Mr. Niall Cody:

I thank the Chairman for the opportunity to make my opening statement. In the context of the discussion today, I draw the attention of the committee to section 851A of the Taxes Consolidation Act 1997 and my obligation to uphold taxpayer confidentiality.

In 2021, Revenue collected total gross receipts of €96.6 billion, including €17.5 billion in non-Exchequer receipts collected on behalf of other Departments and agencies . The net Exchequer receipts of €67.5 billion were up by 20%, or almost €11.3 billion, on 2020. The net receipts for corporation tax were €15.3 billion, up 29%, income tax €26.7 billion, up 18%, and VAT €15.4 billion, up 23%. Up to the end of November this year, the net Exchequer receipts collected by Revenue were more than €76 billion, some €15 billion, or 25%, more than the same period last year.

Revenue’s gross expenditure in 2021 was €489 million, compared with €467 million in 2020, an increase of more than €21 million, or 5% overall. The increase in 2021 over 2020 primarily relates to ICT expenditure and pay. Revenue had 6,535 staff serving at the end of 2021, with €340 million of Revenue’s €489 million expenditure related to pay. The other main item of expenditure was on ICT, which accounted for some €73 million in 2021.

In Chapter 15 of the report, the Comptroller and Auditor General reviewed Revenue’s management of the capture and collection of VAT due on e-commerce.

E-commerce is an integral part of the economy and integral to the trade of most businesses. In 2014, at the start of the base erosion and profit shifting, BEPS, project, the OECD task force on digital economy issued an interim report that considered the tax challenges raised by the digital economy and stated that it would be difficult, if not impossible, to ring-fence it from the rest of the economy for tax purposes. This is a view shared by the European Commission and member states that have been very active in bringing in legislative changes that have transformed the VAT compliance landscape for e-commerce cross-border transactions.

Revenue has been centrally and actively involved in developing responses to the evolving e-commerce trade for more than 20 years at both domestic and international levels. Those innovative responses improved compliance, increased tax revenues, reduced VAT fraud, simplified the administrative burden for businesses involved in cross-border trade and allowed EU businesses to compete on an equal footing with their non-EU competitors.

E-commerce is now an integral part of business, particularly having regard to changed consumer behaviour arising from the UK’s departure from the EU and Covid-19. Next week, the European Commission will present new legislative proposals on the VAT in the Digital Age package to member states. This will further enhance the modernisation of the EU VAT system to respond to the challenges of e-commerce and we will continue to engage at EU level on these. In our submission to the Commission on Taxation and Welfare, we highlighted the need to modernise the VAT reporting system to reflect changes in business and accounting systems.

I am satisfied that the integrated risk management approach by Revenue, together with the wide-ranging legislative changes outlined to combat cross-border fraud and abuses, significantly mitigate the risks associated with e-commerce. However, there is always more to be done. Our compliance management strategy is not fixed and is something we keep under continuous review.

In chapter 16, the Comptroller and Auditor General reviewed Revenue’s suspension of periodic reviews of tax clearance certificates. In summary, in line with a policy decision in March 2020, at the start of the pandemic, tax clearance remained in place for taxpayers until formally rescinded by Revenue and no applicant for the State support schemes received a support payment in the absence of tax clearance. Equally, no payments were made after the rescinding of tax clearance.

In effect, what was delivered was not a suspension of tax clearance but, rather, an extension of the then-existing tax clearance status as of a specific time in March 2020. This cohort of cases were tax compliant taxpayers at that point in time. It is important to have regard to the fact that the debt warehousing scheme provided for the non-payment of certain current taxes as they arose and the parking of those debts in the warehouse, initially on an interest-free basis.

The retention of tax clearance status was, therefore, a pragmatic and administratively straightforward approach by Revenue that aligned fully with the provisions of the debt warehousing scheme during the pandemic.

In Chapter 17, the Comptroller and Auditor General reviewed the 2021 Revenue account in respect of unallocated tax deposits. As a result of the Comptroller and Auditor General's audit findings, we undertook a reconciliation project in early 2022 and the amount of €32.5 million for audit tax settlements has now been correctly reclassified to the appropriate tax heads. I can reassure the committee that taxpayer records were not affected and the funds were promptly transferred to the Exchequer as they were received.

The Comptroller and Auditor General recommended that an automated solution would be implemented to prevent a reoccurrence, which was implemented in October 2022. This system development reduces the steps necessary for the allocation of moneys into a one-step process, streamlining the process and reducing the risk of manual intervention or error going forward.