REVENUE COMMISSIONERS. 36.7b. local property tax collected 94% 76% e-services

Transcription

1 Annual Report 2013

2 ANNUAL REPORT 2013 REVENUE COMMISSIONERS NET RECeipts 37.9b b SURVEY OF SMES 86% local property tax collected 242m satisfied with customer services 94% 76% e-services debt available for collection 1.01b compliance filed online e-returns 6.7m e-payments 38b paye anytime783k non-compliance 548m tax, interest and penalties 484 criminal prosecutions 450 tax defaulters published how we rate on the world stage ease of paying taxes 1st eu - 6th world efficiency of customs administration 4th eu - 5th world large cases 98% Returns/payments on time medium cases 96% other cases 83%

3 To serve the community by fairly and efficiently collecting taxes and duties and implementing Customs controls Annual Report 2013 Ninety-First Annual Report of the Revenue Commissioners for the year ended 31 December 2013, including progress on the implementation of Revenue s Statement of Strategy, in accordance with the Public Service Management Act 1997, presented to the Minister for Finance. April

4 Table of Contents TABLE INDEX... 4 BOARD S REVIEW... 5 MAIN RESULTS FOR STRATEGY 1 MAKE IT EASIER AND LESS COSTLY TO COMPLY COLLECTION FEATURE ARTICLE - ADMINISTRATION AND COLLECTION OF LOCAL PROPERTY TAX NEW SCHEMES DESIGN AND DELIVER HIGH QUALITY ELECTRONIC SERVICES REDUCING COMPLIANCE COSTS DATA SHARING TO REDUCE BURDEN IRISH LANGUAGE SERVICES FEATURE ARTICLE - SME SURVEY RESULTS AND ANALYSIS STRATEGY 2 - INCREASE TIMELY COMPLIANCE AND REDUCE DEBT DEBT PERFORMANCE COLLECTION ENFORCEMENT PERFORMANCE OVERSIGHT OF CORPORATE AND PERSONAL INSOLVENCY DEBT MANAGEMENT OPERATIONS STRATEGY 3 TARGET AND CONFRONT THOSE WHO DO NOT COMPLY INCREASE EARLY DETECTION OF HIGHEST RISK EVASION FEATURE ARTICLE - USING DATA, RISK ASSESSMENT & ANALYSIS TO TARGET COMPLIANCE CASE SELECTION 19 FEATURE ARTICLE - THE NATIONAL CONTRACTORS PROJECT INCREASE FOCUS ON THE SHADOW ECONOMY DETECTION OF FISCAL FRAUD, SMUGGLING AND DRUGS PROSECUTIONS FOR SERIOUS TAX AND DUTY EVASION DETECT AND CHALLENGE ABUSIVE TAX AVOIDANCE FEATURE ARTICLE - FUEL FRAUD REVENUE ACTIONS STRATEGY 4 CONTRIBUTE TO IRELAND S ECONOMIC DEVELOPMENT PROVIDE HIGH QUALITY ADVICE EXTEND TAX TREATY NETWORK WORK INTERNATIONALLY TO SUPPORT COMPLIANCE INFLUENCING INTERNATIONAL POLICY FEATURE ARTICLE - IRELAND S PRESIDENCY OF THE COUNCIL OF THE EUROPEAN UNION JANUARY JUNE ENABLER 1 PEOPLE AND STRUCTURES ENABLER 2 - TECHNOLOGY AND PROCESSES FEATURE ARTICLE REVENUE S MISSION ENABLER 3 GOVERNANCE TABLES APPENDIX

5 Table Index Table 1 Total amount Collected/Gross Receipts 40 Table 2 Total Revenue/Net Receipts 40 Table 3 Local Property Tax Collection/Compliance 41 Table 4 Local Property Tax Payment Types 41 Table 5 Relevant Contracts Tax 41 Table 6 Electronic Payments 2013 v Table 7 Electronic Returns 2013 v Table 8 PAYE anytime Services 42 Table 9 Electronic Repayments 42 Table 10 Diesel Rebate Scheme 42 Table 11 Volume of Business Table 12 Customer Service Standard and Results 44 Table 13 Average % of Tax Collected Within the Due Month by Taxhead 45 Table 14 Return/Payment Compliance by Case Size 45 Table 15 Collection Enforcement Programmes 45 Table 16 Oversight of Corporate and Personal Insolvency 45 Table 17 Audit and Compliance Intervention Activity 46 Table 18 Random Audits Completed 2013 Programme 46 Table 19 Special Investigations 46 Table 20 Summary of Audit Results for Certain Sectors 47 Table 21 Drugs Seizures in Table 22 Excisable Products Seized in Table 23 Prosecutions for Serious Evasion Table 24 Summary Criminal Convictions Table 25 Prosecutions for the Non-Filing of Income Tax, Corporation Tax and Relevant Contracts Tax Returns 48 Table 26 Civil Penalties and Criminal Prosecutions for not Filing Returns 49 Table 27 Mutual Assistance Requests 49 Table 28 FoI Requests 49 Table 29 Internal and External Reviews in Table 30 Complaints Relating to Revenue made to the Ombudsman in Table 31 Complaints Relating to Revenue completed by the Ombudsman in Table 32 Outcome of Appeals 50 Table Compliance with Prompt Payment of Accounts Act 50 4

6 Board s Review 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 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 In 2013, Revenue collected 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 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 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 selfassessment for Corporation Tax and developments to facilitate the roll-out of the Single European Payments Area. Debt Management 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 5

7 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 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 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 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 crossborder 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. 6

8 Resources All of the activities mentioned above were carried out by a staff complement of 6,141 people (5,745 full time equivalents) at end a 13% reduction since 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. Looking ahead 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. Josephine Feehily Chairman Liam Irwin Commissioner Niall Cody Commissioner 7

9 Main Results for 2013 Collection Net receipts for 2013 were billion, up 3.3% ( 1.2 billion) on 2012 receipts. See Table 2 on Page 40. Collection was just below target for the year but 1,219 million (3.3%) ahead of last year. 8.2 billion was collected on behalf of other agencies (of which 7.7 billion was PRSI). Returns/payments compliance rates remained high. New Taxes and Schemes Local Property Tax (LPT). See Feature Article on Page 12. Solid Fuel Carbon Tax on coal and peat million collected. Vehicle Registration Tax (VRT) export repayment scheme. Diesel Rebate Scheme. Home Renovation Incentive scheme. Significant changes to pension taxation. Simplified scheme for charitable donations. Supporting Voluntary Compliance Full self-assessment for Corporation Tax, Income Tax and Capital Gains Tax introduced. 1,520,667 payments (up 15% on 2012) made via ROS with a value of 38.1 billion (up 6% on 2012). The number of electronic returns increased by 39% to 6.7 million. See Tables 6 and 7 on pages 41 and % of business registration activity completed online Automatic Entry Processing (AEP) system processed 1,170,989 customs declarations, 96.5% of which were cleared immediately. 856,320 customers now registered for our PAYE anytime service, up 13.3%. 587,353 electronic repayments made to customers with a value of 3.64 billion. See Table 9 on Page 42. Filing of financial statements in electronic format (ixbrl inline extensible Business Reporting Language) became mandatory for certain companies. Phase 1 of the Customs Electronic Manifest Project implemented. A new Interactive Voice Recognition (IVR) menu for PAYE 1890 callers introduced which provided information and self-help options. Some 317,000 callers responded to information messages of self-help options and did not select to speak to an operator million items of correspondence processed and 2.4 million 1890 phone calls answered. Our website was visited just over 31 million times. See Table 11 on page 43. A high level of customer service maintained but slippage in some areas acknowledged. See Table 12 on Page 44. Participated in 38 outreach events in 2013, hosting public stands at venues such as the National Ploughing Championships, and the Taking Care of Business One Stop Shop. Continued to engage on a regular basis with practitioners and business representative bodies through the Tax Administration Liaison Committee (TALC), the High Level Group on Business Regulation, the Customs Consultative Committee and the Hidden Economy Monitoring Group. Performance Our survey of Small and Medium Enterprises (SME) showed that 86% of respondents were satisfied or very satisfied with our service. See Feature Article on Page 16. An international benchmarking exercise by PricewaterhouseCoopers and the World Bank shows that in 2013, and for the seventh year running, Ireland was the easiest country in the EU in which to pay business taxes (and the sixth easiest in the world). The Global Forum on Transparency and Exchange of Information for Tax Purposes published its ratings for 50 countries on the implementation of its information exchange standard. Ireland was one of 18 countries to achieve the top rating of compliant. 8

10 Managing Debt Debt available for collection was 1,009 million, down 171 million (14.52%) on Debt available for collection as a percentage of gross receipts was 1.95%, down from 2.35% in Over 16,000 taxpayers or businesses covering almost 124 million of tax debt given phased payment arrangements to enable them overcome significant cashflow problems. The recovery of tax using our enforcement programmes increased by 3.6%. See Table 15 on Page 45. Confronting Non-Compliance Overall yield from audit and compliance intervention activity increased by 11.4% to million. Yield from non-audit compliance interventions increased by 78% to million. 8,037 audits completed yielding million. See Table 17 on page 46. Major progress on mitigating fuel fraud risks. See Feature Article on page 26. New tax compliance measure introduced for premises that should be licenced to sell alcohol but the person concerned cannot be licenced because they are not tax compliant. In such cases, the alcohol products held for sale on the premises are liable to forfeiture. Ongoing work on special investigations yielded million see Table 19 on page 45. Revenue s national contractors project extended nationwide. See Feature Article on Page 21. Compliance Code for PAYE Taxpayers launched. 14 avoidance cases, 13 of which were under Section 811 of the Taxes Consolidation Act 1997, settled with a yield of 2.6 million and a restriction of losses of 1.1million. Details of 450 settlements made in 2013 published in Iris Oifigiúl. The settlements involved 43.8 million in tax, 17.9 million in interest and 22.8 million in penalties. Seizures 6,530 drug seizures made see Table 21 on page ,232 litres of illegally laundered fuel seized and 9 fuel laundering plants detected see Table 22 on page million cigarettes and 4,203kg of tobacco, valued at 18.9 million and 1.7 million respectively, seized see Table 22 on page 47. Additional powers introduced to support investigations into illicit tobacco production and to allow the search of bags and receptacles of persons suspected of selling untaxed cigarettes million in cash, suspected as representing the proceeds of crime or intended for use in criminal activity, seized. Cash forfeiture orders amounting to 385,019 granted by the Circuit Court in 17 cases. 5,246 seizures of counterfeit goods, involving 162,298 items with an estimated value of 4.1 million. 1,425 vehicles seized for a range of offences. Using Data, Technology and Analytics Real-time risk evaluation and predictive analytical models employed in VAT and PAYE compliance activity. Interventions in 2,585 PAYE cases yielded 2.6 million. Over 6 million saved from reducing or disallowing incorrect VAT claims. Social Network Analysis for compliance purposes piloted and a number of potentially fraudulent networks currently under investigation. Customs Risk Intervention Selection Program (CRISP) launched providing an electronic risk engine to analyse cases for selection for post clearance Customs controls. Prosecutions/Penalties 35 criminal convictions for serious tax and duty evasion - see Table 23 on page convictions secured in respect of a range of summary offences - see Table 24 on page convictions secured and fines amounting to 1.8 million imposed for the non-filing of tax returnssee Table 25 on page 48. 9

11 Playing Our Part Internationally By the end of 2013, Ireland had signed comprehensive Double Taxation Agreements with 70 countries, of which 68 were in force on 1 January ,364 requests for mutual assistance received from other jurisdictions and 1,000 requests issued by Revenue to other jurisdictions. See Table 27 on page 49 During the course of the Irish Presidency of the EU, chaired 9 Council Working Groups and provided technical support for a further 6 Council Working Groups. See Feature Article on page 32. Participated in a range of international Groups on key tax and customs matters, including European Union, OECD, Intra-European Organisation of Tax Administrations (IOTA) and World Customs Organisation. Participated in 17 of the OECD working groups established to address Base Erosion and Profit Shifting (BEPS). 10

12 Strategy 1 Make it easier and less costly to comply The purpose of this strategy is to ensure that our customers voluntarily meet their obligations and claim their entitlements on time at low compliance cost, with minimal need for Revenue intervention. Our key priorities for 2013 were to achieve our collection targets, implement Local Property Tax, increase the uptake of electronic services, and commence the delivery of full self-assessment for Income Tax, Corporation Tax and Capital Gains Tax. Collection Assessing, collecting and managing the taxes and duties due to the Exchequer is our core objective. In 2013, we continued to manage and maintain timely compliance levels and achieved our collection targets. This contributed in a significant way to the Programme for Government, and to Ireland s successful emergence from the EU / European Central Bank (ECB )/ International Monetary Fund (IMF) Programme in late Table 1 and Table 2 on page 40 show Gross and Net Receipts respectively. Collection performance in 2013 was below target by 143 million (0.38%) but 1,219 million (3.3%) above the yield in

13 Feature Article - Administration and Collection of Local Property Tax The introduction of Local Property Tax (LPT), the largest extension of the self-assessment system in the history of the State, was a major administrative challenge for Revenue during The timescale for its introduction required us to draft the necessary legislation, build a new Property Register and develop a customer service model capable of providing assistance to a very large volume of taxpayers within a nine-month period. Our customer service model for LPT is built on flexible deployment, which includes a mix of experienced existing staff, additional staff on a temporary basis, and an external call centre service to provide an information help line. This flexible mix of resources was vital to the successful delivery of a fully functioning tax within such a short period of time and will continue to play a key role into the future as we bed LPT into normal tax collection and compliance operations. From the outset, we recognised that a comprehensive information and consultation process would be an integral part of Revenue s administration of LPT. From early January 2013 we met with a range of representative bodies to explore in advance issues of relevance to the design of the new tax. In addition Revenue consulted widely with Government departments and State agencies central to the development of the Property Register and to the administration of the tax. A close working relationship was established with the Citizens Information Service (CIS) and their staff were briefed so that they could assist property owners with LPT enquiries. We supplemented this consultation process with an extensive public information campaign involving radio and newspaper advertising. Revenue spokespeople took part in national and local radio interviews explaining the new tax and dealing with enquiries from property owners. Attendance at trade shows such as the Ideal Homes Exhibition also proved to be effective, with over 10,000 callers to the Revenue stand over the two days of the exhibition. In the period from March to December 2013, we issued notifications in respect of almost 2 million properties for the 2013 (half year) and again for the 2014 tax year. During the same period we answered in excess of 800,000 phone queries and replied to in excess of 250,000 letters/ s. We also introduced a very successful on-line service facility that allows taxpayers to manage their LPT requirements at a time that suits them. The on-line service was utilised by 76% of our customers in respect of 2013 and continues to be extensively used for We introduced 8 different payment options, including the use of 3 external service providers and a voluntary deduction at source facility from salary/pension to ensure property owners had as many options as possible to pay the tax in a way that best suited individual circumstances. We lodged 318 million to the Exchequer in respect of LPT for 2013, 242 million was in respect of 2013 and the remaining 76 million in respect of Revenue also took over responsibility for Household Charge arrears from 1 July 2013 and collected 2.7 million up to the end of Approximately 42% of property owners self-assessed the same LPT valuation band as the Revenue Estimate and 58% of property owners self-assessed a different LPT valuation band compared to the Revenue Estimate. 44% returned a lower valuation band than the Estimate: 27% reduced by 1 band, 10% by 2 bands and 7% by 3 or more bands. 14% returned a higher valuation band: 7% increased by 1 band, 3% by 2 bands and 4% by 3 or more bands. Overall, 76% of property owners self-assessed within one valuation band of the Revenue estimate. Some initial compliance work was carried out in This involved issuing 190,000 reminder notifications, 29,000 mandatory deduction at source instructions to employers/pension providers, 3,500 tax clearance refusals and 6,700 Income Tax surcharges. Our compliance campaign is now focussing on 2013 and 2014 non-engagers, 2012 arrears of Household Charge, and undervaluation of property. Our mantra from the outset of LPT was to make the tax as easy as possible to pay but hard to avoid. Specifically, the use of deduction at source from salaries or occupational pensions has played a major part in this regard because it operates a dual role as a voluntary option for those who wish to comply and as a compliance option that Revenue can quickly activate against non-compliers. LPT is also a fully fledged tax in Revenue s consolidated cross-taxhead profile of every taxpayer. It is always reviewed for any outstanding liabilities before tax repayments in any other taxhead are processed. Where any liability exists in LPT the outstanding amount is offset before the tax repayment is issued. 12

14 New Schemes Diesel Rebate Scheme (DRS) This scheme allows for the repayment of part of the Mineral Oil tax paid on auto-diesel purchased for the purpose of business transport activity in the State on or after 1 July The repayment scheme, which operates on a quarterly basis and which is available to both Irish and EU operators, is calculated based on a formula that is laid down in the legislation. The rate applicable in any claim period is calculated on a sliding scale basis, with a maximum repayment of 7.5 cents per litre of diesel, based on a retail price of 1.25 per litre (VAT exclusive). To manage the repayments process, Revenue has developed an on-line facility through ROS that allows transport operators register and claim. The system, in line with all Revenue on-line developments is fully secure and allows Irish transport operators to easily amend details as the need arises and to claim repayments on a quarterly basis. Revenue is currently developing phase 2 of the on-line system, which will allow EU operators access the scheme in the same way as is now available for the Irish operators. Phase 2 will be live by mid The Home Renovation Incentive (HRI) Scheme Budget 2014 introduced a new tax credit for homeowners as an incentive to carry out renovation, repair or improvement work on main homes between 25 October 2013 and 31 December The aim of the HRI scheme is to encourage homeowners to invest in home improvements and give a boost to the construction sector. In addition, by using tax compliant contractors, the scheme will help move certain construction activity from the shadow economy into the legitimate economy. Key information about the HRI for both homeowners and contractors was published on our website immediately after the Budget. Revenue will release a new electronic system in April 2014 which will allow contractors to input details of works that qualify for the HRI as well as all relevant payments received. Homeowners can also access the system to ensure all details are posted on the system in a timely fashion. Interim arrangements, which are operating in advance of the electronic HRI system, are also available on the Revenue website. Design and Deliver High Quality Electronic Services A stated objective in our Statement of Strategy is to establish electronic channels as the norm for doing business with us. We have worked hard to make our electronic services attractive and easy to use and to increase customer usage through better marketing of voluntary take-up, expanding mandatory categories and widening agent provided services. Mandatory Electronic Filing of Financial Statements Revenue is rolling out the mandatory filing of financial statements in ixbrl (inline extensible Business Reporting Language) in phases. From 1 October 2013 companies dealt with in our Large Cases Division were obliged to file financial statements in ixbrl with Corporation Tax returns. The extension of mandatory filing of ixbrl financial statements with Corporation Tax returns will be completed in two further phases by the end of We are examining, in co-operation with other State Agencies, the potential to re-use accounting data filed in the ixbrl format with a view to reducing the overall compliance burden on business in Ireland. Customs Electronic Manifest Project Phase 1 of the Customs Electronic Manifest (e-manifest) Project was implemented in April Real time arrival information on all aircraft and ships is provided to Revenue by the Airport Authorities in respect of all flights, and the Department of Transport, Tourism and Sport in respect of all maritime traffic. This gives Revenue reliable data on when goods have arrived, when they are available for Customs control and the correct date for the application of Customs Duty. The implementation of Phase 1 removes the requirement for carriers to provide this information to Revenue. Further phases of the e-manifest project will be implemented in

15 Reducing Compliance Costs Full Self-Assessment Full self-assessment was introduced in 2013 for Corporation Tax for accounting periods commencing on or after 1 January In addition, full self assessment for Income Tax and Capital Gains Tax is in place from 1 January The aim of full self-assessment is to modernise and streamline the assessing rules for direct taxes, reduce complexity, advance the Government s simplification agenda, provide greater clarity and certainty for taxpayers and agents, and reduce compliance costs. Data Sharing to Reduce Burden To minimise duplication and the associated administrative burden on citizens, Revenue continues to increase the extent to which it provides data to other Departments and Agencies where such exchange is permitted by law and can be facilitated by secure data transfer systems. Student Universal Support Initiative (SUSI) In 2013 Revenue commenced a direct data sharing operation with SUSI, (the Agency which provides financial support for students in full-time further and higher education undergraduate courses). The overriding objective of this initiative enables SUSI to collect information directly from Revenue and removes the need for the grant applicant to produce relevant documentation to SUSI in support of their grant claim. The successful outcome of this initiative has resulted in a much more efficient and simplified grant application process for both the student and the awarding authority, and has resulted in significantly reduced contacts to Revenue offices seeking copies of the required documentation. HSE/Medical Cards In 2013 a data exchange commenced whereby Revenue, on request, provides the HSE with the relevant annual income details for individuals to enable them efficiently validate and review medical card entitlements. Irish Language Services Revenue s Second Irish Language Scheme, , came into effect in June, It aims to build on progress to date in providing an Irish service for our customers. Customers who wish to conduct their business with us through Irish can contact their local Revenue office or us directly. Our PAYE 1890 numbers provide an option for customers who wish to have their telephone query dealt with through Irish. Business tax payers can advise that they wish to conduct their affairs through Irish when registering. All the main forms are available in Irish and are updated regularly. The most significant development during the year was the provision of a fully bilingual property tax section of the Revenue website. An online registration and payment system, together with extensive, frequently updated FAQs were provided bilingually and simultaneously from the start. We also provided comprehensive bilingual information on starting and running a business and in relation to the newly introduced Home Renovation Incentive. Many other pages of our website were already available in both Irish and English. High Earners Restriction The 2006 and 2007 Finance Acts introduced measures to limit the use of certain tax reliefs and exemptions (known as specified reliefs ) by high income individuals. Further limitations were introduced in the 2010 Finance Act, designed to ensure that, with effect from 1 January 2010, individuals with an adjusted income level of 400,000 or more would pay an effective tax rate of 30% on a combination of adjusted and ringfenced income. 14

16 Revenue prepares an annual report on the operation of this restriction. The report in relation to 2011, Analysis of High Income Individuals Restriction 2011, published in October 2013 found that the restriction continues to be an effective measure in ensuring that, at a minimum, high earners are required to pay income tax at a rate of at least 30% on their income where their income exceeds 400,000. The year 2011 was the first year in which the Universal Social Charge (USC) applied and so, as a tax on income, it was included in some of the analysis in this report. The report showed that individuals earning over 400,000 paid on average 30.67% income tax and that rate rose to 39.7% when USC was taken into account. Those earning less than 400,000, and who were partially affected by the restriction, paid on average 19.21% tax, which rose to an average rate of 28.8% when USC was included. 15

17 Feature Article - SME Survey Results and Analysis The small and medium enterprise (SME) sector makes a key contribution to economic activity and employment in the Irish economy and Revenue plays an important role in supporting SMEs by simplifying procedures, providing quality customer service and reducing the costs associated with meeting tax and duty obligations. In December 2013, Revenue published the results from its third survey of SME customers, which was conducted during the period November 2012 to March Over two thousand survey forms were issued to a random sample of VAT registered customers. The overall response rate was 46%. The survey was conducted to canvass the views of the SME sector on a range of issues affecting their business. The four broad areas covered by the survey were: Customer Service and Channels of Communication, Filing Annual Income Tax Return, Factors that Influence Compliance, and Shadow Economy Activity. Key Results 86% of respondents reported that they were either satisfied or very satisfied with customer service. The proportion reporting dissatisfied or very dissatisfied is at its lowest since the first SME survey in out of 4 SMEs spend less than two hours per week on Revenue related matters. 55% of respondents contacted Revenue in the year preceding the survey. The phone remains the most used channel of communication followed by ROS and the Revenue website. More traditional methods of contact such as letters and fax and calling in to Revenue in person have declined. 1 in 5 (19%) SMEs experienced difficulty paying taxes both on time and in full, a substantial increase on The main reported reason for difficulties was a temporary cash flow problem (85%). A further result of note is that, compared with 2008, SMEs are now almost twice as likely to contact Revenue about their difficulties. 1 in 6 respondents (17%) reported that they have personally seen an increase in shadow economy activity in the year preceding the survey. Of those who observed an increase, about twothirds (65%) felt this had an impact on their business. 60% of respondents indicated that they were aware that they could anonymously report an incident of shadow economy activity and 72% said they would anonymously report specific instances of activity to Revenue. The results suggest that the public pay taxes by consent in large part because they want to do the right thing and this should translate into a high level of voluntary compliance. Of the Revenue sanctions, a concern with having to pay interest charges is found to have the greatest degree of influence. Since 2008, the results show that there has been a large reported increase in the influence of interest charges. We asked respondents if they would like to add a comment on any aspect of the survey or suggest service improvements. The largest proportion of responses related to ways in which Revenue could help businesses including deadline flexibility, providing training when new systems are being launched in addition to simplifying taxes and returns. The second largest proportion of responses related to general praise for Revenue as an organisation and for Revenue staff. The full survey results can be accessed on the Revenue website. 16

18 Strategy 2 - Increase timely compliance and reduce debt Our priorities for 2013 were to reduce the amount of debt available for collection, maintain timely payment and return compliance, and reconfigure our resources to maximise debt collection and recovery. While some sectors of the economy showed tentative signs of recovery in 2013, the overall debt collection environment remained challenging as many of our customers continued to experience difficulties meeting their tax and duty obligations because of reduced cashflow and problems accessing credit. Debt Performance The total outstanding debt for 2013 was 1,840 million, down 8.28% ( 166 million) on We reduced the debt available for collection by 14.52% ( 171 million) to 1,009 million. In 2013, Revenue wrote off 263 million of uncollectible tax, compared to 287 million in 2012, a reduction of 8%. Significantly, we retained or slightly increased the already high levels of timely compliance that we have achieved in recent years. See Tables 13 and 14 on page 45. Collection Enforcement Performance Our collection enforcement programme is a key component of our strategy to foster tax payment compliance and is deployed in circumstances where there is no meaningful engagement with us by the taxpayer in regard to outstanding tax liabilities. During 2013 we collected 224 million in outstanding liabilities through enforcement, which was a 3.6% increase over The results of Revenue s collection enforcement programmes, using our Sheriff, Solicitor and Attachment enforcement options, are shown in Table 15 on page 45. Oversight of Corporate and Personal Insolvency During 2013, Revenue was actively involved in both commencing and supporting corporate and personal insolvency action, including Liquidation and Bankruptcy, against defaulting taxpayers with significant or intractable debt. See Table 16 on Page 45. Revenue provided the funds in 13 instances for action by liquidators against directors in the event of suspected serious abuse of company law provisions, particularly where the liquidator has evidence of fraudulent or reckless behaviour or where there are grounds to pursue action against rogue directors. We also maintain a close working relationship with the Office of the Director of Corporate Enforcement (ODCE) and the Official Assignee's Office. Debt Management Operations Throughout 2013, our debt management operations continued to focus sharply on both timely collection of taxes and reducing debt available for collection. Our twin strategy in this regard included working pro-actively with businesses or taxpayers experiencing temporary cash-flow difficulties, providing there was positive engagement with us, and deploying appropriate enforcement sanctions against those who chose not to engage. At the beginning of 2013 we extended the use of our Arrears Case Analysis Tool (ACAT) from a pilot phase to all of our debt management units. The deployment of ACAT allows each debt management unit to interrogate its case base according to specific risk criteria rather than on the basis of centrally created parameters as had previously been the case. In particular ACAT facilitates: 17

19 Unit level real time case selection in preference to central selection based on older data. Flexible independent case selection capability in each debt management unit. Unit level staff deployment based on clearly targeted cases or sectors. Drill down capability supporting either individual case selection or sectoral selection with up to date data. By using ACAT as our primary case selection tool, we have improved collection for both our larger and medium sized cases while being able to simultaneously divert additional resources to our smaller cases. For example, a significant number of cases that were on a 12 week intervention cycle are now subject to caseworking activity within 4 weeks of the payment due date. This enhanced focus has played a key role in achieving further reductions of 14.52% over 2012 in our key debt available for collection measurement target. 18

20 Strategy 3 Target and confront those who do not comply It is a key part of Revenue s on-going work to identify and focus its compliance interventions on the riskiest cases and sectors. The less risky cases receive less intensive attention. This strategy maximises tax recoveries and reduces the regulatory burden placed on largely compliant and less risky businesses (see Feature Article below). We employ an array of interventions to tackle non-compliance, ranging from assurance checks to address minor issues to criminal prosecutions for serious tax and customs fraud. We pay particular attention to shadow economy activity, cigarette and alcohol smuggling and fuel laundering, all of which can have a negative effect on Exchequer returns, and we are guided by structured risk assessment, analytics and intelligence. This approach is underpinned by close cooperation and information sharing with the Department of Social Protection (DSP), where we work together to uncover non-declaration or under-declaration of income and/or fraudulent DSP claims. Our response to the threat posed by drug smuggling includes promoting cooperation and the exchange of intelligence with An Garda Síochána, the Criminal Assets Bureau and other international law enforcement agencies, along with effective operational interventions. In combatting the illicit trades in tobacco products, mineral oils and alcohol, we address all stages of the supply chains for those products and, as in the case of drugs, cooperate closely with other countries and international organisations in identifying and targeting the organised crime groups that are responsible for a large part of this criminal activity. Increase Early Detection of Highest Risk Evasion Feature Article - Using Data, Risk Assessment and Analysis to target Compliance Case Selection A core Revenue objective is to ensure that all taxpayers are compliant and that compliant businesses are not undermined by non-tax compliant competitors. In an increasingly digital economy, Revenue uses a range of tools to identify and target non-compliance risks. Key aspects of our approach to data analysis and risk assessment include: Risk, Evaluation, Analysis and Profiling system (REAP) Most cases requiring a compliance intervention are identified by our Risk Evaluation Analysis and Profiling (REAP) system. REAP cross-checks and interrogates data sources we have available on individual taxpayers and businesses. Using third party information and data has been a particular strategy of ours for many years. REAP now incorporates and interrogates over 50 separate data sources, from Revenue s own information sources to data from Government Departments and other third party sources from the public and private sectors, such as payments made by Life Assurance companies in respect of investments held, payments by State Agencies, and details of Casual Trader licenses issued by Dublin City Council. In 2013, Revenue gained access to two significant new third party data sources comprising returns from merchant acquirers in respect of payments made to merchants for credit and debit card sales, and returns from investment undertakings in respect of values of investments held by certain unit holders. The extensive sources of third party data in REAP have the potential, when cross-checked against other Revenue data, to identify cases where businesses are operating but are not registered with Revenue for tax purposes, where taxable income has been under-reported and where a range of other compliance issues may arise. REAP risk ranks the taxpayer population, automatically highlighting the particular issues that need to be examined in the context of Revenue s tax compliance activities. Customs Risk Intervention Selection Program (CRISP) CRISP is an electronic risk analysis programme that identifies cases for customs audits and individual Single Administrative Documents for post clearance checks. CRISP interacts with other Revenue systems to create and evaluate risk scores in order to inform the selection of cases for compliance and audit interventions. Conversely, risk scores assigned by CRISP may inform the selection of cases for audits or compliance interventions for other taxes. 19

21 Real-Time Risk Analytics Real-time risk analytics ensure that transactions are risk assessed in real time i.e. as the transactions are processed. A combination of predictive models and specific business rules are applied to transactions and behaviours, to identify compliance risks such as fraudulent refund or repayment claims. Revenue is also developing and deploying other predictive models using advanced data mining techniques. These models are used to identify risky cases by analysing historical risk indicators and then predicting the future behaviour of cases. The models are used for case selection and decision support. Social Network Analysis A recent addition to Revenue s risk evaluation approach is Social Network Analysis (SNA). This approach should not be confused with social interaction websites such as Twitter or Facebook. In essence SNA allows complex networks of individuals and businesses to be easily visualised and understood. This technology uses our own data and other data available to Revenue to identify links and relationships between individuals and businesses. It helps to identify potentially complex relationships that can mask tax frauds where, for example, the risk lies in transactions between businesses or between individuals and businesses which would not be readily apparent if any of these participants were examined in isolation. Audit and Compliance Revenue concentrates its compliance resources on the riskiest cases. Revenue s focus continues to be on selecting cases for intervention based on the presence of various risk indicators and other information available. This is the type of targeted intervention that gets best results. This strategy maximises tax recoveries and reduces the administrative burden placed on largely compliant customers. The overall yield from audit and compliance intervention activity increased by 11.4%, from 492 million in 2012 to million in The yield from non-audit compliance interventions increased by 78%, to million (of which 2.7 million was sent for enforcement). 8,037 audits were completed in 2013 yielding million (of which million was sent for enforcement). Overall, inability to pay was claimed in respect of 26.4 million (not included in above figures). See Table 17 on page 46. Revenue has in place a targeted programme of compliance interventions in relation to Stamp Duty to ensure that filers/taxpayers are meeting their obligations. In 2013, compliance interventions yielded over 6 million in case settlements. The data from stamp duty returns for properties and commercial leases are transferred to the Property Registration Authority, to form part of their published registers. The transfer by the Department of Social Protection to Revenue of details of payment of long-term social welfare pensions first took place in late On receipt of such details, Revenue initiated a compliance programme to recover outstanding tax liabilities for back years that accrued as a result of social welfare pensions not being declared for tax purposes. The programme focussed primarily on high risk cases and on cases where the income per annum other than from a social welfare pension exceeded 30,000. During 2013, 5,862 cases were finalised yielding 14.8 million. Since January 2013, details of social welfare pension payments are transferred to Revenue on an on-going basis. PAYE taxpayers pay tax on their social welfare pension by way of reduction of their tax credits. Non- PAYE taxpayers pay the tax due on their social welfare pensions by way of direct payment to Revenue and, to ensure that such taxpayers return details of their social welfare pensions, their tax return forms are prepopulated with details of their social welfare pension. We also continue to identify cases with evidence of significant sales suppression (both manual and electronic), particularly from the use of Electronic Point of Sales (EPOS) Systems, training staff in e-audit techniques and the use of computer forensic tools. A number of cases are being considered for prosecution. 20