Mr. Niall Cody:

The VAT system came into being on 1 November 1972. Basically, it has had the same structure for 50 years. The EU rules were introduced in 1993. In the last budget, the Minister announced a consultation process on VAT modernisation. Over the next few years, there will be big changes. We have had our first consultation about the VAT system. It does not reflect what would happen in the modern environment of digital records and it will be a big transformational change in which we will engage fully with business software developers to try to integrate VAT reporting with the business process.

As the Chairman will know very well, VAT is based on the supply of goods or services, and the inputs based on that. I hope that when the new VAT system is in place and the first two years have passed that we will all say it is a terrible pity this was not done years ago. It will be a definite challenge transform the system.

Every year Ms Acheson's team conducts a voluntary survey on PAYE customers in a statistically sound way. The survey informs us about what people think about us. The survey is totally anonymous so people can say what they like. We have published the survey and it is in the material we provided to the committee. It is a real positive view. When Ms Acheson and her team presented findings of the survey to us, we thought that we needed to insert some negative stuff in the survey as people would not believe us and we wondered whether people were just telling us this because we would audit them if they did not but that is not the case.