Tax Audits and Late Payments Keeping Revenue Busy

9,000 audits, 499,000 enquiries and 1 in 5 late payments & returns in a busy 2012 for Revenue

Revenue recently published their Headline Results for 2012, which includes some very interesting statistics.

Tax Receipts

In 2012, Revenue collected €36.7 billion in taxes. Income Tax raised €15.2 billion, just ahead of the combined total from VAT & Excise duties, which amounted to  €14.9 billion. This reflects the increasing role of indirect taxes in supporting the public finances in the current recession.

Late Payments & Returns

Last year, more than one in five tax payments and returns were filed late – in fact only 80% of normal tax returns and payments were made within 1 month of the due date.

However there was much higher compliance amongst larger taxpayers. A 95% on-time rate was recorded for “medium case” taxpayers with annual combined tax liabilities (including Income Tax/Corporation Tax, VAT, PAYE/PRSI etc)  over €75 ,000. The compliance level was higher again (at 98% rate) for “large case” individuals and businesses who pay over €500,000 each year.

This reflects the fact that larger businesses have much more to lose by failing to pay tax or file returns on time, as their % surcharges and interest bills will be much higher.

I wouldn’t be surprised if the comparatively low rate for “small case” taxpayers prompts Revenue to target this sector in 2013. That said, Revenue mustn’t forget many small businesses are struggling badly at the moment and any over-zealous approach on their part could prove both damaging for these businesses and counter-productive for Revenue.

Revenue Audits

Revenue completed a total of 9,065 audits in 2012.  These audits raised a total of €359.1 million, less than 0.1% (or one-thousandth) of the entire tax take. However, each audit raised on average a sum of €39,613, which includes liability for tax arrears, interest and penalties.

This is a substantial sum, especially when it is noted that most audits raise little or no liability for the taxpayer. If “zero settlement” audits are excluded from the figures, I would expect that the average liability sum would rise sharply.

Obviously hardcore tax evasion is still rife in Ireland, but once detected, evaders face severe financial consequences. On the other hand, court prosecutions for serious tax evasion remain relatively rare, with only 25 convictions secured in 2012, while another 156 prosecutions for alleged serious evasion were before the Courts at the end of 2012.

The vast majority of Revenue activity was in the form of Risk Management Interventions (ie querying apparent anomalies) and Assurance Checks (eg verifying claims for credits etc against supporting documentation). Revenue completed almost 499,000 such exercises in 2012, raising over €110 million.

In addition, Revenue last year implemented their new PAYE Compliance risk system, designed to identify and pursue tax underpayments by PAYE workers. This system enabled almost 30,000 tax return checks. These yielded €22m in extra tax, an average of €750 per case. I expect that these checks will become much more commonplace in 2013 and future years.

Tax Collection

In 2012, Revenue used special collection enforcement measures in almost 32,000 cases, to collect €210 million in taxes.  Over 22,700 such cases involved Revenue Sheriffs, who collected €149 million, with the remainder collected through a further 5,000 cases via solicitors and 4,000 cases involving attachment orders.

The full Headline Results document is available online.