After several difficult years, the Irish economy is showing signs of recovery. In 2013, domestic demand contributed to growth for the first time since 2008, augmenting the on-going strong performance by the export sector. Signs from the labour market are encouraging, with employment estimated to have grown by 2.5% during the year. These signs are reflected in the tax and duty receipts for 2013 when net receipts grew by 3.3% to €37.87 billion. All of the main taxheads recorded growth, with Excise Duty up 4.8%, Income Tax up 3.97% and VAT up 1.56%.
Data from Revenue’s Relevant Contracts Tax system provides us with a range of positive indicators, pointing to a growing level of activity in the construction sector, particularly in the second half of 2013.
In 2013, Revenue collected €37.87 billion in taxes and duties, representing 93.4% of all Exchequer funding. We implemented new base broadening taxes and new schemes which were important elements of Government policy. These receipts and innovations reflect the important role played by Revenue and Revenue staff in effectively administering the tax and duty system and supporting the Government achieve its fiscal consolidation programme and Ireland’s exit from the bailout.
Over the past six years, very strong filing and payment compliance rates have been maintained and marginally improved at a time when the opposite might have been expected. The compliance rates achieved in the first year of Local Property Tax are exceptional. We recognise and acknowledge the part played by individual taxpayers and tax and customs practitioners in the achievement of these results.
Supporting Voluntary Compliance
Our strategy of making it easy to comply is key to ensuring that we collect taxes and duties in a manner that is cost effective for our customers and for Revenue. To achieve this we offer a wide and growing range of easy to use and efficient electronic services to meet the expectations of an increasingly e-literate public. The take-up and use of these services shows that our ongoing investment in online channels is paying dividends. In 2013, we collected €38.1 billion (gross) via the Revenue On-Line Service and by year-end over 780,000 customers had used our PAYE anytime service, a 112% increase on 2012. The effectiveness of our strategy is recognised internationally: for the seventh year running, Ireland was rated the easiest country in the EU in which to pay business taxes (and the sixth easiest in the world). Our own survey of SME customers showed that 86% of them were either satisfied or very satisfied with the services we provide.
Introduction of a New Tax and New Electronic Services
In 2013, the introduction of Local Property Tax (LPT) was a major undertaking for us. Within nine months we prepared the legislative framework and designed, built and implemented a fully functioning tax system, complete with a comprehensive register of residential properties and valuation guidance. We redeployed staff to administer the tax and contracted call centre resources to help us respond effectively to customer contacts. Given the very tight timeframe and the many technical and logistical challenges, the results to date have been encouraging. The compliance rate for 2013 LPT currently stands at 94% and €242 million has been collected in respect of the half year charge. An online easy to use pay and file facility was a key feature of our approach and 76% of returns were filed electronically. For 2014 LPT, the compliance rate currently stands at 90% and €319 million has been collected. Since taking on responsibility for Household Charge arrears in July 2013, €7.6 million has been collected.
The year wasn’t all about Local Property Tax. 2013 also saw the introduction of an innovative suite of services all underpinned by our strategy to establish electronic channels as the norm – our Customs e-Manifest system, a Diesel Rebate Scheme, a Vehicle Registration Tax Export Repayment Scheme, full self-assessment for Corporation Tax and developments to facilitate the roll-out of the Single European Payments Area.
Despite difficult economic circumstances, maintaining timely payment and returns compliance levels continues to be a priority for Revenue. We do this by intervening where necessary and at the earliest possible opportunity; by supporting viable businesses with phased payment arrangements and, ultimately, by pursuing vigorously those who fail to meet their obligations.
This strategy is serving us well. Timely compliance for filing and payment of the main business taxes in 2013 ranged from 98% to 83%, depending on case size. This means that the overwhelming majority of our customers filed and paid on time with no intervention from us – a key indicator of a fit-for-purpose tax system.
While the economic outlook is improving, we are acutely aware that many businesses and individuals are still experiencing financial hardship, particularly with regard to temporary cash-flow problems and access to credit. For several years now our approach has been to offer limited debt rescheduling to viable businesses while at the same time pursuing enforcement action against those who will not engage constructively with us or who simply refuse to comply. This has enabled us to manage our debt position in a sensitive but prudent way. In 2013, total outstanding debt fell by 8.28% to €1.84 billion while the debt available for collection fell by 14.52% to €1.01 billion.
Confronting non Compliance
Activity in the shadow economy deprives the Exchequer of funds and puts compliant business at a competitive disadvantage. Where voluntary compliance is not forthcoming, it is our job to intervene. Utilising data, technology and analytics, our approaches are increasingly sophisticated, risk driven and calibrated to achieve the maximum result in the most cost-effective manner. In 2013, we carried out fewer audits but increased our focus towards less resource intensive, lighter touch, earlier interventions, a growing number of which are carried out in ‘real time’. This approach saw our audit and compliance programme yield €548.3 million. In 2013, we again paid particular attention to business sectors where cash transactions are the norm. Our audit activity in these sectors resulted in a yield of €125 million.
Fuel fraud and cigarette smuggling pose a serious threat to the Exchequer and to legitimate businesses. A range of legislative and operational measures were introduced to improve our ability to monitor the fuel supply chain and identify and address suspicious trading activities associated with fuel laundering. In 2013, Revenue closed down 30 filling stations, bringing the total number of fuel station closures since 2011 to 119. We also detected and dismantled 9 fuel laundering plants. In addition, Revenue obtained new powers to enable us to deal more effectively with the illicit manufacture of tobacco products, including new offences and provision for the forfeiture of equipment or materials used in illicit production.
The final link in the compliance chain is prosecution in the Courts. In 2013, we secured 35 criminal convictions for serious tax and duty evasion. At year-end, 150 cases were in the investigation process with a further 55 cases with the Director of Public Prosecutions or in the judicial system. We also secured 449 summary criminal convictions for a range of tax and customs and excise summary offences, resulting in fines amounting to €964,386 being imposed.
Contributing to Economic Development
2013 was particularly busy for us on the legislative and policy fronts. Three Revenue-related Acts were passed – two Finance Acts and the Finance (Local Property Tax) (Amendment) Act 2013. In addition to drafting the legislation, Revenue provided policy advice, costings and projections to the Department of Finance. We also played an active part in the planning and delivery of what was widely regarded as a highly effective EU Presidency in the first half of 2013. We chaired 9 Council Groups and provided technical support to 6 others, working with the Department of Finance and the Irish Permanent Representation and engaging with the European Commission, the Council Secretariat and other Member States.
Internationally, Revenue advocated and advanced Ireland’s tax and customs policy agenda at European Union, OECD and World Customs Organisation level. We participated in a range of initiatives relating to the automatic exchange of information between tax administrations to improve compliance and deter cross-border tax evasion. In this context, the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes gave Ireland a top rating of ‘compliant’ in relation to the availability, access to and exchange of information. This underpins Ireland as a transparent jurisdiction for tax purposes. During 2013 Revenue also actively participated in the OECD in relation to the BEPS (Base Erosion and Profit Shifting) Action Plan.
All of the activities mentioned above were carried out by a staff complement of 6,141 people (5,745 full time equivalents) at end-2013 – a 13% reduction since 2008. We have mitigated the effects of this substantial staff reduction by building capability, redeploying resources, exploiting technology and rationalising our work processes, all within the spirit of supporting public service reform and the Haddington Road Agreement.
Revenue performed well in 2013 and this performance was due to the dedication, skills, adaptability and integrity of our staff. We are proud to acknowledge and thank them for a job very well done.
The economic environment in 2014 and beyond is looking more positive and first quarter tax and duty receipts are in line with expectations. We are implementing new schemes – the Home Renovation Incentive is likely to be the most popular – and managing compliance challenges, some new and some very old. Reform of the Tax and duty appeals process currently under consideration will impact significantly on our operating environment and we will need to put in place a substantial change management process. We can anticipate developments in international and EU taxation yet to be decided and some EU developments for example the VAT Mini One Stop Shop where the direction is clear.
Workforce planning for 2014 and beyond is likely to be one of our most critical challenges yet but it is essential that we continue to invest in people and technology and build capability by recruitment and training if we are to continue to serve the community as we should.
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