Mr. Seamus McCarthy:

As members are aware, the Revenue Commissioners are responsible for the collection of taxes, duties and other levies and charges, and for their prompt transfer either to the Central Fund of the Exchequer or to other fund accounts or public bodies as provided for in law. Revenue accounts for these receipts and transfers in what is generally referred to as the Revenue account. The 2020 account was certified by me on 20 April 2021 and received a clear audit opinion.

Tax receipts payable to the Exchequer in 2020 amounted to a net €56.2 billion, a decrease of €2.1 billion or 3.6% when compared to 2019. The most significant change related to net VAT receipts, which decreased by €2.7 billion or 18% year on year. This decrease was offset by an increase of €946 million in corporation tax net receipts. Non-exchequer net receipts collected by Revenue on behalf of other agencies decreased from €15.8 billion to €15.3 billion, a reduction of nearly 4%. Pay related social insurance, PRSI, contributions account for nearly 75% of such receipts. PRSI net receipts decreased by 7.5% in 2020 as compared to 2019.

Revenue’s administration and operational expenses are charged to Vote 9 - Office of the Revenue Commissioners rather than to the Revenue account. Revenue’s total gross expenditure in 2020 was €467 million. Salary costs of €329 million account for 70% of Revenue’s spend. Taking account of appropriations-in-aid of €60 million, net expenditure under the Vote amounted to €407 million.

In my report on the appropriation account for 2020, I draw attention to non-compliance with procurement rules. This is disclosed by the Accounting Officer in the statement on internal financial controls.

As members will be aware, the temporary wage subsidy scheme, TWSS, was introduced to enable employers affected by the Covid-19 pandemic restrictions to receive support from the State in relation to their wage costs. The scheme was operated by the Revenue Commissioners and funded by the Department of Social Protection. The scheme operated in two phases over a 22-week period from 26 March to 31 August 2020. It was succeeded by the employee wage subsidy scheme, EWSS, which is also operated by Revenue and funded by the Department. The scheme provided very substantial assistance to employers. In 2020, subsidies totalling €2.8 billion were paid to 66,370 employers in respect of approximately 678,000 employees. This represented support to an estimated 36% of all employers registered with Revenue pre the pandemic.

Similar to the administration of the tax system, the scheme operated on a self-assessed basis. This meant employers self-declared that they met the eligibility criteria and calculated how much they were due and received subsidy payments on that basis. In June 2020, Revenue commenced eligibility checks on all employers who received subsidies. By the end of July 2021, subsidies totalling €311 million had been identified by Revenue as repayable. The bulk of this, approximately €252 million, related to subsidies paid during the initial phase of the scheme when a flat rate of €410 per week was paid. Of the €311 million repayable, €212 million had been repaid and a further €81 million was warehoused for future collection. The balance of €18 million was outstanding for recovery. These figures are as at the end of July 2021. Overall, we found that while there was a material level of excess funding of employers under the scheme, Revenue had signalled to employers from the outset that they would be required to repay any excess. Revenue implemented a comprehensive compliance regime that has identified overpayments and has substantially recovered them.

The Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 introduced the requirement for certain designated persons to submit reports to Revenue where they have suspicions of terrorist financing or money laundering, including the laundering of the proceeds of tax evasion. These are referred to by Revenue as suspicious transaction reports, STRs, and potentially provide useful intelligence to Revenue in tackling shadow economy activity. Over the five-year period 2016 to 2020, Revenue received approximately 125,000 STRs or an average of approximately 25,000 STRs per year. The STRs received are matched to taxpayers, where possible, and are risk rated. Revenue was able to match nearly 90% of the STRs it received in the years 2016 to 2020 to identified taxpayers. Some 40% of the matched cases were considered high risk. Of these, nearly half were subsequently closed without a Revenue intervention and 20% progressed to some form of compliance activity. Ultimately, very few STRs directly yielded additional tax revenue. Only approximately 500 of the reports received between 2016 and 2020 had yielded additional revenues by end February 2021, amounting to just over €23 million. STRs are also used to feed into Revenue’s risk assessment of taxpayers, however, and so may indirectly contribute to a later targeted audit or other intervention.

The examination reviewed a sample of 50 closed cases to assess whether the appropriate course of action had been taken and in nearly 85% of cases reviewed, no issues were identified. In a number of cases, Revenue officials considered the STRs to be relevant to other Revenue branches for possible further investigation but there was no evidence of activity following referral to the other branch. Revenue carried out a review of aged cases and concluded that a new protocol was needed to manage the transfer of STRs between divisions.

Overall, we found that Revenue complies generally with international good practice in the management of STRs. The examination made five recommendations in relation to the management of STRs, all of which were agreed by Revenue.