the system should be changed.

Chairman.—In fairness to Mr. Páircéir —

Deputy McGahon.—I am not blaming Mr. Páircéir.

605. Chairman.—He has already explained the position. If people are not prepared to make a return then there is an estimate of assessment coming through from the Revenue Commissioners. Is that correct?

Mr. Páircéir.—Yes I would also like to say that I, too, approach what the Minister called today this annual ritual, with even greater reluctance than anybody else in this room. If you would direct the Comptroller and Auditor General to stop publishing this report we might make some headway, or get Deputies to stop asking the Minister in the House to reveal all these figures. The system is a public system and provides for publication of this information. It is indeed unfortunate that some people either deliberately misrepresent these figures or use them as a stick to beat the self-employed which, is quite wrong, or do all these other things, cause strikes, as Deputy Mitchell said. I, of course, regret all of that. It seems to have got out of control, particularly as these figures are used, deliberately I think, to misrepresent the situation. I would like to say, because it has been mentioned a couple of times, I do not misrepresent the situation and I have not given the Minister misleading information in the Dáil. I have been accused of that three times before this committee. I did not do any such thing and the Minister never mislead anybody in the Dáil in my time or, to my knowledge, before that, about these figures.

Deputy G. Mitchell.—I just want to withdraw something which I may have said in the heat of the moment. I accused Mr. Páircéir of causing a strike and I want to withdraw that. I should not have said that.

Mr. Páircéir.—Thank you.

606. Deputy M. Ahern.—My comments on these figures is that the figures are there, explanations of the figures are there, and it is the people who interpret them for their own misuse are the people who stand to be condemned, not the people who produced the figures because take the figure of £1 billion for 1984-85 for the charge. There is an explanation of how this figure was calculated and how it is discharged and that it is the people who misused the figures afterwards who are the people who should be condemned, not the people who produced the facts.

Mr. McDonnell.—May I say something, Chairman? The Accounting Officer referred there to the possibility of perhaps not publishing these figures. As you know, I am statutorily obliged to report to the Dáil on the assessment, collection and bringing to account of the revenue and it is in the exercise of that statutory function, which I have, that these figures must be published each year. They are published in the form in which the Revenue Commissioners present them to me. The Accounting Officer has referred to — I think Deputy Mitchell also referred to it — the £190 million and £90 million being the final agreed liability in respect of 1984-85- That is the position. I know the Revenue Commissioners would take the view that the agreed liability is the true liability ultimately. I sometimes wonder whether the agreed liability and the true liability in an absolute sense are the same thing, What I am wondering is that the agreed liability is, if you like, at the end of the day, after all of the treating with the Revenue Commissioners and the process of appeal and so on and once settlement has been finalised, the absolute proof, so to speak, in terms of the taxpayer having proven every aspect of that liability. Sometimes that is something that I wonder about. I know the difference is discharged and the agreed liability becomes the true liability. I sometimes wonder if the truth, the absolute truth, lies somewhere in between.

607. Deputy Crotty.—Sorry, Chairman, I was late coming in; I had another important meeting to attend. I am sure the question was answered, but I want to raise it again: can we not get a more accurate assessment and not give the people who like to use figures the opportunity of doing so? This has been mentioned by all sides here this morning, that there are people who use figures, which are made available from the Revenue Commissioners, for their own ends and to prove their own point. Seeing that we have this difficulty, have the Revenue Commissioners made any progress in getting down to a more realistic assessment, because everyone agrees that the assessments that are dispatched in a large number of cases are not realistic and I question to know were they meant to be realistic?

Mr. Páircéir.—In answering that question I would like to distinguish between the estimate of liability in an individual case and the result that you get when you aggregate all of that together and produce one single table. First of all, there is a group of people who are the complying end, who in fact will supply their accounts, maybe on time, maybe somewhat late. Their liability will be determined in a satisfactory way. There are others who will not supply accounts but they will make some return to the Revenue and we will make some kind of stab at getting the estimate right, after a considerable amount of difficulty, because very often adequate records are not kept, books are not audited, etc. Then there is another group where in fact we use this assessing process because the people do not seem to want to communicate with us at all. In relation to the overall charge, where we use the assessing procedure as what I would call a forcing assessment to try to get people to pay some attention to their business and to come in and to give us some kind of a return, they tend to inflate the estimating process because you have absolutely no information at all about them really except that they are doing business. In the case of the people who are from time to time supplying us with information on a regular basis, the trouble about it now is the structure of the tax — there are so many of what are now fashionably called tax expenditure and there are also deductions in relation to things that are allowable that we all know about, such as bank interest, capital allowances or capital expenditures; we had stock relief for a while. These other factors which the Inspector when he is making his assessment does not really know about — and he will not know about them until such time as the taxpayer tells him — these also tend to inflate the estimates. There are also provisions, such as losses forward, and in the Corporation Tax end there are very complex reliefs. But we have been aware of the problem and in the year subsequent to this one, 1984-85, that is, in the year 1985-86 we did make a concerted attempt to try to trim down the estimation in the Income Tax, (excluding PAYE) and in the Corporation Tax area, and we have brought them down, as the Comptroller and Auditor General’s report will show, by about £200 million each. We are aware of the problem and have been trying to tackle it. The trouble about it is the great deal of unknown in it.

608. Deputy Crotty.—Just on a point of explanation, can the Revenue Commissioners in the final analysis demand or seek payment for an amount in excess of what they originally estimated, if it transpires that there is more tax due than what the estimate demanded?

Mr. Páircéir.—That is a technical question depending on whether or not they can legitimately make what is known as a discovery. The general answer is that in lots of cases, yes, they can make additional assessments if some additional facts come to their knowledge. But it is a rather tricky area and we have tended in the past, but we are more or less abandoning it now bit by bit, we tended to protect the end of the Revenue by keeping the assessment high.

609. Deputy Crotty.—Genuine people who wish to co-operate with the Revenue Commissioners feel very aggrieved — and no blame to them — when they get a very large demand, out of proportion, and also from the point of view of having to deal with this type of situation, a ritual every year, it is in everyone’s interest that realistic estimates should be dispatched. I do not see any reason, in view of the Accounting Officer’s reply to the last question, why this cannot be adopted in the future?

Mr. Páircéir.—First of all, nobody who complies in any way with the system gets a very large demand based on the estimate. The only circumstance in which you will get a demand based on the estimate is that, if you do not appeal it and specify the amount of liability — and you can specify nil if you have no liability — but if you ignore the whole process then you will get a demand based on the estimate. One of the problems in relation to the enforcement area is that people tend to sit on their hands, ignore the estimate, do not appeal, ignore the Revenue, wait for the Sheriff to arrive then try to start the process. The point is that any trader who is trying to stay within the system and to avoid large demands, or to avoid problems about money that he does not owe, has adequate protection in the system — in fact, I would say slightly over protected in the system — but it is where they decide to ignore it totally that we run into problems.

610. Deputy M. Ahern.—Paragraph 19 refers to the enforcement procedure. New Revenue solicitors have been set up recently. Would you have any comment on how they are operating, or has it helped the enforcement procedure?

Mr. Páircéir.—What we have done is to use solicitors in private practice to do Revenue work. We started off at District Court and Circuit level and in the middle of 1986 we moved into giving them High Court work. It certainly has improved the rate of judgments and the rate of recovery. The court processes are slow and sometimes complex.

611. Deputy G. Mitchell.—Very briefly on No. 18, perhaps I could recommend to the Comptroller and to the Accounting Officer that some modern system be found for laying out the actual liabilities so that when somebody asks a question or the PAC get a report, the final liability will stand out as clearly as it should, and anybody reading it will not mistake what the actual liability is. No. 19 refers to enforcement. You did refer earlier to the statement of the Taoiseach in October 1985 regarding the appointment of additional Sheriffs. Has the situation improved greatly since the 1984 report?

Mr. Páicéir.—The situation, generally, has not improved greatly since the 1984 report and the appointment of the Sheriffs obviously took a bit of time. At the moment we have a new Revenue Sheriff in Waterford, in Limerick and in Galway.

612. Deputy G. Mitchell.—Can we expect with the appointment of the Sheriffs that the situation will improve when they get into full swing?

Mr. Páircéir.—Yes.

613. Deputy G. Mitchell.—Does the fact that the Country Registrars are subject to the Department of Justice and not Finance or the Revenue Commissioners create any problem?

Mr. Páircéir.—There is a general piece of information which one should note about Country Registrars, that they are officers of the Court. Their primary function is to be officers of the Circuit Court. In that they have the freedom of action which is associated in this country with the Judiciary and though the Department of Justice are responsible for payment and the correctness of accounts and for other administrative matters, the Country Registrars are not accountable to the Department of Justice, that is to the Executive, in respect of what they do, but to the Judiciary. That is really the problem of accountability.

Deputy G. Mitchell.—What is the status of a Sheriff then in that regard?

Mr. Páircéir.—A Sheriff is also an officer of the Court but not as immediately associated with the Court as, say, a Country Registrar, in so far as he is an independent individual holding an office of very ancient origins.

Deputy G. Mitchell.—So we can take it then that now the Sheriffs are in place and are operating there will be significant increases?

Mr. Páircéir.—Indeed, I would hope so.

614. Deputy McGahon.—Do you have a special investigating unit in the Revenue?

Mr. Páircéir.—Several.

Deputy McGahon.—Do you pay informers?

Mr. Páircéir.—Yes.

Deputy McGahon.—How much would you pay an informer?

Chairman.—In fairness, I would say that would be a policy matter.

Mr. Páircéir.—It could be in the other end of the Appropriation Account. There is a report of moneys paid and—

Chairman.—It will be coming up under the Vote.

Mr. Páircéir.—We make a report. Not very much.

615. Deputy M. Ahern.—In relation to arrears, I presume there is a system of clearing arrears by instalments, or is there any specific instalment system there? Is it by agreement with the particular taxpayer?

Mr. Páircéir.—There is no such thing as an instalment system. It is part of the exercise of the discretion of the Revenue in getting in the revenue. As you know, every year the taxes and duties are committed to the care and management of the Revenue. Sometimes if you have large debts which people cannot pay, then you have to see whether, on balance, the people may be solvent and may be able to discharge their liabilities over a period of time, in which case it is wise to make some kind of an arrangement with them if they have some temporary trouble. On the other hand, if people are clearly not just illiquid but in fact have serious solvency problems and are not able to keep up their current liabilities, then we do not make instalments arrangements, not because we are taking any action about it but because the business situation itself does not allow for any actions to be taken, the thing is beyond redemption.

616. Deputy M. Ahern.—Is it discretionary?

Mr. Páircéir.—It has to do with the responsibility of collecting the money and we have to collect the money to the best of our ability.

617. Deputy M. Ahern.—You view each individual case and see their capabilities of paying and then allow them—

Mr. Páircéir.—Yes, in smaller cases that would be dealt with administratively at a fairly low level and merely as a matter of practice. When you get into substantial amounts, we have groups of people who deal specifically with that problem, particularly in recent years.

618. Deputy Crotty.—In view of the last question could I ask the Accounting Officer have the Revenue Commissioners any policy in relation to the collection of back taxes and the possibility of a firm continuing in operation? In other words, what is the relationship, and what flexibility is there for the Commissioners when dealing with this type of company?

Mr. Páircéir.—Whatever policy we have derives from our obligation to collect the tax, though very often, obviously, one has to take into consideration other questions such as employment, or disaster to a particular area, etc. Strictly speaking, that is an intrusion by the Revenue Commissioners on the function of other State bodies. The judgment we have to make then is whether in fact somebody has accumulated arrears of tax. There is usually some reason for this. That reason will be reflected in the capital statement of the company and also reflected in whatever way the company is financed. If it appears to the Revenue Commissioners that the company is viable and is capable of working its way out of this particular problem then of course we try to accommodate them. But if it is not, it is our business to provide what may be the ultimate enforcement for that particular group.

619. Deputy Crotty.—Do the Revenue Commissioners take into consideration, as a result of loss of employment, the cost to the State of social welfare of all kinds, the loss of income tax and these sorts of situations, or do they just treat it basically on an accounting basis?

Mr. Páircéir.—I do not think it is within our authority to make the kind of assessment in relation to the economy generally that the question presupposes. The social welfare system is there to cater for one kind of situation, the tax system is there to cater for one kind of situation. The answer would have to be within the parameters of what I said before. It has to do with the viability, in other words the real collectability of the amount at stake, not issues such as social issues or whether the State should support this particular trade or industry, or should support this particular locality, that would be an arrogation by the Revenue Commissioners of a function which is not theirs.

620. Deputy Crotty.—We note that in the recent past firms go into liquidation or receiverships and there are large amounts of uncollected tax, VAT, PRSI and this sort of thing. Why is this situation allowed to arise? It is causing a certain amount of disquiet in the minds of the general public. Could we get some general explanation of why people are allowed to accumulate large amounts of tax, unpaid and uncollected, and why the Revenue Commissioners have not collected it?

Mr. Páircéir.—Where you have a large company in financial trouble you will usually find that they will not owe any Corporation Tax. You will find that they will owe large sums of Value-Added Tax or PAYE or PayRelated Social Insurance. The scheme of taxation that we have in this country is such that about 50 per cent of the total tax revenue is committed into the hands of traders and employers to collect for the Exchequer and to remit to the Revenue. Before we introduced VAT at import in 1982 the amount of tax committed into the hands of the business community was nearer to 70 per cent of the total tax revenue. That is the system of tax collection which has evolved over the last 25 years. Up to the time we introduced PAYE in 1961 all of the tax revenue was in the hands of the Revenue Commissioners to collect directly from the tax paying public. Now we have a system where the consumer tax is collected through the agency of the traders and the employee’s tax through employers. That gives a company control of the money that should be remitted to the Revenue. I can say in passing that usually the most scandalous affairs giving rise to disquiet in the public mind arise in the case of good taxpayers. Where you have a very large organisation or corporation getting into trouble and it uses the Revenue money as working capital, it will have a previous history, as far as Revenue is concerned, of being a good remitter, because we go after the big ones. Then the amount of money that can be sidetracked into working is enormous because of the high levels of value-added tax and the high levels of the take from the pay between the PAYE and PRSI. That is fact number one. Fact number two is that the number of times there are incidents giving rise to this liability in the case of PAYE is 12 incidents every year and, in the case of VAT, six. So there are six occasions on which they should remit these moneys, and the kind of money we are talking about, as you see here, is over £2 billion nowadays in PAYE and about £1.5 billion in VAT. If a company wants to stay in being it has to attend to its affairs and try to make some arrangements with the Revenue or go into liquidation or whatever. If it decides to stay at arms length from the Revenue all the Revenue can do is sue in the Court for each of the liabilities as they arise. It can take, between getting a judgment in the Master’s Court for an undefended process summons for a liquidated amount, anything from ten to 16 weeks to get a judgment. During that period the company will have accumulated another rift of liabilities. Where you have a company which has really given up and is unable to work its way out of its problems and is now totally using as working capital whatever money, theoretic money, is there which is due to the Revenue, then we get this scandalous result at the end of the day.

621. Deputy Crotty.—I would go along with the larger firm, but there are firms which are not so large who have not paid some of these taxes for quite a considerable period. Why has this arisen. Is it lack of staff, lack of ability to pursue the collection? I am talking about where firms have not been brought to court to get a judgment. What is the general explanation?

Mr. Páircéir.—The general explanation is the thing we have touched on here this morning and on previous occasions: the enforcement of civil debt in this country is in a state of ineffectiveness. That is the key answer. That is the general answer. Part of it is in paragraph 19, where we have 79,000 unexecuted warrants out with the Sheriffs and County registrars at the end of 1984. There is a delay in the courts, the incidence of default and the antiquity of Sheriff law compared to the nature of ownership in current business circumstances where you have leasing, hire purchase, retention of ownership — all of these things really protect the goods from the Sheriffs.

622. Deputy Crotty.—Could I ask in a general way what period would the Revenue Commissioners allow to elapse before they would take strong action against any firm for VAT or for PAYE which has not been remitted?

Mr. Páircéir.—It depends on the size of the activity.

623. Deputy Crotty.—I am asking what has been the practice over the last two or three years?

Mr. Páircéir.—It depends on the size of the activity. In the case of VAT and PAYE, a very high proportion of the total tax remitted comes from a relatively small number of companies, for reasons of size. They are given immediate attention when they fall into arrear. You talk about a smaller guy. It could be anything from 12 months to two years before we might be able to get around to taking effective action against him.

624. Deputy Crotty.—Would this be a reason why a lot of these firms get into financial problems in that they are allowed to use this fund, which is freely available to them, to bolster a company which obviously requires other action, because they have become unprofitable? If the Revenue Commissioners were in a position to move in the same as any other creditor and demand payment after a month or maybe two months, would they not be providing a service to industry in this country generally?

Mr. Páircéir.—There are three points I would like to comment on there. First of all nobody is allowed to. I do not go along with that concept. They have a statutory obligation to make the remittance. We have organised the taxes with voluntary compliance by traders and employers. Secondly, like any other creditor, the level of bad debts reported in the major banks in recent years does not suggest that a lot of these people are having any greater joy with this thing than I am. I think that, if an individual or company wants to survive and goes down the road that you describe, we are going to put him out of business in the end or the bank is or somebody else will. But if he wants to survive he will have to make some arrangement and stop using Revenue money or make some arrangement or trim his sails in some way.

625. Deputy Crotty.—I think that this is a very important question for a lot of firms. I think it should be a very important question also for the Revenue Commissioners in that, while the Accounting Officer mentions that they should trim their sails or that they should take their business in hand, the fact of life is that here are funds which are available to them and they are by nature going to use them. I say this from experience, because I have had the experience of approaching the Revenue Commissers with people who have maybe inherited businesses or who have slipped into this sort of a situation. We have a difficulty, then, in working out an arrangement — a difficulty for the Revenue Commissioners and for the firm. I am convinced that quite a number of firms at present are failing because they have not taken their business in hand when the warning signs appeared, because this fund was available to them. Have the Revenue Commissioners taken this in hand or have they the resources to pursue the smaller firm who wish to pay their VAT, PAYE and so on, but who run into difficulties and are not prepared to face up to them. Have they any policy now to pursue these when due, in this type of situation, where a firm will go under because they get into substantial financial difficulties, due to the fund being left with them.

Mr. Páircéir.—I certainly do not think I would ever have an organisation large enough, or an enforcement system draconian enough, to deal with the multiple incidents of the type of thing the Deputy is referring to. I have some difficulty in understanding that these people would in some way be better off if we took the money sooner rather than later, because that seems to suggest that the money is available but we are not collecting it, and that if we had collected it the business would still survive. If the business is generating enough profitability to pay the Revenue Commissioners and the money is being expended in some other way, I do not think it is the function of the Revenue Commissioners to carry out a surveillance of the nature of the business. I have to implement the legislation. The shape of the legislation, that is the decision that has been come to by the Legislature, is that the taxes of VAT and PAYE and the collection of PRSI should be a matter mainly of voluntary compliance, not a matter of individual policing by the Revenue Commissioners. I am not staffed for it. The tax is not geared for it and I would have some doubts as to whether the business community would welcome it, because the shape of these taxes is dictated at the time that they are conceived by people including business interests who do not wish an overly interfering Revenue in their business affairs. Though the problem is very serious and gives rise to the results the Deputy describes, I do not think I could ever see the Revenue Commissioners being so organised as to deal with that kind of individual level.

626. Deputy Crotty.—I want to bring this to a conclusion. I think the Accounting Officer misses my point. I am not saying that the Revenue Commissioners should interfere with business people. I think they interfere too much with them as it is. So we are not at logger heads on that.

Mr. Páircéir.—You cannot have it both ways.

627. Deputy Crotty.—No. What I am saying is that any firm that is in business is liable for VAT and PRSI. The firm recognise that and the Revenue Commissioners recognise it. As the Accounting Officer mentioned, it is a voluntary business and the firm should submit them. I am questioning why the Revenue Commissioners do not pursue the payment, why they can run for 12 months or two years, why they are not pursued. The Accounting Officer also mentioned that if the firm are not in a position to pay their taxes, because of difficulties, the fact that they have not paid their taxes and are able to hold on to them will not save them. I would dispute this because then they have to say: “Where are we going wrong? Where must we make changes in our firm?” If they are left with these taxes for two years and they have traded for two years in bad circumstances, in circumstances in which they should not have continued — maybe it is pointed out to them by their accountant that they should take action, but they have not taken action, but if they must pay this tax and it is not available to them they will have to take action, and I am convinced in these situations the Revenue Commissioners are falling down on their duty to collect the tax which is due to the State and, secondly, are accountable for good firms going into liquidation or receivership.

Mr. Páircéir.—By way of a preliminary declaration, I have to say that I totally deny all of that. When I speak about pursuing these people I mean pursuing at the point where the sheriff knocks at the door. These people the Deputy describes, in the case of PAYE, will get one or two reminders every month that they have not sent in their money. When we come to the end of the year they will get a reminder that they should send in the P.35 and they may well get a summons if they do not send in the P.35 because that is one area where we prosecute. In the case of ValueAdded Tax they will get a reminder once every two months and in that case it will be followed some months later by an estimate of the amount they should have remitted and by a demand for the amount estimated and by a notice which says that this matter will be then sent to the sheriff. Deputy Crotty’s ideal businessman is certainly not unaware of his responsibilities and certainly it is not for any lack of the Revenue Commissioners reminding him. The point I am addressing is that you have either a situation of voluntary compliance or a situation of close policing. What we would need to do the kind of thing the Deputy is talking about is a much more widespread enforcement system. I am not against it, but I wonder whether the Legislature would ever accept it, that in all instances, in month two, when the money had not come in, I would have somebody knocking at the doors, shutting the shop door, like they do in the United States, going into the supermarket with a huge case and taking out all the contents of the tills and putting them into the case and bringing it back to the Inland Revenue Service. What we are talking about is that we need to do the thing the Deputy postulates and which we are not failing to do because we are not geared to do it and the Legislature does not visualise that we do it. We need the power to collect the money. Anything else only leads to the kind of discussion we have with the taxpayers now.

628. Deputy Crotty.—Have you sought the power to collect the money?

Mr. Páircéir.—Yes.

Deputy Crotty.—What was the reply?

Mr. Páircéir.—That is policy.

629. Deputy McGahon.—Would you accept that one of the reasons that many self-employed people tend to try to avoid the Revenue Commissioners is out of fear of the unknown? You referred earlier to the fact that many people, if they face their responsibility and contact the Revenue Commissioners may find they are not liable to tax. It underlines the case for a simplified tax system. Have you any type of system, or would you countenance any type of system that would allow small, self-employed people to pay on a monthly basis and at the end of the year have a final assessment rather than build up the kind of indebtedness to which Deputy Crotty referred and then find themselves unable to pay the accrued amount? Surely a system that would allow a monthly payment for small retailers would entice more people to come clean and would improve the Revenue situation for yourselves?

Mr. Páircéir.—In the case of the taxes they are supposed to collect and remit, that system is in operation already, the monthly remittance etc. The subject comes up sometimes under the heading of the tax liability of the trader himself, that he should pay by instalments, let us say a monthly sum related to his turnover. That is the kind of thing that is being considered at the moment under the heading of self-assessing. The only thing about it is that it would suit some people and not others and it is very hard to police it.

630. Deputy McGahon.—In the case of the larger company giving large employment, is there any type of incentive you could introduce, such as giving them some type of tax credit or tax incentive, to encourage them in their own interests to make payments — a discount? Would it not be beneficial to everybody?

Mr. Páircéir.—Again, strictly speaking it is policy; but it is a bit theoretical, I think. What kind of inducement do you need to put your hand in your pocket and fork out the money.

Deputy Crotty.—Give them Green Shield Stamps.

631. Deputy M. Ahern.—Going back to what Deputy Crotty was talking about, the enforcement of VAT, I have some across some cases recently in connection with people who have been paying their VAT regularly and correctly and when they fell behind in July or August they had a visit from the Sheriff in November because they had not the July/August amount paid by the end of October. Perhaps the Collector-General has brought up to date his enforcement policy?

Mr. Páircéir.—What county did it happen in?

632. Deputy M. Ahern.—Cork. In connection with other amounts outstanding, I presume that in cases here there are arrears and that there could be vets and doctors and other consultants who are being paid by the State. Was there ever consideration given to deducting tax at source from payments by the State to these people who are being paid by the

State, people such as vets who are doing TB testing or doctors and so on?

Mr. Páircéir.—The idea of operating some kind of withholding tax on these things has been considered from time to time but does not meet with any great enthusiastic response.

633. Deputy M. Ahern.—Is that because of the opposition from the bodies involved or because they are paying up their tax?

Mr. Páircéir.—The first, I would imagine.

634. Deputy G. Mitchell.—Could I ask the Accounting Officer what the rate of interest was an overdue taxes for the year in question? Was it 1½ per cent per month?

Mr. Páircéir.—One and a quarter per cent, I think.

Deputy G. Mitchell.—That is an annualised rate of 16 per cent?

Chairman.—Fifteen per cent.

635. Deputy G. Mitchell.—Effectively for a taxpayer paying a 50 per cent rate of tax, if he did not pay his due taxes, then he was being charged an affective 30 per cent interest rate compared to what he would have paid the banks, for instance, for funding that?

Mr. Páircéir.—I do not follow that.

636. Deputy G. Mitchell.—If a man was working off an overdraft he would pay only 15 per cent or something less than that and his business interests would probably be tax deductible, but his interest to the Revenue Commissioners would not be tax deductible. So it would be an effective rate of 30 per cent paid to the banks. I feel the interest situation is quite penal already. Whereas I agree with the principle set down by Deputy Crotty, I think there are exceptions to every rule and I think the system has to serve public interest and not public interest serve the system. For instance, I had a case yesterday where a company, which is relatively successful and which now pays VAT at the point of entry, is being hit with an interest bill of £42,000, in interest alone, none of which is tax deductible, and which may well threaten the viability and the employment within that company. I do think there are exceptions to every rule. I think there are sufficient powers there, particularly since recent Finance Acts, Finance Acts in the life of this Dáil, to pursue errants taxpayers. I want to say as a matter of record, because often Public Accounts Committee minutes are trotted out in support of stricter lines being taken, that in every case the public interest has to be considered. I do not think the public interest should be asked to serve the system; I think the system must serve the public interest. I do not think there is any perfect system or any perfect businessman. Certainly, we should pursue errant businessmen, but I think every case has to be examined on the basis of what is the public interest. I want to put that on record.

637. Deputy Crotty.—Mention was made of payment of VAT at the point of entry. Would the Accounting Officer inform the committee what difference this has made to the collection of VAT generally?

Mr. Páircéir.—From a collecting point of view it is obviously more satisfactory to get the tax at the earliest possible point. VAT at the point of entry has the same kind of structure as this country depended on for so long when we had high tariff barriers, where 60 per cent of the duties were coming in that way. I think there has been substantial cash flow gain to the Exchequer as the result of the introduction of VAT at the point of entry.

638. Deputy Crotty.—Could you quantify the cash flow gain?

Mr. Páircéir.—It varies; it depends on the—

639. Deputy Crotty.—Is the Accounting Officer aware that the collection of VAT at the point of entry causes problems to industries and firms in having their goods cleared and getting the documentation cleared and available to his officers for the release of goods? Has the Accounting Officer made any study of this and are there any plans to improve that situation so that there can be a free flow of goods and that industry will not suffer any disadvantage due to the collection of VAT at the point of entry?

Mr. Páircéir.—The entire structure of the manner in which the tax is collected and dealt with, the availability of deferment, the general administration of it has always borne this in mind. From time to time the Revenue Commissioners receive representations from particular groups which might have a problem. So that the matter is constantly kept under review, that people are not delayed unduly by the necessity of providing documentation.

640. Deputy Crotty.—Are you aware of particular difficulties and would you think that there is or has been a problem in this area?

Mr. Páircéir.—At the beginning there were some complaints about delay, but recently I had thought that the thing was running fairly smoothly, particularly as we excluded people who had what we call inward processing, importation for processing and for exportation, and we had excluded people who were manufacturing for export, etc. The people who were mainly disadvantaged by what was a totally unnecessary overhead in their activities have been taken out of the system as it gained experience. I was not aware of any recent problem of the nature the Deputy mentioned.

641. Chairman.—Paragraph 20 of the Report of the Comptroller and Auditor General reads:

“Income Tax

Under Section 11 of the Finance Act, 1983 all full time farmers are liable to Income Tax with effect from 6 April 1983 on the basis of their computed profits. Prior to that date only farmers with holdings in excess of £40 rateable valuation were liable. The procedures devised by the Revenue Commissioners to assess farmers becoming liable under the new statutory provisions were—

(a) the issue of a farm profile form to those farmers with holdings in the £30 to £39 rateable valuation range to get an idea of the scale of the farming enterprise,

(b) the review by the Inspectors of Taxes of the returned forms, with assessments to be made in the normal manner where, after review, liability to tax seemed likely. If the review suggested that liability was unlikely the case was to be noted accordingly and reviewed in future years.

(c) an estimated assessment to tax to be made if the form was not returned within thirty days.

During a local audit carried out by my staff in March 1985 at one Income Tax District Office it was noted that farm profile forms were issued in July/August 1983 to some 2,700 farmers with holdings in the £30 to £39 rateable valuation range. Of these, 500 were later identified as being existing PAYE etc. taxpayers. Out of 1,500 cases in which forms were returned, approximately 800 were, following review by the inspectors, considered to be liable for tax, but assessments in these cases did not commence to issue until December 1984. In the 700 cases, in which forms were not returned, reminders had not been issued nor had estimated assessments been made by March 1985. It was also noted that steps had not been taken to identify possible tax liability of farmers with holdings having a rateable valuation of less than £30.

I asked the Accounting Officer what steps were being taken to ensure that the farmers who did not return the farm profile form are assessed for tax and why estimated assessments had not been made in these cases; why the assessments for those considered liable did not commence to issue until December 1984 as such assessments should have issued by 1 October 1983, the due date for the payment of tax in respect of 1983/84; why no action was being taken in regard to farmers with holdings of less than £30 rateable valuation almost two years after the passing of the Finance Act, 1983, and whether other District Tax Offices had taken steps to ensure that farmers with holdings having a rateable valuation less than £40 were assessed for Income tax by 31 December 1984.

Mr. McDonnell.—This paragraph deals with the bringing of fulltime farmers with holdings having a rateable valuation of less than £40, within the income tax net, under the 1983 Finance Act. Prior to that, only farmers with higher rateable valuations were liable for income tax. The paragraph outlines what the Revenue Commissioners did with a view to assessing farmers in the new category. It then summarises the results of a local audit which was carried out by my staff in one Tax District. This suggested to us that the assessment of farmers under the 1983 Act was not being done expeditiously and, in some cases, not at all. It was because of this that I asked the Accounting Officer a number of questions about the assessment of this tax generally. He gave me a very long reply and in the course of that he provided a number of statistics relating to the assessment of the tax. Before I try to summarise those I should, first of all, say that he explained that in general the problem of assessing farmers with holdings below the £40 threshold was one of staff resources and that the work of identifying and assessing such farmers could be carried out only by diverting scarce resources from other areas. Because of this problem and because of an embargo imposed by the staff associations on additional work it was not until December 1984 that any significant moves could be made towards assessing this new category. When he replied to me, which was in October 1985, he said — I am going to give you some statistics here and try to break them down into the various stages of the processing if I might call it that—

642. Deputy G. Mitchell.—Do all of these statistics refer to one district?

Mr. McDonnell.—No. I mentioned figures in relation to one District in the report because we had only examined one District. But I felt that rather than confining it to one District for the purpose of discussion now I should perhaps give the statistics given by the Accounting Officer on a total basis. The statistics which I am going to give you relate to the overall situation and are broken down into the various stages of processing. He said that the farm profile forms, which are referred to and which are intended to get an idea of the scale of the enterprise, had been issued to 21,842 farmers in the rateable valuation range of £30 to £40 — not all were below £40. He said that of these 7,313 forms were not returned at all, but that no further action had been taken in regard to this number. That left 14,529 cases which were returned. These threw up 10,580 cases which had not been previously in the tax net. The other 3,949 returned forms related to persons who already had a tax number or, in some cases, could not be traced by the post office. Of the 10,580 new cases, on preliminary scrutiny 3,922 were found to be not liable — so obviously no further action was called for there — 1,960 were seen as possibly liable and 4,698 were seen as probably liable. I know I have given you a lot of figures and I hope it does not confuse the situation. He went on to say that income tax return forms — that is the next stage after the farm profile form has been returned and scrutinised — had been issued to the possibly liable and to the probably liable — that is to the 1,960 and to the 4,698. But the response was very poor in regard to getting the tax returns from them. No more than 10 per cent of them had been returned. However, assessments had been made and, obviously, since the forms had not been returned in all the cases, estimated in many cases. Assessments had been made in the case of the 4,698 cases of probable liability and also in a few cases of the possible liability. Further to that, a number of cases in which there had been failure to complete the tax return forms, because there was only a 10 per cent return, were being selected for prosecution. The net result of that exercise was that work remaining to be done was to assess the remainder of the possibly liable cases, to assess the 7,313 people who had not returned their farm profile forms at all — those who had not complied with the first stage of the operation — and then to deal with the cases in the less than £30 rateable valuation category. By way of general comment the Accounting Officer went on to day that out of about 90,000 farmers brought within the tax system on the abolition of the £40 threshold, it was estimated that about 15,000 would have a tax liability. This is of the total, not just those with the £30 to £40 rateable valuation who were issued with the forms, but all farmers with a rateable valuation under £40 — 90,000, out of which 15,000 would have a tax liability. He explained that the process of inquiry which is needed to identify these farmers is costly, time consuming and involves the application of scarce staff resources diverted from other areas and that the level of initial return on the effort expended is limited. The cost involved of course, not only relates to the actual administrative cost of identifying the new cases but also the cost of any indirect Revenue losses which might result from drawing staff away from other areas, thereby causing a problem in other areas and perhaps a loss of revenue there. Finally, he made a point that the more recently proposed income tax exemption, which is associated with the introduction of the new farm tax, has introduced a note of uncertainty into the whole inquiry process because until such time as the arrangements for implementing this new farm tax have been decided upon the possibility of getting any adequate or acceptable level of response or co-operation from farmers will be considerably reduced, and the prospects of achieving any results will be limited. The position was, as he said, that the cost of identifying farmers who may be liable to tax might cost more than the amount of tax which the exercise would yield, if, at the end of the day, they became exempt from tax on 6 April 1986. So the outcome of any further moves must be governed by the expected yield which that would generate and the availability of resources. I am sorry for going on so long. I hope that I have adequately summarised the Accounting Officer’s response to me.

643. Deputy M. Ahern.—Could Mr. Páircéir tell us if he has any up-to-date information on what the Auditor General has already told us in regard to the under-£30 rateable valuation farmers or in connection with the other figures that have been quoted? Has there been any further procedure against these people and has it yielded more satisfactory results?

Mr. Páircéir.—Well, the only thing I could say in addition is that we have now assessed just short of 5,000. Most of those are under appeal. We selected 31 cases for prosecution, not with any very satisfactory result. I would prefer to say, to begin with, that it is a major problem. To understand the nature of the problem you have to go back to the action taken by the farmers against Wexford County Council which abolished the RV as a basis for any kind of taxation. So, even when we refer to £40 RV now, we are talking about something that is not strictly legal. The problem then was that we had to amend the taxation of farming profits in a way which did not allow us any longer to differentiate between people broadly on a certain kind of level. We also had a little problem in so far as we did not get any additional inspectors to deal with it. I had to find people and take them off other work to try to undertake this task. We had 61 heads of staff to deal with this and other problems. These people were loaned to us from other Departments in 1983. All but 24 of those people have now been returned or lost through embargoes and they will be going back at the end of the year. At this point I have even fewer people to deal with it than I had in 1983. There is a general climate abroad where people who are under this level are waiting for the appraisal of this adjusted acreage thing, where, if they have under 20 adjusted acres, they will be exempt from tax anyway, and up to 80 adjusted acres they will be allowed a credit. Considering the yield from the farming community at the moment and what we know of the nature of their problems as reflected in accounts, apart from trying to find somebody who — I am sorry for picking on you again now, but in Munster, for instance, where the RVs were fairly low in certain areas, they managed to have fairly intensive dairy farming where they would have profit. But, apart from searching to find those among this huge mass of 80,000 people, the work is unproductive. Then the prospects of recovery, unless you have voluntary payment, in the light of the developments about farm taxation generally, are not great, apart altogether from the perceived problems of the farming community in the EEC.

644. Deputy M. Ahern.—There were about 22,000 assessed in the 30 to 40 RV at that stage and it was estimated that a total of 90,000 would come in from 1983-84 onwards.

Mr. Páircéir.—There were 22,000 to whom we issued farm profiles.

645. Deputy M. Ahern:—So that would mean that there was about another 68,000 to whom no profiles were issued? I can understand your position due to staff shortages and so on, but I would be concerned that a lot of the people to whom profiles had not been issued would be employed under PAYE and I presume that, if they ever made returns of income, they did not fill in the little slot to say whether they owned land or not. A lot of these people, due to the fact that they would be PAYE workers, would be liable to tax on whatever profit they made on their land. Had you any basis for estimating how many of those 68,000 would have been under the PAYE system?

Mr. Páircéir.—We brought in liability for taxation of farming profits in 1974 for persons who had other income, including PAYE. We have been actively pursuing that since 1974. Interestingly enough, of the 14,500 profiles we got back, 4,000 of them were already on record, mostly under PAYE. In regard to developments in part-time farming, which is pretty extensive now, or where a wife is employer, I am fairly confident that we have most of those people, or at least as much a proportion on them as we have of anything else, on record.

646. Deputy Crotty.—I do not know how to approach this situation. Would it be correct to say that the Revenue Commissioners have thrown in the towel in relation to collecting this tax?

Mr. Páircéir.—We have not thrown in the towel in relation to those persons with valuations under £30 — we never got into the ring; that is our problem — but only for the reason given by the Comptroller and Auditor General when summarising the reply we gave already. Where we have scarce resources and where the Revenue is operating on a low manpower we are constantly trying to get the priority and the productive dealt with and leave aside those things that may be necessary, or even essential, but at the end of the day are not productive in producing tax revenue.

647. Deputy Crotty.—Is it the function of the Revenue Commissioners to decide what tax they should pursue, what tax they might be flexible about and what tax they might not even get down to collecting at all? The Revenue Commissioners are charged with implementing tax policy, as implemented by the Dáil. Have the Revenue Commissioners this flexibility?

Mr. Páircéir.—The Revenue Commissioners are charged in each Finance Act, as I understand it, to collect all of the tax, all of the duties, all of the interest and all of the penalties. But, of course, they are given limited resources. It is their function — and that function is described as care and management — to be prudent in relation to the deployment of their resources. It is not a question of discretion, but that it is imposed as an obligation on the Revenue to do those things which will yield tax. Incidentially since we cannot do all of the things, the exercise of judgment clearly comes in. It is not a question of saying “I have a discretion.” I accept entirely that the Dáil enacts the tax law and it is up to us to administer it; and we do that. But we would look very silly if we were to devote our energies to those things which yielded very little and not deploy our resources on those things which yielded much.

648. Deputy Crotty.—Would it not be reasonable to say that there is disquiet among the general taxpaying public, particularly PAYE people, that the farming industry is not yielding what it should by way of income tax returns? Is this being compounded by the fact that the Revenue Commissioners are not pursuing the collection of these returns?

Mr. Páircéir.—Certainly, in the generation of disquiet, I am sure that is compounded by almost anything that will generate disquiet.

649. Deputy Crotty.—You mentioned that about 63 people were made available to you. What description did you put on them?

Mr. Páircéir.—Sixty one people. I got 15 higher tax officers, 16 tax officers and 30 clerical assistants.

650. Deputy Crotty.—How many people are employed in the Revenue Commissioners?

Mr. Páircéir.—At the moment there are 6,519.

651. Deputy Crotty.—Sixty one people would seem to be a small number in relation to that overall figure. Is the Accounting Officer satisfied that he is getting the productivity that might be expected, say, in the private sector from the staff that is employed, taking into consideration, maybe, buildings, equipment and all the other things that go to make the running of an efficient organisation? It is a very large organisation.

Mr. Páircéir.—It has a very large remit. The duties consist in controlling the frontier, collecting VAT at import, watching after the Excise, collecting the Customs, servicing the PAYE taxpayers, assessing and collecting the Income Tax and the Corporation Tax, collecting the Residential Property Tax, deciding whether works which are original and creative have cultural or artistic merit, and a whole lot of other bits and pieces in relation to various pieces of legislation, all of which are laid to the Revenue and which, I can tell you, if it is a very large organisation, it has a very large remit. Productivity is the same as in the private sector. Productivity is a very elusive concept if you cannot measure it. You can measure productivity in manufacturing or in process, but where you come to administration there is an enormous difficulty in being satisfied that you have a correct or good measure of what in fact is the end product. What is the productivity of a man who is sitting in a patrol car on the frontier waiting for something to happen? It is very hard to judge that. On the other hand, if you have a million employments to service, with a turnover of about 50 per cent in various kinds of activity, then you can be reasonably satisfied that you keep the work up-to-date and you are satisfied about the productivity. I am saying that there is no easy answer to that question.

652. Deputy Crotty.—Have you any work study group or efficiency organisation within the Revenue Commissioners which would carry out a continuous assessment and examination of the workings of this very large number of people?

Mr. Páircéir.—Yes, there are several such groups. A lot of the work comes under the heading of what I would call operations, that is things which have to be done by a certain target date. There are many groups within the Revenue dealing with the various tax heads. There are even some groups dealing with the attainment of the objectives of the organisation which report directly to me. As well as that, we have people down as far as principal level, and that encompasses about 150 to 160 people, who have measurements of their objectives, rather akin to management by objectives. We call it management accountability and we have schemes going for all of those people. It is a constant concern for the management of the Revenue and has been increasingly so. Since the first embargo was introduced, we have lost over 1,000 heads so we have had to keep going, and you can only keep going by the kind of review that the Deputy mentions.

653. Deputy G. Mitchell.—May I ask the Accounting Officer if this does not really amount to civil disobedience, where you send out forms to a potential 90,000 farmers falling into this £30-£40 rateable valuation? You sent out a total of 21,842 farm profile and 7,313 did not even bother to reply. One-third did not even bother to reply, they completely ignored the forms that were sent out and, if I quote the Comptroller and Auditor General correctly, no further action was taken in regard to those 7,313. Now of the 14,529 who did return the forms, 3,949 referred to persons with either a tax number or could not be traced. What does “could not be traced” mean? Does that mean that they had some sort of fierce animal at the gate that chased them away, or what does it mean? When we are liquidating firms for paying interest on outstanding taxes, when we were strengthening the residential property tax section to pursue £1.1 million in 1984, and when other sections of the community are carrying a crippling burden of tax, it seems to me that this requires very special attention. I would like to know from the Accounting Officer why it is that 7,313 — one-third — in the year concerned were allowed to ignore completely the notices sent to them by the Revenue.

Mr. Páircéir.—First of all, about strengthening the Residential Property Tax, we have 15 people engaged on the Residential Property Tax.

654. Deputy G. Mitchell.—In the year concerned, you strengthened your endeavours on the property tax. We will be coming to that under No. 22.

Mr. Páircéir.—Right. The only thing left for us to do was to prosecute the 7,313. Even that takes a great deal of energy. We started out with 31 of them, ones that not alone did not return the form but looked fairly promising. We initiated proceedings under section 94 of the Finance Act, 1983. Twenty-one of those are still with the Revenue Solicitor and proceedings are going ahead. The prosecutions that we did take boiled down to three. We withdrew one because we got an adequate explanation. One is listed for hearing, we got a decree for penalties in another and in one the material was submitted as a result. It is a very tedious process and it takes a long time.

655. Deputy G. Mitchell.—Arising from the forms returned, you sent out 4,698 copies of Form No. 11 to probable and 1,960 to possible taxpayers to determine their precise income and allowances and only 500 of those, or something of the order of 10 per cent of those, were returned. Is that correct?

Mr. Páircéir.—Yes, but we brought 9,000 of them into assessment.

656. Deputy G. Mitchell.—But does it not all add up to a total refusal to join the tax system as set down by the Oireachtas? Does it all not add up to a total lack of willingness on the part of Revenue to pursue these people? How do I explain this to the man who came to me yesterday — about which I have been in touch with you — and has to pay £42,000 in interest which is going to put his company in very serious trouble? How do I explain to him when he reads that one-third of these people did not even bother to return the farm profile forms and of the 4,698 people with probable liability only 10 per cent bothered to return the assessment forms at that stage, how can you explain that to other sections of the tax paying community? What explanation would you give? Are you not devoting resources to chasing some people and screwing them to the wall while others are thumbing their noses at the system and refusing to participate?

Mr. Páircéir.—I think I have been explaining with a great deal of words for the last 20 minutes why I do not.

657. Deputy G. Mitchell.—Not to my satisfaction. You have quoted—

Mr. Páircéir.—I cannot help that.

658. Deputy G. Mitchell.—You can help that. You have got a quarter of the Civil Service working for you. Why can we not pursue people more evenly? Why is it that these farmers can thumb their noses? They did not even bother to return them — 7,300 of them, one-third of the total number sent out. Surely that is an outrage in anybody’s language. What stage of prosecution are the 7,300 at now?

Mr. Páircéir.—There are only 21 of them going in for prosecution at the moment. I have not got the resources to tackle it, nor do I think that I should devote resources to prosecuting people in this particular territory, for the reasons that I have already explained.

659. Deputy G. Mitchell.—Do you not feel if people do not make any return at all on such a scale that the Revenue are being held in contempt and if every other sector of the community were to do the same thing the whole system would collapse? Do you not feel that you have an obligation to ensure that the system does not collapse and is not held in contempt?

Mr. Páircéir.—I have not got the resources to do any more about it.

660. Deputy G. Mitchell.—You have the resources to pursue other sectors of the community?

Mr. Páircéir.—And if I were not doing that you would be complaining about it.

661. Deputy G. Mitchell.—I would not be complaining if you were pursuing all the sectors of the community evenly.

Mr. Páircéir.—I do not see how I can deal with it. I have dealt with it as well as I can.

662. Deputy G. Mitchell.—I do not believe you have. I believe you are chasing one sector of the community with all your resources and letting another sector of the community off the hook completely?

Mr. Páircéir.—As I am a witness before this Committee, all I can say about that, without getting into some kind of an argument with you, is to say that I deny that.

663. Deputy G. Mitchell.—I would say to you that the figures show that your denial does not stand up to examination?

Mr. Páircéir.—That is a matter for the Committee.

664. Deputy G. Mitchell.—Why did you allow 7,313 people to thumb their noses? Why did you bother sending out the forms in the first place to 21,000 if you were going to allow a section of the community to totally thumb their noses at you?

Mr. Páircéir.—I think that is ridiculous.

665. Deputy G. Mitchell.—Why do you think it is ridiculous? The only thing that is ridiculous here this morning is the amount of money we are paying you to do a job that you are not doing if you are not pursuing those people. How do you account for the fact that by doing—

Mr. Páircéir.—I do not think I have to listen to that.

Chairman.—No. That is unfair. I think the Deputy should withdraw that.

666. Deputy G. Mitchell.—I will not. I do not have to listen to the chairman of the Revenue Commissioners telling me, a Member of the Dáil examining him on this outrage, that I am ridiculous. It is an outrageous impertinence on behalf of a public servant to say that to a member of the Public Accounts Committee. I can only say that it is typical arrogance coming from this particular Accounting Officer. I would like to ask the Accounting Officer how many people are involved in the farm tax section of the Revenue Commissioners?

Mr. Páircéir.—Chairman, I feel I am entitled to your protection.

Chairman.—Yes.

667. Deputy G. Mitchell.—I feel I am entitled to your protection as well, Chairman I would ask you to ask the Accounting Officer to withdraw the word “ridiculous”. There was nothing ridiculous in any question I asked him this morning.

Chairman.—You want to be reasonable. You made a statement against him with regard to his job. I think we should get back to the questioning on the order here and stick to what is before as with regard to the farm accounts and farm assessment.

668. Deputy G. Mitchell.—Could the Accounting Officer tell me how many are working on the farm accounts?

Mr. Páircéir.—I will let you have a note. At the moment there are no people working in the area dealing with the assessment of farmers under valuations of £40, but there are large numbers of people dealing with the farming area. I have not got the figures with me. I will send a note.*

669. Deputy G. Mitchell.—Could the Accounting Officer tell me of the almost £2,000 million collected in Income Tax that year how much of it came from farm tax?

Mr. Páircéir.—Of the £190 million reported in schedule 1, £27 million for 1984-85 came from farmers and—

670. Chairman.—Sorry, Mr. Paircéir. Would that be £1,900 million?

Mr. Páircéir.—No, this is tax paid under 1984-85, £190 million.

Chairman.—Income tax, including PAYE?

Mr. Páircéir.—Of the total income tax paid in 1984, about £34 million came from farmers.

671.—Deputy G. Mitchell.—I will be raising this matter again. I think it is a matter which should be the subject of a special report to the House.

Deputy M. Ahern. Deputy Mitchell raised the question of the 7,300 odd cases, so I will not pursue that. I would like to ask the representative from the Department of the Public Service about further staff for the Revenue Commissioners, because I am aware of the shortage of staff in some offices. We raised this matter last year and the year before and there still seems to be a great problem in the Revenue Commissioners. I know that 30 years ago they had staff out on the road collecting sizeable sums of money, because in any business if you write letters to people they tend to put them into boxes, but if you knock at their door they will come up with cash. But these collectors were brought in and are now behind desks doing assessments, checking accounts and so on, but the cash is not coming in. I believe that the most effective way of collecting tax is to have somebody out calling to the people. Have the Department of the Public Service looked into this and have they changed their mind with regard to providing more staff, or is that possible?

Mr. J. O’Farrell (Department of the Public Service).—It would be fair to say that we would be receptive to a proposal from the Revenue Commissioners on the lines that it would maximise revenue collection. We would be receptive to such a proposal. We would have to consider it on its merits and we would also get into the policy area. But, in so far as I am able to say as an official, we would be receptive to a proposal like that. We would have to examine it to make sure that any staff, as the Accounting Officer mentioned, would be sure to generate a return well in excess of the cost of the staff themselves, which, as you know, is pretty expensive, too.

672. Chairman.—Could I make one point? We made a special reference in our report, A.2:

The committee therefore wishes to be informed whether such evaluations have been carried out in Departments such as the Revenue Commissioners as regards to staffing.

That report was submitted in January 1985.

Mr. J. O’Farrell.—There has been a very extensive management services survey of the Revenue Commissioners by the Department of the Public Service.

Chairman.—We referred to cost effectiveness in particular.

Mr. J. O’Farrell.—In regard to any staffing proposals and the deployment of staff that we consider, it is no exaggeration to say, Chairman, that the cost effectiveness of those staff would be paramount in that consideration.

673. Chairman.—On the last three occasions Mr. Páircéir has appeared here before us he has referred to the question of staffing. That was the main reason that this report was compiled and presented for that purpose.

Mr. J. O’Farrell.—Again, Chairman, I think the answer is yes. The cost effectiveness of the staff allocated to the Revenue Commissioners and of the deployment of those staff within the Revenue Commissioners would be the primary consideration in our dealings with them.

Deputy Crotty.—Have the Revenue Commissioners requested extra staff from the Department of the Public Service? Earlier in your reply you mentioned that, if the Revenue Commissioners made a request to you, it would be considered. Have they made a request?

Mr. J. O’Farrell.—As things stand at the moment there is not a request on hand. In fairness, the Revenue Commissioners have had problems with the amount of money they could spend in 1986 in the Estimates, which possibly might have been precluding them from putting proposals to us at the moment. Perhaps the Accounting Officer would like to confirm if that was the situation.

Mr. Páircéir.—There are two things which make it impossible for me to look for staff at the moment. One is that by Government decision in January 1986 it was announced by the Minister as part of the schedule to his Financial Statement — a further £780,000 was cut off the pay area of the Revenue Vote. The Government considered the staffing of the public service in connection with further reductions at a meeting in July and decided that a further 130 heads of staff should be cut off the Revenue establishment.

674. Deputy M. Ahern.—In the studies carried out by the Department of the Public Service did the results show that it would be cost effective to employ more Revenue staff in collecting money? What was the result of those studies?

Mr. O’Farrell.—I should say that the findings of the Department of the Public Service survey were preliminary findings and do not have the status of a formal report because the Revenue Commissioners did not agree with them. In other words, the Department of the Public Service were arguing for the suppression and redeployment of a certain number of posts that the Revenue Commissioners could not fully agree with. I have to say in this context that most of that has been overtaken by events, that the reductions that the management service report would have been looking for would have been achieved and possibly exceeded by now, in any event. I do not think that that report would be a barrier any longer if we had proposals at this stage.

675. Deputy Crotty.—When the Department of the Public Service representative mentions an examination of cost effectiveness in relation to staff for the Revenue Commissioners how is this decided? In other words, is he saying to this committee that the Revenue Commissioners should not pursue the collection of tax if it was going to cost more to collect than it would yield?

Mr. O’Farrell.—We would be getting into a policy area there.

Deputy Crotty.—This is not policy area. This is a question from this committee. We are concerned that taxes should be collected. It is on that that we are examining the Accounting Officer this morning. This committee deserve a reply from the Department of the Public Service on this question.

Mr. O’Farrell.—Yes, but I could not make a comment at any stage that the Revenue Commissioners should not enforce a particular tax or that they should. That would be a policy area. As regards the question of cost effectiveness, if the proposal is, and this arises in other Departments also apart from the Revenue Commissioners, that staff can either generate or save funds to the Exchequer well in excess of the cost of the staff, that would be a most important consideration in recommending to the Minister and if necessary to Government whether or not they should have the staff.

Deputy Crotty.—To be more specific, the Accounting Officer mentioned this morning that he has not pursued the collection of a certain category of tax because he has not got enough staff. What would your comment be on that?

Mr. O’Farrell.—Well, the Accounting Officer was talking about the internal redeployment of his staff. This would be a matter of internal redeployment of staff, allocation of work, within the competence of the Accounting Officer as chairman of the Revenue Commissioners.

Deputy Crotty.—I could not accept that. The Accounting Officer specifically stated that he did not pursue, or could not pursue, the collection because the staff were not available to him. There is no question of redeployment. All the staff that were there are deployed in areas where the Accounting Officer feels he can get the best results, that is in relation to the yield of tax. The Accounting Officer may want to comment on this. I do not want to put words in his mouth, but his reply to this committee is that he has not got the staff to pursue as he would like to a—

Mr. Páircéir.—May I comment on that? I certainly did say that but I also said three or four other things. That is only one of the things in the context. There is the question of the uncertainty. There is the question of the sample that we have taken of the people who have given us information, which would suggest that this is going to be very low yield. There is the knowledge we have about the profitability of the farming community generally. There is the low prospect that people with valuations under £30 are going to be liable for very large amounts of tax or any tax. I also dealt with the fact that those persons who had other income had already been dealt with since 1974 and we were reasonably satisfied they were in the net. I am not cutting across you, Deputy. I then said, because I was asked some question that I cannot recall, that in 1983 I had 61 heads of staff allocated to me specifically for the purpose of dealing with this 93,000, but that I had not got them now.

676. Deputy Crotty.—So, you have not got the staff to deal with a tax situation where tax should be collected. I am asking the Department of the Public Service if they are satisfied with the situation and do they not feel obliged to provide staff so that a tax situation can be pursued? Is it policy in the Department of the Public Service that if a tax may not yield the cost of the staff they will not make the staff available?

Mr. O’Farrell.—The Department of the Public Service would implement Government policy. It would not be purely policy on the part of the Department of the Public Service. If there was a Government direction that a certain tax was to be implemented, if there was a memorandum for Government and the staffing proposals were set out and the cost thereof, then it would be a matter of policy to say whether the additional staff should or should not be made available.

677. Deputy Crotty: In this case it is policy of the Government that a certain section of the community the same as any other section, should pay tax and the staff is not there to collect it. The Accounting Officer has put in certain qualifications. Basically, however, the position is that he has not got the staff. What is the view of the Department of the Public Service on this matter, that they are not making the staff available to collect tax?

Mr. O’Farrell.—There is always going to be a certain amount of selectivity in how the Chairman deploys his resources. It is like the 300 miles of the Border, he is never going to have enough staff to pursue every individual and every sector 100 per cent. There is always going to be an element of selectivity or the Revenue Commissioners would be four times the size that it is.

678. Deputy Naughten.—First of all, having missed the earlier part of the meeting I just wonder how many taxpayers are on record in your Department. This is PAYE, selfemployed and farmers?

Mr. Páircéir.—For the year we are dealing with, there were — I am dealing with individuals now, not corporations — 853,000, of which 745,000 were PAYE taxpayers. Approximately, 100,000 are farmers, other self-employed and professionals.

679. Deputy Naughten.—Many of those 745,000 would be dealt with under one heading, whether they be public service staff or semi-State staff. The amount of time taken by officials of your Department collecting the tax from them would be very little. Is this correct?

Mr. Páircéir.—The people concerned with collecting tax from PAYE taxpayers are the staff from the Collector-General’s Office. The other staff in the Revenue are concerned with what we call servicing the PAYE taxpayer in the sense of deciding tax free allowances, making adjustments, allowances for interest, changes in the mortgage rate, additional children, etc, so that they keep the PAYE system turning over up to date.

680. Deputy Naughten.—The amount of time involved by staff in your Department with that 745,000 would be small in comparison to what would be spent in dealing with industries, companies or farmers.

Mr. Páircéir.—In individual cases, yes.

681. Deputy Naughten.—You have 6,500 staff. Is this correct?

Mr. Páircéir.—Yes.

682. Deputy Naughten—Just from looking at the figures it would appear that it should not be an impossible task to get around to looking at all the files of those 853,000 taxpayers?

Mr. Páircéir.—First of all, the figure of 6,500 contains a lot of people who are not engaged anywhere near taxation. The people engaged in what you described as looking at the files would be about 3,000 people in the office of the Chief Inspector of Taxes. They deal with tax surveillance, Corporation Tax, PAYE, the fall-out from PAYE, dealing with directors, back duty, etc. You can take it that there is quite a heavy work load involved.

683. Deputy Naughten.—Could you tell me how many of the farmers with a valuation under £30 receive tax profile forms?

Mr. Páircéir.—None.

Chairman.—We have gone into that.

684. Deputy Naughten.—What was the yield of tax from the under £40 valuation?

Mr. Páircéir.—I doubt if there was any yet; and, if there was, it was very small.

685. Deputy Naughten.—Some farmers who receive those profile forms fill them up, others pay £400 or £500 to accountants, and return them to the Revenue. Do you not find it very unjust that the farmers who try to comply with system are penalised as against those who totally ignore the tax forms?

Mr. Páircéir.—Obviously, I do not really know anything about people paying £500 to accountants to fill in farm profiles, because the idea of a farm profile was that people could fill it in themselves or with the assistance of their organisations. Certainly, people do employ accountants. But I do not see how penalisation comes into it.

686. Deputy Naughten.—I can assure the Accounting Officer that this is the situation. Those people who tried to comply with the system were penalised — there is absolutely no question whatever about that — while those who ignored the system got away scot free. You stated that there was practically no yield from the people with a valuation of under £40. One would imagine that, having gone through the figures, there are a certain number of people who had off-farm employment. Surely those would have had a tax liability?

Mr. Páircéir.—But they did not come into that scheme. They came in under the 1974 legislation. I have already explained this. They have been tackled by the Revenue since 1974. We consider that we have as good a surveillance on that particular group as on any other group.

687. Deputy Naughten.—Is not the situation that, as far as the farmers with a valuation of under £40 are concerned, there is no system there for collecting tax and that, if they receive bills, they can ignore them?

Mr. Páircéir.—I obviously could not say that.

Deputy Naughten.—But that is the situation?

Mr. Páircéir.—Under £30 valuation, at the moment I am not taking any action.

Deputy Naughten.—From everything we have heard there today and from what is embodied in that paragraph, no action is being taken under the £40 either?

Mr. Páircéir.—Oh, yes. We have assessed 10,000 of the people under £40. Those 10,000 assessments are going through the usual process of being under appeal or waiting for accounts to come in or negotiating with the Tax Inspector, etc.

Deputy Naughten.—But there is another large number who did not reply.

Mr. Páircéir.—That is the 7,000.

Deputy Naughten.—They are not being tackled at all?

Mr. Páircéir.—A small number of them are. There are 21 of them in the Revenue Solicitor’s Office, which may seem a very small figure. That official has to get on with the collection of large amounts of tax, take actions for amounts in hundreds of thousands, pursue various liabilities. This is a very small end of his activities.

Deputy Naughten.—What you are really telling the Committee is that you are pursuing the 10,000 or so who filled up their forms and tried to comply with the system, tried to meet their obligations as citizens, and you are ignoring the others?

Mr. Páircéir.—In a way, yes.

Deputy Naughten.—So, in fact, all of those farmers who tried to comply with the system, tried to get accountants to do their accounts were foolish?

Mr. Páircéir.—I cannot quite make that jump in the logic.

Deputy Naughten.—If they had ignored it, they would not have had to bother with accounts, they would not have had to pay accountants?

Mr. Páircéir.—Is that not the very attitude we are trying to tackle.

Deputy Naughten.—What I am trying to establish here are the facts of the situation. That is how I see them, and nothing you have said has changed my mind on that. The people who filled in the forms and submitted their accounts to your Department are being pursued whereas the people who ignored the forms and dumped them in the bin or the fire have no liability whatsoever. They have walked away scot free.

688. Chairman.—Mr. Páircéir has made a statement that, of that 7,313,31 were referred for court proceedings.

689. Deputy Naughten.—Thirty-one of 7,000. What I am saying is true. The people who tried to co-operate with the system are being penalised and pursued. The people who ignored the system got away scot free. Going back to my earlier question, is there not a question of victimisation of these people who tried to co-operate with the Revenue Commissioners?

Mr. Páircéir.—If I accept your theory about victimisation because of the 7,000 people, it does not seem to me to be any more grievous in relation to the 10,000 than it is to the 853,000.

690. Deputy Naughten.—I would accept that point. But they have walked away and ignored the system and you are not doing anything to pursue it. This is a very unjust situation. I take the point made earlier that, in regard to the under £30 valuation where a married couple are involved, there is no tax yield there and it would be a waste of time pursuing it. But, in simple justice, those people who have ignored the system should be pursued?

Mr. Páircéir.—I do not think it is a question of simple justice. The Government, in the period we are discussing today, had a policy with regard to the containment of expenditure. They decided, because of the high cost and the long term cost, to reduce the numbers in the public service. As a result of that the Revenue Commissioners and the 6,500 people working in the Revenue Commissioners have being doing the best they could within the Gvernment policy, which seems to be a very large and serious policy under which a person like myself, an Accounting Officer, has very serious obligations. I tried to accept these obligations in the very large scale idea of what was to be done: how I should contain my operation; I should co-operate in the reduction in the numbers of staff; I should not seek additional heads and I should try to deploy my resources to the best possible advantage. I do not think that all of that policy can be narrowed down to 7,000 farmers under £40 valuation who did not send back profile forms. The idea that I should break out of the policy and start pursuing those in some way, would be unacceptable to the Government. I already said that the Government considered the staffing of the public service in July of this year and they decided, not that I should get additional people, but that I should be cut another 130 heads. I did not demur. I accept that the Government is pursuing a policy with regard to the containment of the public service because of the cost of it. That is the area in which I find myself operating. Whatever injustices arise, and I have no doubt they do, they are a function of one ideal, such as chasing after farmers under £30 valuation, with the containment of the cost to the public service, coming in conflict with each other. I am in the middle of those and I do the best I can. If this committee is dissatisfied with that it should report about it to the Executive.

690. Deputy Crotty.—This last portion of the Committee’s work comes back to the Department of the Public Service again. It is becoming more obvious that the Accounting Officer is short of staff. I do not accept the last remark of the representative from the Department of the Public Service that you could deploy four times as many people on the Border and the Department would have four times as many people. Basically what is in question is, would the yield from these extra people justify their deployment and, if it would, they should be deployed in these areas. Could I have a comment from the representative of the Department of the Public Service on that?

Mr. O’Farrell (Department of the Public Service).—It has never been demonstrated that the yield would meet the cost of the extra staff. In fact I think it is common ground that it would not, but there is more at issue than the yield. There are these other considerations as Deputy Naughten said. As against that, the Chairman of the Revenue Commissioners and every other Accounting Officer who comes here has to operate within the Government policy on containing the size and cost of the public sector and so have the Department of the Public Service. It is quite true to say that the Accounting Officer has co-operated fully on that. That, in itself, has been a very effective policy. The savings now are of the order of £30 million to £35 million a year. We are really getting into the policy area. If the case was made now for extra staff for any purpose, that would have to be considered on its merits in the context of the numbers policy now obtaining. It is no longer a simple embargo in that — although people still refer to it as the embargo — it has been replaced by a system of setting staff targets for individual Departments and Offices, which takes into account the volume, quality and nature of the functions they perform. It is a more flexible arrangement now since the publication of the White Paper than it was previously, where it was a straight two out of three across-theboard regardless of function. The situation is more flexible at present. Obviously the case the committee are referring to would have very substantial staffing implications which we will have to consider and which I would say could not be resolved at less than Government level. As an official, I would be going into areas of policy. I could, as you will appreciate, give a yes or no answer across-the-table to what would be a detailed and complex proposal with policy implications.

691. Deputy Crotty.—I wonder could I suggest that the Revenue Commissioners are in a more sensitive area than the Department of the Environment, the Department of the Public Service or any other Department, from two points of view. It is an area in which justice must be seen to be done, as mentioned by Deputy Naughten and, secondly, there is finance for the State involved. From that point of view should it not be considered in isolation from the other Departments?

Mr. O’Farrell.—Both of those factors would be very important in considering proposals for staffing in the Revenue Commissioners. Of course, the staff of the Revenue Commissioners cost money too.

Deputy Crotty.—It yields money.

Mr. O’Farrell.—They would, in certain areas, and they do and they are deployed very cost effectively at the moment. In accordance with the spirit of the committee’s earlier observation on that, they are very cost effectively employed. There is no doubt about that. None of the other functions of State could perform at all if it were not for the output of the Revenue Commissioners. Certainly these are factors and I would not like to give any impression that we do not take that very much into account or that we would not. In the context of an overall Government policy on Civil Service numbers, you are constraining your action very much if you say that the Revenue Commissioners are a case apart. We are still talking about 6,500 people. It is a big chunk out of the Civil Service. one has to be balanced against the other. Certainly the considerations you have mentioned would be no means be dismissed. On the contrary, they would be taken very much into account.

692. Deputy Crotty.—Are the Department of Public Service aware that there was a report produced in the UK some years ago which showed quite clearly that the tax yield in certain areas increased significantly when resources to pursue it were provided?

Mr. O’Farrell.—Yes.

693. Deputy Crotty.—And actually yield quite considerably in excess of the cost of that extra staff?

Mr. O’Farrell.—Yes, Deputy. That is really the equation that we look at. It would be a major factor, subject to the Government’s overall policy, in considering proposals from the Revenue Commissioners in relation to either the creation of staff or the restoration of previously existing staff.

694. Deputy Crotty.—In that context have you considered this particular area of taxation and the provision of staff to pursue it?

Mr. O’Farrell.—We do not actually have a proposal in front of us at the moment for the overall consideration that, no matter what he wanted to do in 1986, the Accounting Officer did not have the money to put proposals before us. Therefore, there is not one at the moment.

695. Deputy Crotty.—What do you mean, he has not got the money? If he requests staff to do a particular job is it not considered?

Mr. O’Farrell.—In 1986, if he got extra staff in April — even if we sanctioned it, — he would not have got the money to pay them. The money was not there because of the estimation process at the start of the year. A proposal now would certainly be considered. I cannot give an indication of what the answer would be, because we would be getting into a policy area and into the functions of my Minister and of the Government. Certainly, a proposal would receive consideration.

Deputy Crotty.—But the situation is that a supplementary can be introduced if staff is required or if money is provided for any particular item?

Mr. O’Farrell.—Well, I think, with respect, Deputy, that we are getting into an area here of Government policy.

696. Deputy Crotty.—We are not getting into any policy at all. We are getting down to the brass tacks of whether staff should be provided to pursue the collection of tax from any particular area? There is disquiet and dissatisfaction that certain people have not been pursued. Satisfactory replies have not been forthcoming from the Public Service. I am not aware whether the Accounting Officer has requested extra staff or has explained to Public Service that he has not got the staff to pursue the collection of this tax; but, if he has not, I think he should be doing it.

Mr. O’Farrell.—We do not have a proposal at the moment. We are debating hypothetically at this stage.

697. Deputy Crotty.—Would the Accounting Officer be making a proposal? I suggest that he would be making a proposal.

Mr. Páircéir.—I would agree with the representative from the Department of the Public Service that this is entirely a policy matter. Let me explain my position on it. The presentation of a proposal will, of course, be entirely contingent on the settlement of the supply Estimate for the Revenue for 1987. I certainly feel that in 1986 it would have been, to say the least of it, provocative of me to submit to Government a staff proposal for this exercise in the context of the overall appearance of the Government finances. I would not be allowed to do such a thing.

698. Deputy G. Mitchell.—I think it puts this committee in great difficulty when people arrogate to themselves the decision as to what is policy or what is not policy, when, in regard to the question of whether 7,313, a third of notices, sent out to be collected or not, when they defend that by saying they do not have staff. I do not go the full road with Deputy Crotty on this one. There is approaching about a quarter of the Civil Service working for the Revenue Commissioners. You can make the very same arguments for the Department of Health, the Department of Justice for funds for the Garda. Leaving aside the completion of the examining of the Accounting Officer here today on the accounts before us, I believe we should recall the Accounting Officer to talk to him specifically about assessment, collection and accounting procedures and the productivity of his staff in ensuring that these moneys are properly collected and accounted for. Quite apart from the paragraphs in the Comptroller and Auditor General’s report I would like us to look at that as a topic in itself, apart from the rather specific points here but as a general question of deployment, productivity and accounting for that. I propose that we have a special meeting and recall the Accounting Officer for that purpose.

699. Deputy Crotty.—If we are having a special meeting, as suggested by Deputy Mitchell, I suggest that we take the further two paragraphs at that meeting.

700. Chairman.—How are you disposed to that, Mr. Páircéir?

Mr. Páircéir.—I have no difficulty about the matter which is before you now, nor have I any difficulty about the committee’s decision to inquire generally into productivity. The range of the inquiry, the nature of the information which it would require, the amount of study that I would have to do beforehand and the amount of resources that I would have to occupy in doing it is obviously not something I am going to do off the top of my head. I think it is a matter of giving me time.

Chairman.—What do you suggest, Mr. Páircéir? you mentioned a time.

Mr. Páircéir.—If I could have some idea of the range and scope of the inquiry which is intended I will then give you an estimate of the time.

Deputy Crotty.—I think that could be made available to the Accounting Officer.

Mr. Páircéir.—What I am trying to say is that, if you are going to have such an inquiry, it should be contained in some way so that I can make a meaningful response to you. I would like to know the scope of it and what I have to respond to.

701. Chairman.—I will ask Deputy Mitchell to elaborate on that.

702. Deputy G. Mitchell.—I would like to know specifically about the productivity of staff.

Chairman.—We will send you a note on it, Mr. Páircéir.

Mr. Páircéir.—If you want to know specifically about the productivity of staff, that covers a very large range of activities. The productivity will have to be measured in various ways and, therefore, it will take me some time to compile any such information.

Chairman.—And we will take the two paragraphs as well.

Mr. Páircéir.—That is provided I get some idea of what you want and the scope of what you want. As I mentioned earlier on, if you talk about the productivity, say, of the people engaged on the frontier, it is quite a different consideration to the people who are dealing with the assessment of Corporation Tax, the banking institutions. You cannot say 6,500 and think you have come up with some kind of answer. It is a very complex question, particularly if you wish to hold a special inquiry into this. Also I think I should be allowed to be accompanied by persons who would answer in specific cases. The nature of that inquiry should be spelled out for me.

Chairman.—We will sent you a note and, if you have any observations on the note, you can come back to us before pursuing it. Thanks, Mr. Páircéir.

The witness withdrew.

The committee adjourned.

* Includes £76.7 million duties, taxes and levies deferred under EEC regulations (1983 — £69.4 million). £5,097.2 million was paid into the Exchequer during the year leaving a balance of £90 million as compared with £72.6 million at the end of the previous financial year.

* While the amounts shown here were not, at 31 May 1985, disputed, it is likely that a significant proportion will be subject to claims for admission of late appeals.

† See note (b) on Schedule 1 (Income Tax) regarding the estimate of the amounts likely to be collected. The amount likely to be collected in respect of the years of account up and including 1982/83 is £35 million and the yield in respect of the two years 1983/84 and 1984/85 is likely to reach £172 million.

† See note (b) on Schedule 1 (Income Tax) regarding the estimate of the amounts likely to be collected. The amount likely to be collected in respect of the years of account up to and including 1982/83 is £5 million and the yield in respect of the two years 1983/84 and 1984/85 is likely to reach £6 million.

* The balance outstanding in the years to 1982 includes a large element due in cases in liquidation/receivership and it is likely that little of this will be recovered. There are also amounts due from other companies and individuals that have ceased to trade, many some considerable time ago and in these cases the prospect of recovery is not good. The estimate of the amount of the balance likely to be collected takes these factors into consideration.

* In addition to the number of cases on hands of Sheriffs/County Registrars at 31 December 1984 a further estimated 77,600 cases due for enforcement and representing assessments of £170 million were not referred to the County Registrars during 1984 because of the accumulation of uncleared cases already with these enforcement agencies.