Oireachtas Joint and Select Committees

Thursday, 9 May 2013

Public Accounts Committee

2011 Annual Report of the Comptroller and Auditor General and Appropriation Accounts
Chapter 11: VAT on Intra-Community Trade

10:40 am

Ms Josephine Feehily:

It is important to know the way the system works. When a company is filing a VIES return, the first level check is automated and we do not see it at all. It bounces back. The second level check is carried out at EU level and it is returned to us in the form of a report. We write to the businesses and, partly thanks to this audit, we are improving our follow-up procedures. Where we are not happy with the follow-up, we are sending cases to districts for local checks. In parallel with the work being done by the Comptroller and Auditor General, as documented in the report, we had decided to carry out a project audit in the south east and the Waterford district specifically. With this we aimed to discover the proportion of risk.

The data in the Comptroller and Auditor General's report are interesting and the data we updated last week bring it, more or less, to a conclusion. From 600 cases which looked like they had questions to answer on the face of things, 500 had no questions to answer, and as we worked through them, 32 or 33 had negligible issues. A very small proportion involved serious money. By far the better way to handle risk is to try using risk rules and real-time VAT risk assessment put in place since last year. These ensure we are only challenging the cases with serious amounts of money involved, so we are not wasting our time and that of everybody else challenging hundreds of cases to find a dozen or so with real issues.

With regard to managing risk, we have increased follow-up on incorrect numbers. We are using VIES data to inform risk rules in the risk analysis system for audit, and more importantly, we are using it to inform the rules we have embedded in the VAT real-time framework. When somebody sends in a VAT 3 form, either payable or repayable, we have built some rules into the system to check it automatically at the first point. There are two VIES rules already in the real-time framework. When we refresh the process later this year, we are expecting to add another couple of VIES rules, built on the learning from the Waterford project and a new project regarding missing trader fraud in the plant and machinery sector. It is better to try to prevent VAT loss rather than chasing the money afterwards.