Ms Josephine Feehily:

I thank the Deputy. He remarked on the brevity of my opening statement. It is short because that is what I am expected to do with two minutes. In a more traditional opening statement, I would have ranged across the various paragraphs. With my two minutes, I was trying to explain that the risks were recognised in the legal framework and to place it in context. There are 10,000 VIES traders. The majority are small businesses. Until a couple of years ago, the cost of filing VIES on paper was high for business. As part of our general approach of supporting voluntary compliance with all taxes by providing a good service, it is our responsibility to make compliance as easy as possible. We are conscious of the cost to business.

In 2006 or 2007, the EU and the then Government set a target for public administration generally and Revenue in the Irish context of reducing the administrative burden on business by 25%. We have achieved that. I must pay attention to the cost of administrative burden on business. Even if I did not need to, making the process easy would be the right approach to take in terms of supporting voluntary compliance.

Regarding the Deputy's point on little versus large, large companies making intra-EU supplies worth more than €10 million had a monthly VIES filing compliance rate of 87.4% in 2012. This is 63% by value. The rate in the next tier - €1 million to €10 million - was 83.9% per month. The rate in the third tier - €635,000 to €1 million - is 81.6% per month. The weakness, which is below that level, sees a return rate of 66% per month. This category comprises 74% by volume but only 2.5% by value. The situation is the opposite of the Deputy's perception, as the numbers suffering the administrative burden are in the lowest tier.

A number of changes occurred in recent years. At the beginning of 2010, services fell under VIES for the first time, changing the framework significantly. In the context of our discussions with business and our search for efficiencies in Revenue, we realised that businesses were filing VIES, INTRASTAT and VAT 3 forms on three different dates, which only added complications for business.

Part of the reason for the slowdown in terms of prosecutions and follow-up is the end-to-end review we carried out with the CSO, the alignment of filing dates, changes to the systems and mandatory online filing. All of this has resulted in an improvement in the compliance rate, including by small businesses. At the same time, because of changes to the legislation, we had to make changes to how we issue penalty notices and had to review all of our associated legal documentation.

I will respond in a minute to the Deputy's point about the €200 million. At the end of the day, it is important that I point out that the compliance programme is only about returns, data and line items. The real risks in relation to VAT are policed in other ways. The Waterford project mentioned by the Deputy is one example. Work is currently ongoing in the plant and machinery sector. As regards the €200 million, it is a theoretical figure that might be collectable if it was due. There is no evidence it is due. We cannot issue assessments for VAT based on a missing number. There have been two developments since the C&AG produced his report. First, the connection between a VAT number and liability as provided for in EU legislation is not the same for goods and services. In relation to services, it is not essential that the business provides a VAT number. The requirement is for it to provide a VAT number or otherwise satisfy us that it is a business. Second, a recent European court case, with a complicated name, has determined that a charge cannot be laid just because of a breach of the regulations. It does not deny the substantive exemption if the substantive conditions are met. That is a reasonably recent case.

Our focus has been on getting the returns. Where we do not get the returns, we sample the transactions to satisfy ourselves that there is no VAT at risk pending the fixing of the various systems to make the returns flow more easily. In relation to the business mentioned by the Comptroller and Auditor General, we have sampled its transactions and are satisfied that there is no VAT at risk. I apologise if I gave the impression that I am unconcerned about VAT. It is important that we are proportionate in relation to VIES because at the end of the day more than 9,000 of our 10,000 filers will not owe us any money. There is no point in our carrying out VAT assessments if at the end of the day businesses appeal and we get nothing because the substantive entitlement will apply in many cases. I apologise for the lengthy reply. I hope I have answered the Deputies' points.