John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I welcome Mr. Niall Cody, Chairman of the Revenue Commissioners, Ms Ruth Kennedy, commissioner, and Ms Angela O'Gorman, principal officer. We will start our meeting as usual with an opening statement from Mr. Cody and then members can engage with him on the content of that statement and possibly some other matters.

Mr. Niall Cody:

Thank you, Chairman, for the opportunity to make my opening statement. I will begin with VAT on e-gaming.The regulation of gambling is currently provided for in the Betting Act 1931 and the Gaming and Lotteries Act 1956 and as the committee will be aware the Gambling Regulation Bill is currently before the Dáil. The operational aspects of gambling and gaming regulation are dealt with by a number of State bodies, including An Garda Síochána, the courts, and Revenue. Under VAT law, betting or gambling, including e-gambling services, are exempt from VAT, while gaming services are taxable at the standard rate of VAT, currently 23%. E-gaming is an electronic service, and under EU and Irish VAT legislation, VAT is payable by the service provider in the member state where the private consumer is established, has a permanent address or usually resides. This means that VAT is payable in Ireland by the providers of these e-gaming services at the standard rate. A non-established supplier can register for VAT in Ireland or will, more likely, register through the one-stop shop, OSS. This is an EU wide administrative simplification which allows a business engaged in these supplies to register in a single member state to file and pay its VAT liability for all member states through a web portal in the member state of registration.

Corporation tax receipts for 2021 were €15.3 billion, an increase of 29.5% on 2020. Receipts up to the end of November were €21.1 billion, up 56% on the same period last year. We have published detailed reports on corporation tax receipts every year since 2016 and will publish our next report next April. A key feature of the receipts is their concentration, with the top ten companies paying 53% of the receipts in 2021 and the top ten groups paying 56%. This represents a significant increase in the share paid by the top ten. The equivalent figures in 2019 were 40% and 43%, respectively.

Work is currently ongoing at the OECD on finalising the pillar 2 package of measures to address the taxation challenges arising from the digitalisation of the economy. Pillar 1 is a set of rules designed to ensure the largest and most profitable multinational enterprises pay tax on a certain portion of their worldwide profits in countries where the end consumers and users of their products and services are based. The detailed technical work which will determine the overall cost of this is ongoing. As key elements have yet to be agreed, such as the marketing and distribution profits safe harbour, which affects the elimination of double taxation, it is very difficult to estimate accurately the impact at this stage. The agreement will provide for the reallocation of profits to market jurisdictions such that multinational enterprises will pay a greater proportion of their tax in countries where their consumers and end users are based. The agreement will also provide for the removal of digital service taxes.

Pillar 2 is a series of co-ordinated rules which will ensure that in-scope groups pay at least a 15% minimum effective rate of taxation on their profits in each jurisdiction in which the group operates. While it will be optional for countries to implement the OECD rules, the European Commission has proposed a directive to make the application of the rules mandatory for EU member states. Based on the current draft EU directive, it is expected that pillar 2 will apply from 31 December 2023. The introduction of the pillar 2 rules will have impacts on both the Exchequer and in-scope businesses. However, it is too early to estimate reliably the impact of the global minimum tax as this will depend on ongoing technical negotiations and on policy decisions made by Ireland and other jurisdictions.

Significant policy and detailed technical issues have yet to be agreed at OECD and EU levels. Our role in Revenue is to support the Department of Finance on the technical issues. When agreement is reached and policy decisions are made, there will be a significant legislative programme to give effect to the new rules. There will also be significant ICT developments to implement the changes over the next two to three years and significant consultation and engagement with business, representative bodies, software developers and agents to implement the changes. Implementing the new system will have significant resource implications for Revenue.

Moving to the Commission on Taxation and Welfare report, Revenue made a submission which focused on tax administration, reflecting Revenue's statutory remit as the body responsible for the administration of tax and customs and ensuring the fair and efficient operation of the tax system. The report provides a timely review of the tax and welfare system and provides a detailed framework to support policymaking for the medium term. Revenue will continue to support the Department in aspects of the recommendations which it chooses to take forward.

Chapter 17 of the report deals with modernisation of tax administration. I consider this chapter to be among the most important frameworks to signpost the direction we must travel to succeed in our vision to be a leading tax and customs administration. We strongly endorse the recommendations in chapter 17, and several initiatives are under way in Revenue which will help to implement the conclusions over time.

In addition to the implementation of significant changes arising from the international corporate tax agenda, which I have already touched on, there are a number of other key challenges facing Revenue in the coming years. We are in an unprecedented position, in that, as at the end of November, nearly €2.5 billion of tax debt was warehoused by businesses in the debt warehousing scheme. The effective management of this debt in the current economic environment is crucial.

The digital transformation and modernisation of tax administration, which is a key priority for Revenue, requires a continued refresh of technology to underpin it. Our investment in technology enables us to support Government policy in relation to the implementation of new schemes, such as the temporary business energy support scheme, and new taxes, such as the residential zoned land tax.

There will continue to be challenges arising from the UK exit from the EU both as businesses continue to adapt their supply chains to the very much changed trading relationship with the UK, including to regulatory changes on the UK side, and the supply chain pressures brought about by the Russian aggression in Ukraine. We must ensure we have the people and capability to continue to meet all evolving challenges and to deliver on our vision requiring a significant investment in people and making sure we are an employer of choice capable of attracting the talent and skills we need to continue to be a high-performing organisation.

I draw the committee’s attention to section 851A of the Taxes Consolidation Act and my obligation to uphold taxpayer confidentiality. Subject to this constraint, I am happy to answer the committee’s questions.

Mr. Niall Cody:

I thank the Senator for the comments he made at the start of his contribution about our activities. Some of the things we did over the two years of the pandemic were exceptional. The helplines to which the Senator referred were run at a time when people were working from home and we developed systems to allow that to happen. For people at my level, that is fine, but there were people at clerical officer level dealing with schemes that did not exist. They sometimes spoke to businessmen on the phone and they used to read the Revenue website to each other to reassure themselves as to what it meant. That is a testament to the people involved.

On the VRT issue, one consequence of the UK exit from the EU has been to turn the second-hand car market on its head. I know some of the statistics off the top of my head because I had a similar discussion with the Committee of Public Accounts last week. In 2019, 115,000 second-hand cars were registered for VRT. Up to two weeks ago, the relevant figure for 2022 stood at 34,000. That is a consequence of the changes in rules and not because of our systems. Cars coming in from Great Britain, as opposed to Northern Ireland, are subject to customs, VAT and VRT. Documentation must be produced for all of them. It depends on where the car was originally sourced and whether a European make had gone into the UK before coming to Ireland. In such a case, a transaction is subject to customs duty at 10%, VAT and VRT. As I said at the meeting last week, because we drive on the same side of the road as the UK, the second-hand car market before the UK left the EU was a single market within a Single Market. It is no longer a single market, with all the consequences that entails.

In a way, the VRT registration system has not changed fundamentally and it is the steps people have to take before they get to VRT. We do not have the ownership of the solution in that area. It actually changed the nature of some businesses. Their key business was to source cars and because of the size of the market in Britain and the nature of cars, the tax levels inbuilt in cars made it viable to import them. That model may well settle down a bit but it is still in a huge transition.

In regard to corporation tax, I do not have a crystal ball to look into. One of the things we very much do - this is one of the things I was very interested in when the corporation tax receipts started to show that significant increase - is to publish detailed analysis of what happened, and we have done that every year with as much detail as we can give, having regard to taxpayer confidentiality. What we tend to do is focus on and report on what has come in. We support the Department of Finance on forecasting in that we give it the insights that we have but the Department is the body that has the responsibility for forecasting.

The reality is that there is significant detailed technical work still to be finalised and agreed at international level for both pillar 1 and pillar 2 that will determine what the outcome will be. For pillar 1, there will definitely be a cost because the nature of the agreement at pillar 1 is a distribution of profits to market countries, so bigger countries with bigger markets will get a bigger proportion. However, there are still technical details about the order of the distribution and what element of countries’ profits are redistributed. It applies to multinational groups that have a turnover of €20 billion-plus with a profit margin in excess of 10%. It is estimated that there are about 100 companies worldwide and, of these 100 companies, probably in the region of 60% of them have a presence in Ireland, so we are right in the mix of that whole debate. There are still key issues to be worked out to see what is the proportion and the order.

On one level, pillar 2 seems simpler, if multinationals with turnover in excess of €750 million and a minimum effective rate of 15% is what is in scope, but there are still technical issues. I know there was tentative agreement yesterday in Europe so that, if it follows through with the political sign-off, there will be a directive which means that each member state would have to introduce the rules around the 15%. There are still key issues in regard to the interaction of the rules in each country, the order and who will get the additional taxing rights, and that is not yet finalised. We have not provided any indication of what we think will be the likely cost, on one side, and additional yield, on the other, because until we have certainty on those rules, they will just be guesstimates.

As regards our engagement with multinationals, we are organised in such a way that our large corporates division deals with all the large enterprises and we are actively engaged with all of those companies on an ongoing basis. Again, our primary responsibility is to ensure that each of them pays the right tax in the year and we are not so much into discussing their likely decisions. In any case, the decisions of multinationals and businesses are often made in their international headquarters. We do engage and, when it comes to each year's forecasts, we survey the top companies, we get as much insight as we can and we share that on a statistical basis with the Department to aid forecasting. Nonetheless, the reality is that forecasting of corporation tax is a really difficult issue. I often look at quarterly results from multinational companies and see the surprise in the markets even for the next quarter, so we can imagine what it is going to be like looking forward a year. To assess what is the impact in two years’ time is very difficult with the volatility.

Mr. Niall Cody:

Again, I do not want to put forward any kind of figure because if I suggest a figure, that then becomes the figure. The Minister has been consistent in talking about the risks around corporation tax and the concentration. There is even the idea that, in 2019, the top ten paid 40% and, last year, that had gone up to 56%. The year before was the first year that the top ten paid over 50% and up to that year, for a long time, it was probably consistently between 37% and 43%, and then 2020 was the first time it was over 50%. Some of that was impacted by the pandemic because a lot of other businesses were suppressed, so there was a kind of natural suppression across the broad swathe, whereas some of the large companies, whether in pharma or IT, probably had a very good pandemic, so that probably impacted as well. The level of growth in corporation tax receipts this year means it is now well surpassing VAT as the second-largest, and that is the first time that has happened. November just gone had the largest tax receipts for any month in the history of the State at €13.3 billion, and €5.5 billion of that was corporation tax.

On one level, it is a great problem to have and, certainly, in any discussion I have about this, it is very positive that we have such healthy tax receipts. This year, we will collect well over €100 billion gross, the first time we have collected over €100 billion. There are challenges and risks and we have to be careful, but when it comes to our organisation, our role is very clear, and that is to collect, as we hope, the right tax at the right time from the right people.

Mr. Niall Cody:

Companies in the pharmaceuticals, life sciences and technology sectors have been attracted in by the IDA over the years. They have invested huge amounts of money in the State and are huge employers. In the context of our corporation tax reports over the last number of years, we have also highlighted the income tax, that is PAYE and PRSI, paid by the employees of those companies. It is well known that the levels of pay are very strong and the proportion of income tax, through PAYE and PRSI, from the multinational sector is very strong as well, which adds to that concentration of tax that we receive from the large companies.

Mr. Niall Cody:

The UK rules on VAT are historical and the country was allowed to keep them because they were in place before it joined the EU. Of course, it can keep them in place now because it has left the EU.

Mr. Niall Cody:

There are limits on what we can do under the EU VAT rules. We have dealt with this issue at various fora and have responded to various parliamentary questions about the options that are available. We apply a 13.5% rate on construction across the board. We could not zero-rate new houses. There are options around social housing but there is no flexibility to have a zero rate on new houses under EU VAT law, which we are bound by.

Mr. Niall Cody:

No, not zero-rating. We cannot have zero rating at all. The complexity of the EU VAT Directive in terms of what we can do on reduced rates and the standard rate is significant. I have a bit of form on this because my formative years were spent in the VAT area but if it would be useful, we can give a short summary of what is possible in construction under EU law.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Deputy Doherty is next.

Pearse Doherty (Donegal, Sinn Fein)
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I thank our guests for coming before the committee. I will start by picking up on the point made by Senator Davitt on VRT, which was very well made. I have been a huge advocate for and have heaped praise on the Revenue Commissioners for its unbelievable ability to adapt to the crisis that we had and to create the structures required. We passed legislation and the Revenue Commissioners had to put the systems in place. There was a massive effort by Mr. Cody and all of his team. That said, VRT is a real issue. We are hearing time and again from individuals who see the goalposts moving all of the time. An individual contacted me recently whose business is dealing in secondhand cars. In correspondence he said that the VRT on all cars seemed to have been hiked up in the last week because it appeared the Revenue Commissioners had adjusted all vehicle prices. Two weeks prior to that, this individual agreed to purchase a car. According to the VRT calculator at that time, a sum of €3,400 was owing. However, when the sale went through, with a sale and a margin agreed, the VRT calculator said that €4,000 was owing. We can all see what is happening to the value of cars in the secondhand market. It is madness, with cars bought for €18,000 that are worth €26,000 two years later. We understand that but the businesses affected are not getting any communication from Revenue to tell them what is happening. Dealers have found that their profits were completely written out or they were selling cars at a loss to the business.

Another issue I want to raise relates to certificates of conformity. I give the example of a business which sold a number of secondhand cars in 2021. The cars were made in Britain and were, therefore, zero rated but one does not get a certificate of conformity for a secondhand car. A year later, Revenue contacted the business and said it wanted to check if the cars really should have been zero rated. The issue presented to me was that in other circumstances, when that business files paperwork, Revenue is able to tell it immediately that the car was produced in Turkey, for example, is not zero-rated and that 10% has to be applied. That is fine because then the business knows the rules. Certainty is what these businesses need. They know the rules and they know that they have to pay at 10% so they build that into the sale price. However, for Revenue to contact them a year later to tell them that a part of the car was not created in the UK, thus wiping out all of the profit, is a serious issue. I say that in the context of Revenue being able to move mountains in order to do what we have been able to do in the last couple of years. I am sure we can get the VRT stuff right too. I am fully aware of the volatility in the secondhand car market which is largely due to Brexit. Businesses are not worried about that. They just want certainty; they want to know what are the rules. If they purchase a car today and the VRT calculator tells them they owe €3,000, they do not want to be surprised when they file their return to discover that the VRT owing is €4,000 because that means a week's work is gone. No business can survive in that environment. I encourage Revenue to look into that. It is interesting that this has been raised today because it has been raised with me on more than one occasion.

Mr. Cody's opening statement began with e-gambling. I am not sure why that was the case; perhaps someone asked him to address that issue. A long-overdue gambling law will be enacted next year because the existing law dates back to 1931. We have gaming companies that are operating in this State and paying corporation tax to Revenue but they are operating without a licence. They are operating illegally. Mr. Cody mentioned the fact that Revenue works with the Department of Finance, An Garda Síochána and the Courts Service. When Revenue knows that there is a company filing corporation tax returns that does not have a licence to do what it is doing, does it just accept the money or does it do something about it? There are numerous companies out there that are involved in gaming which do not have licences. They do not have a licence because they cannot get a licence for the type of activity in which they are engaged. If they have a permit, they are breaching all of the conditions of that permit because the type of gaming activity in which they are involved is way beyond what is covered by a permit. I must declare here that I am a director of not-for-profit community music festival in Gweedore that raises money through a gaming permit and a gaming licence, which is why I am familiar with this issue.

Mr. Niall Cody:

I started talking about e-gambling and e-gaming because the invitation from the committee itemised VAT on e-gaming, Pillar Two rules, the Commission on Taxation and Welfare, and any other relevant matters. If the invitation had mentioned VRT, I certainly would have addressed it in my opening statement. I know that VRT is problematic and as the Deputy rightly says, the car market is hugely volatile at the moment. VRT is payable on the open market selling price. We refresh the open market selling price, having regard to market conditions.

I do not want to say in relation to any individual case because, obviously, I do not know it. I would definitely be interested in looking at it. I know there are problems with certificates of conformity and I know there is a problem sourcing documentation from the UK.

On the system for post-clearance checks, we operate customs controls at the point of entry and we operate post-clearance controls, which are essentially a form of audit where somebody declares paperwork and we subsequently check it, as we do for all the taxes. In some of those circumstances, it turned out that the documentation that is being produced was not correct. We do not have the details at the time. It is like any self-assessment system. We have not confirmed at import that that is the correct documentation. When we do a post-clearance check, we look for documentation. If it turns out that the documentation does not reflect what the case actually is, that is the first time we know about it. That can – and I know it has – give rise to difficulties for some dealers. That is the nature of any audit-type system. People paid their tax or duty on a basis, their business runs on that and it turns out that subsequently there is a liability.

There were significant challenges, particularly in the first six months post Brexit on cars. We know there were arrangements in certain cases where it was clear that people did not know what they were doing. Sometimes, in some cases, we were not 100% certain on some aspects of it ourselves. As the Deputy recalls, the final agreement was a couple of days before Christmas and it was coming into effect on 1 January.

I am willing to look at any details. VRT is an area in which I am very interested. VRT was introduced in 1993 with the Single Market. The technology and the system also has to be in accordance with EU rules and based on registration. It was never visualised that our biggest source of secondhand cars would not be in the EU. That has complicated issues as well. The bulk of money we collect in VRT comes in automatically from the new car system. It is one of those taxes that 90% of the work on VRT is for 10% of the money. We are used to doing everything the other way around. We want most of the money without any work on trying to get stuff out of it. We want it to be as seamless as possible. Certainly, we have no interest in making it difficult for legitimate businesses.

Unfortunately, in the sector we have seen some claims being made that people did not know or they have lost money on this. It was very clear that some businesses were using the system to get a competitive advantage and were taking shortcuts. That is a challenge in all sectors, but there is definitely some element of it in the secondhand car market and we have to balance that.

If the Deputy wants to provide me with any specific details, we will look into them. I think that it would be worthwhile. We would want to talk even to the Department of Transport because there is the licensing and the registration.

On whole car sector, back when we became the registration authority in 1993, it was a fairly straightforward concept of registering cars. We now have environmental conditionality around registration. In some ways, there needs to look at who is the registration authority. There is no problem with us being the registration authority because we have the technology to do it, but there are issues around environmental standards that we are not qualified to address fully. That is an area that there could be some significant work done. We have had some initial, very tentative discussions – they probably will not appreciate me saying this – with the Department of Transport. I would be interested in that.

On e-gaming, the 1931 Act deals with gambling and the 1956 Act deals with gaming. The 1931 Act and the changes that happened around 2019 around remote bookmakers all deals with licences for gambling. Any of those companies that the Deputy talked about is licensed for gambling. There is no licensing system for gaming. The 1956 Act essentially dealt with gaming machines and things such as roulette machines, one-arm bandits and the like. Clearly, there was no idea that there was going to be e-gaming, so e-gaming is not regulated. A lot of e-gaming comes into Ireland from other member states where gaming and e-gaming are regulated. There was a discussion at the Committee of Public Accounts last week about whether it is illegal. I am not competent to say whether it is illegal or not - I know it is not regulated. However, it is legal and regulated in some member states. Under EU law, VAT is charged for the sake of fiscal neutrality and the like. That has been the subject of European Court of Justice, ECJ, cases. It is all handled through that one-stop shop. We get a portion of the receipts from e-casinos in other member states in respect of Irish players.

Pearse Doherty (Donegal, Sinn Fein)
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I appreciate that information. This is not the core issue - I want to talk about the other issue. As I said, I raised it because it was in Mr. Cody’s opening statement. I am talking about registered companies that are set up here that pay corporation tax on their profits to the Revenue Commissioners that should be operating under the Gaming and Lotteries (Amendment) Act 2019, where they can either get a licence or permit but have neither. If they have, they cannot get a licence because they are for-profit. Licences obviously are for philanthropic organisations or charities and the permits are for very small prize funds and all the rest. Therefore, one cannot be raffling cars and so on and so forth. Yet they are doing it, making big profits and paying taxes. It is more a general question. I am not naming any individual company. When Revenue sees corporation tax being paid, does it have any duty at all to say that the company is operating without any legal basis or operating against the law? It could be in that area or a different field. What responsibility or duty does Revenue have? As the revenue collector, is it just a case of its job is to collect the taxes and make sure the taxes are applied to the profit and it is up to the Garda to decide whether a company is operating within the law? I want to have an understanding on whether there is crossover or any responsibility.

Mr. Niall Cody:

Our obligation is to collect tax that is due, and tax is due on gaming, for example, under EU and Irish VAT law. We have engaged consistently. I think I said last week that 14 years ago I was at a meeting about what was going to be the gambling regulation Bill with the Department of Justice, the Department of Finance, the Office of the Attorney General and us. Every few years the issue would come up and the question would be asked why we are collecting tax on what may well be unregulated – we will use that term – areas or where a local authority has banned slot machines. The legislation provides that where a District Court has granted the authority, we have to grant the licence. We operate within the legal framework.

We did a big exercise between 2017 and 2019 on illegal gaming machines. We seized 450 across the country, leading to an increase in application for licensing.

The gaming premises has to be licensed and each machine has to be licensed. It is a little like our discussion around VRT. Some people took out licences and used them as machine licences when they were clearly not. We seized more than 450 gaming machines throughout the country. There will probably be legal challenges relating to that area. There is good co-operation between Revenue, the Garda, the Department of Justice and the courts. Everybody knows what is happening, but the relevant legislation dates from 1931 and 1956.

Pearse Doherty (Donegal, Sinn Fein)
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Yes. It is as broad as daylight. It is different from some of the other stuff where it is trying to be hidden.

I will ask about some core issues. Corporation tax concentration has increased. As Mr. Cody mentioned, the top ten companies made up 40% of such tax just three years ago but that has now increased to 53%. When we look at the group of companies, the figure is 56%, which is a significant increase in corporation tax receipts. In the context of the large corporates division in Revenue, did Revenue anticipate that type of level of increase in corporation tax receipts? It appears it did not. This is not a question of why Revenue did not know, rather, if the officials can give any insight to this committee. There is huge volatility in these receipts. Is there any certainty that next year might repeat itself? Could it even be higher again? We are seeing increases in the region of 50% over a short period. Could we see volatility next year? What is Mr. Cody's insight into the large corporates division that is dealing with these groups, including these ten groups, which make up nearly €10 billion of our corporation tax receipts?

Mr. Niall Cody:

We have significantly increased our large corporates division and we continue to increase the resources for work in that area. We spoke previously about realigning our structure and trying to increase resources to deal with these areas of higher risk. Our first engagement is to ensure that what is paid is correct. Every year, in the context of the annual budgetary cycle, we engage with the top 30 multinational groups. We survey them on their expectations for the coming year and on any further insights they might have. I will not say that includes the longer term because "longer term" does not make any sense in this area and I do not think these multinationals are any better equipped than us. That engagement takes place. When the monthly Exchequer receipts come out, every so often the Department of Finance highlights the fact that a once-off factor is included for that month, which is a result of information we received. The tendency, by the companies and Revenue, has very much been to take a conservative view. It is not in any way to understate what will happen. It is because there is such uncertainty about what is happening in the economy. That process takes place. We collate that material and feed it into the Department of Finance.

I am constantly amazed, whether business reporting returns are published on a quarterly, six-monthly or annual basis, about the surprise in the marketplace regarding company A's results being X% above or below expectations, when we look at a quarterly period. There is huge volatility. The size and scale of some of the companies, and probably the nature of the businesses they are in, means they have in-built volatility. For example, there is obvious volatility in pharma. There are also technical issues around capital allowances, intellectual property allowances and timescales for how capital allowances are written down. Individual companies can significantly impact on that. If we look at the figures, we can say that the rate of growth has been in a unique period post-Covid during which we probably had accelerated profitability condensed into a period. That is clearly slowing down in the tech sector and whatever is happening-----

Pearse Doherty (Donegal, Sinn Fein)
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At the end of November, we were at €21.1 billion in corporation tax receipts. I presume that will go up to €22 billion or possibly €23 billion by the time the year is out. Mr. Cody is the best person with any type of insight into where corporation tax is likely to land next year. We talked about betting and gambling. If Mr. Cody was to take a punt on it, is he of the view that we are likely to see those receipts being repeated? Will we see them going back to 2021 levels? Where does he see things at?

Mr. Niall Cody:

The figures that were published at budget time had input from the Revenue survey. The figures for next year are something like €22 billion. Next year's figures will probably be where this year's figures are, which is the out-turn. The projected increase was quite small but I see no reason for it not to be in that ballpark.

Pearse Doherty (Donegal, Sinn Fein)
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Do the issues in respect of the tech sector, including some of the lay-offs and the present concentration of tax receipts, concern Mr. Cody in respect of those projections for next year?

Mr. Niall Cody:

Well, kind of-----

Pearse Doherty (Donegal, Sinn Fein)
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I know there are always risks.

Mr. Niall Cody:

Obviously, the lay-offs concern me. If it involves people losing their jobs that concerns me, but in the overall context and numbers, the figures do not concern me at this stage. If there is a downturn, one of the things I will consider is that it would probably bring tax receipts back to where they would have been, if some of the excesses of the past two years had not taken place. The figures just jumped up and it was probably intended for there to be more like that. I do not know how that comes across in the report.

Pearse Doherty (Donegal, Sinn Fein)
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Okay. The projections are solid enough. Mr. Cody thinks the projections indicate that what we saw this year will probably be repeated.

Mr. Niall Cody:

Yes. In a way, again, I appreciate the Deputy is trying to get some sense from us because there is this view that we are involved with all these companies. The one thing we do not get involved in is projected economic growth, or downturns or the recession. We leave that-----

Pearse Doherty (Donegal, Sinn Fein)
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No.

Mr. Niall Cody:

-----to the Department.

Pearse Doherty (Donegal, Sinn Fein)
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It is just about getting the best assessment. To move on from that, quite a lot is required of Revenue in order to prepare for the OECD's base erosion and profit shifting, BEPS, process, including IT modernisation and new systems being in place for pillar 1 and pillar 2. Will Mr. Cody talk to us about whether Revenue has drafted in an additional team? Has it got the resources? What is it doing to prepare for that? Pillar 2 is to take effect through an EU directive by the end of next year. If the EU directive is applied by the end of next year but America may not have joined up, has there been any assessment of what that would do to our corporation tax base? Has Revenue any assessment regarding that risk, which may or may not materialise?

There was a sense that the OECD package would cost us €2 billion. That is very outdated. At this stage, does Revenue suggest that is not the reality? Instead of putting words into his mouth, I invite Mr. Cody to comment on that. I know we cannot pin down exactly what it would cost but have we a little more idea of the shape of what may happen? I invite Mr. Cody to comment on that. I will then speak on Irish real estate funds, IREFs, if that is okay.

Mr. Niall Cody:

If we use up all the time on the OECD question, we might never get to IREFs.

Pearse Doherty (Donegal, Sinn Fein)
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We will get there. I should not have warned Mr. Cody.

Mr. Niall Cody:

I remind the Deputy that I cannot talk about policy matters. I mentioned the challenges we face earlier. Taking it that the directive will be adopted and will apply to accounting periods that begin after 31 December 2023, it will be legislated for in the finance Bill next year. There will be a significant body of legislation required. A significant redesign of our corporation tax will be required because it affects a small number of cases in pillar 1. In pillar 2, we think there are in the region of 70 or so Irish-headquartered entities, with about 1,700 companies out of that. There are probably about 1,700 non-Irish-headquartered entities, with about 7,000 to 8,000 entities off them. We are probably talking about 10,000 entities in scope. Some of those are non-trading, but there is a significant level of engagement.

We have to design a reporting system that will have to be consistent with the EU and the OECD, because this will form the basis of a reallocation to ensure the minimum 15% is paid across each jurisdiction. Then there will have to be transparency for other countries. If you take it that the accounting year will start on 1 January 2024 and the year end will be 31 December 2024, that will be the first full year of accounting. The normal corporation tax reporting for that entity will be September 2025. The pillar 2 agreement provides for reporting on the pillar 2 element 15 months after the end of the accounting period. In the first year or two, that will be 18 months. We will have our normal corporation tax reporting after nine months, and then nine months hence there will be the pillar 2 process. We have to develop a corporation tax reporting system to reflect that report. We have to develop our IT systems and engage with business and their accounting systems have to tie in with ours. A big challenge for us in pillars 1 and 2 is that they rely on accounting principles as opposed to the tax principles and computations we are used to. There is a significant capacity and skills-building process that we will need.

On additional people, in recent years we have significantly increased the resources and numbers working in the: international tax; business tax policy and legislation; large corporates; and medium enterprise divisions, which are the four divisions that will be impacted by this. I am conscious that the Deputy was asking questions on Committee Stage about resourcing and whether we are adequately resourced. As long as I have been in this job, we have been hugely supported in the context of any case we made. The challenges are significant, however. Since 2018, some 3,000 people have left our organisation, mostly through retirement. I do not know why I pointed at myself, but that reflects the demographic of where we are. Some 3,500 people have joined our organisation in those five years. The challenge for us is that bringing people in on their own is not sufficient. There is a development process involved and you cannot bring in too many people at the same time.

I see two big challenges for us over the next few years. The first is the continued investment in technology. Members have talked about what we have been able to do but we have ambitious plans in technology and the corporation tax modernisation because the worst thing we could do is implement pillar 2 for 15 months without looking at corporation tax reporting. We have to use that opportunity, go in there and do a real refresh. What happens with systems is-----

Pearse Doherty (Donegal, Sinn Fein)
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You add on.

Mr. Niall Cody:

We keep adding on. Ms Kennedy could take about this at length because she developed the PAYE technology system and she knows this far better than I do. We have ambitious plans there and it is important for Ireland that we continue to be effective at what we are doing. That is one challenge.

We also have a challenge in continuing to attract people to join us who have the right skills. Some of these skills are not in the marketplace. When we started our transfer pricing process in 2010 we gradually built it up to now having a significant transfer pricing resource. Part of the challenge is that the nature of the Irish tax rate at the time meant there was not a core competence in the marketplace and so we have had to develop a lot of that ourselves. Obviously, we will lose some of them to tax practitioners. In recent years, the flow has not all been one way. We attract a lot of people in from the firms because we can give a quality of work and life, both of which are important. I welcome the Deputy’s consistent support in respect of what we need in order to do our job. That support is cross-party, and long may it continue.

I forget what the Deputy wanted me to finish on in the context of praising ourselves.

Pearse Doherty (Donegal, Sinn Fein)
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Much deserved. I appreciate the level and complexity of work in the systems that have to be put in place for pillars 1 and 2. Just like Brexit, it is not finished yet so it is hard to develop something that is not there.

Mr. Niall Cody:

The Deputy asked about the costings.

Pearse Doherty (Donegal, Sinn Fein)
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Yes. That was the other thing. I also want to ask about the impact there would be if Europe goes with the directive while others may stay out, particular America. How could that impact us?

Mr. Niall Cody:

Pillar 2 is clearly more certain on some levels. It looks like the EU will have a directive, so that will be mandatory for all member states. In other countries it is optional but the US has already moved and its system not fully compatible. It is not the same as pillar 2 but it has its categorisations of guilty. It looks like they will have an increase in their rate. The remaining complexity around pillar 2 and putting figures on it involves the following. The big aspect of it is the interaction of the US rules and pillar 2 and who will end up with the taxing rights of the additional money, which is not certain. To the extent that anyone has commonly held views on corporation tax, the commonly held view is that there will be extra money with an additional 2.5%. It is not clear that the additional money will accrue to Ireland.

Pearse Doherty (Donegal, Sinn Fein)
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Is that because the Americans might just go with their guilty rate, even with an OECD agreement? That would have an impact on Irish companies.

Mr. Niall Cody:

The interaction of the US rules and the pillar 2 rules.

Pearse Doherty (Donegal, Sinn Fein)
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Would the US Administration not have to drop its proposal on a guilty rate in order to adopt the OECD rules?

Mr. Niall Cody:

The OECD rules cannot be mandatory.

Pearse Doherty (Donegal, Sinn Fein)
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I know, but if you are part of it, you are opting into it. Some of that is well outside the sphere of influence of this.

Mr. Niall Cody:

That is even beyond policy.

Pearse Doherty (Donegal, Sinn Fein)
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Just in case Mr. Cody had any thoughts of getting out of answering them, I will move on to the questions about IREFs. I have a question about the amount of withholding tax being paid by IREFs in recent years. The taxable amount has increased. If one looks at just the two most recent years for which there are reports, the amount involved went from €369 million to €621 million but the dividend withholding tax nearly halved during the same period. Despite the taxable amount nearly doubling, the withholding tax has dropped off. The effective rate now being paid by IREFs is less than 6%. When it was introduced, it was coming in at about 18%. It moved down to about a 13% effective rate, back up to 18% and is now down below 6%. Some of this may be due to those who are shareholders in terms of pension funds and so on. Does Revenue have any concern about what we are seeing in terms of withholding tax and the sharp fall in it? What is Revenue's view on that? I know it is doing a review on it.

Mr. Niall Cody:

We are carrying out a review. Over the years, there has been many a debate with the Minister around the whole sector. The changes that have taken place over time have been as a result of us looking at what is going on. This goes back to our large corporates division realignment. We set up a branch specifically around the whole area of, let us call them, funds. They are not big payers of tax in the context of the tax that we are responsible for. I remember many a time we were asked how many audits we did on them; we looked at it and said, "Why would do an audit on them? They will not have a tax liability". We have a branch in large cases looking at the whole funds industry. Over the past while, between that branch and our policy and legislation people, we have been keen to find out what is going on in the sector, what trends are going on in the sector, and, to the extent that unintended consequences are happening, to bring them to the attention of the Department. Some of the changes over the past number of years have come as a result of that work. That branch is actively looking at, as the Deputy rightly pointed out, shareholders exempt distributions, etc. I am not saying that there is anything wrong in the sector but we want to establish the facts and if there is something we should bring to the attention of the Department, we will. That work is ongoing.

Pearse Doherty (Donegal, Sinn Fein)
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I will move on. The number of those paying the non-domiciled levy has dropped to fewer than ten. The Revenue-----

Mr. Niall Cody:

It is a little bit more,. I have the figures. There were 16 in 2020, 16 in 2019 and ten in 2018.

Pearse Doherty (Donegal, Sinn Fein)
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I am getting it from the Revenue website. In 2018, there were fewer than ten, in 2019 there were 11, in 2020 there were fewer than ten.

Mr. Niall Cody:

We have the updated figures from the new report we have to publish. This is the draft.

Pearse Doherty (Donegal, Sinn Fein)
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They are still small.

Mr. Niall Cody:

They are small numbers.

Pearse Doherty (Donegal, Sinn Fein)
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Revenue won a large, long-running court case recently regarding Louis Fitzgerald; it took seven years to get €400,000 of a domicile levy. Does Revenue have to pay the legal costs?

Mr. Niall Cody:

Under section 851A of the Taxes Consolidation Act 1997, I am not, as the Deputy knows, allowed to talk about the tax affairs of any individual or company.

Pearse Doherty (Donegal, Sinn Fein)
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Yet the matter appeared in the media because it was a High Court case; it was an open court. Is that not correct? I am not asking Mr. Cody to explain the case. In instances like that, where Revenue has pursued an individual - I am entitled to say it because it is public knowledge in relation to this-----

Mr. Niall Cody:

Absolutely. The Deputy is entitled to say it.

Pearse Doherty (Donegal, Sinn Fein)
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The individual in this case argued with Revenue for seven years. Revenue pursued them and won both cases in the High Court and the Court of Appeal. Some €400,000 will be paid in that levy. Will Mr. Cody explain if the legal costs that would apply? I assume Revenue built up quite a significant amount of legal costs in that case. I commend Revenue; it is important to pursue these issues to the nth degree. Does Revenue have a concern about that fact that there is a smaller number of people paying the non-domiciled levy?

Mr. Cody mentioned that there is €2.5 billion of debt tax outstanding through the warehouse scheme. This was important in the Covid-19 period. There is a crunch period, given the economic environment and uptick in insolvencies. I understand that some of that debt has been written off in recent times; it was €26.4 million. Will Mr. Cody give the committee an indication of how much of that debt tax warehousing Revenue expects to receive? We always knew when there was debt warehousing that not every bit of debt was going to be collected, it is the same in terms of taxable accrued, with companies falling into insolvency and so on. Is that in keeping with Revenue's expectations? Is that lower or higher than Revenue's expectation? Where does Revenue see it going?

Mr. Niall Cody:

On challenges, court cases and tax litigation, tax is and has been a very litigious area. My counterpart in the Department of Social Protection was decrying the idea that some of the social welfare cases now involve legal people; I said, "That is our territory. It has always been our territory". In the Tax Appeals Commission, there has been significant improvement in dealing with a whole legacy of cases and the legacy cases are now nearly gone from the tax appeal situation. We will start to see cases coming through in a shorter time frame. Whether it is seven or ten years, by the time a case goes to appeal - it used to have to go through the Circuit Court but that is no longer there - it must first have gone to the High Court, the Court of Appeal and the Supreme Court. There is also the potential to go to the European courts. There are a few types of cases. One is a case which is trying to clarify what is intended in the legislation.

I have been asked if I mind losing cases. I try not to see it as winning or losing. Some of them are clarifying the treatment of the law. There are other cases that I feel strongly about winning or losing. There are cases relating to avoidance that we pursue. While you will not find me talking about the matter, the publication of the determinations in tax appeal cases - and in fairness to The Currencyand much of its subsequent coverage in this regard - has been a positive part of the tax environment. In those types of cases, if we win, we seek our costs, as happens normally. In cases where we lose, we will always end up paying costs.

That is just the nature of the system that we are in. The other part of the realignment at the time was with our large cases division. It used to deal with large cases on high-wealth individuals, HWIs. In many ways, because of the scale of the large cases, the high-wealth work was never fully resourced. In 2017 we divided them and an assistant secretary-led division was resourced to deal with high-wealth individuals but also to deal with anti-avoidance, which would have been carried out mainly by the tier of people below the HWIs. Again, we continued to invest in that and it is really important work because it goes to the heart of trust in the system.

The debt warehouse is unprecedented, there never was such a thing before. I remember initial discussions, or chat rather, about what we should do. We suspended enforcement and the collection of interest in March 2020 but it would have been unsustainable to do that without legislation. Half the people would give out to us for not collecting tax and the other half would give out to us for collecting it. The debt warehouse became a very useful weapon in our armoury. Hopefully, we will not have to use it again in a lifetime. We structured it in such a way as to support businesses but also to support businesses when the pandemic finished. There was the year interest free and then the 3% cuts in from next January and next May for the people who were extended because of the new health restrictions last November. In September, when we saw the impact of the energy crisis we extended that period for a year, for people to engage with us. We have extended it 3% and that is a really attractive rate. I am not surprised because I think the €26 million is very low and most of that has happened because either a company went into liquidation or examinership or the small company administrative rescue process, SCARP. The €26 million is neither here nor there in the context of €2.5 billion.

The extension was really necessary because of the energy crisis. It depends on what is happening in a year's time but what we want to do is have a tailored arrangement for each of the companies. We will not have something where everybody has to pay 40% down and enter into an instalment arrangement over two years. We will look at the circumstances of each case. Some businesses are paying, because right now there is the zero interest getting cleared before the end of December. The reality is that there are over 70,000 cases with money in the warehouse and of those, 7,300 of them have debt in excess of €50,000. Many of them have essentially their January-February 2020 liability. They closed down, then they started partially trading and they paid their current liability. They left their January-February debt there. Some of them are very small, only a few hundred euro, but about 7,300 that have debt in excess of €50,000. That accounts for €2.1 billion of the €2.5 billion. Essentially, that is the chunk of the money. I would be very confident that a significant portion of it will be paid. I think that there are businesses currently looking at their banking finance and the interest rates. They look at the 3% and they say if we could pay off more expensive debt, it makes sense to leave the Revenue debt sitting there. Also I think the inflation will have a significant impact on the issue. Two years ago, in the context of budget arithmetic, a figure was put in of a 25% write-off but it was not scientifically based, it was just recognising that there would be a write off. Generally, for debt that is not paid within a first few months, they level a write-off. But this is planned debt. The important thing that people do not take seriously enough is that to retain the warehousing facility, people have to file and pay their current returns on time. We can see it very clearly, probably half of the businesses in the warehouse are totally abiding by those dates and the others are not as scrupulous. We are going to be quite firm on that because that will undermine the system. The message that I would like to give is that we continue to engage with businesses and if they cannot pay their current liability, they need to engage with us. If they do not, then not only will we be looking for the current liability but we will be cancelling the warehousing facility. If a business's warehousing facility is cancelled it will lose the value of the zero rate and the 3% rate from the start, so the money that the business owes for January-February 2020 would then be liable to 10% interest from 2020. That is how it is legally structured and the key issue is that businesses pay their current liability. I do not think that everybody fully understands that. We were quite lenient through the process but that is a message that needs to be heard.

At the Committee of Public Accounts last week we had a chapter about a pragmatic approach to tax clearance. The challenge is that if we had employed tax clearance as rigidly as we could have, then X number of people would not have qualified for the support systems. We could not have done that when we had a debt warehousing system that if they had, they would not have had to pay the money. Now we do not have a debt warehousing absolution, that is really important. When we talk about a business's due date for VAT, for September-October is 23 November, a lot of small businesses treat that as 23 January. We will be very much following the legislation around due month. From our perspective, this is an opportunity for businesses to move to that idea of the due month actually meaning the due month. When the wage subsidy was first introduced, we built it on due month compliance, payroll compliance at the end of February, and people were surprised. Many people were used to sending it in six months late every time. We might even have had representations about it from Members of the Oireachtas lobbying for businesses saying that they meant to do it on time. This is a really serious consequence of not doing things properly. If someone has a difficulty with their current liability they should file it and engage with us. We will not throw any business that engages with us out of the warehouse.

Pearse Doherty (Donegal, Sinn Fein)
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If they mess about, the big stick comes out.

Mr. Niall Cody:

No, it is not the big stick, it is just----

Pearse Doherty (Donegal, Sinn Fein)
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It is a very big stick, 10% since 2010.

Mr. Niall Cody:

It is just the application of the law.

Pearse Doherty (Donegal, Sinn Fein)
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Yes, absolutely.

Mr. Niall Cody:

We are subject to the Ombudsman, but the Tax Appeals Commission is an efficient, effective and low-cost process. Some of the cases we talked about involve significant legal and accountancy advice, but we try to sort out ordinary cases with our review process. The Tax Appeals Commission is effective and quick. The significant arrears were a challenge but it is now dealing with cases in real time. It is a first level, relatively informal process, and certainly when it is an individual taxpayer, the Tax Appeals Commission deals with it. I have said it here a number of times. The reform of the tax appeals system is one of the biggest administrative improvements across the board.

Mr. Niall Cody:

The vast majority of cases are sorted out at a tax appeals level.

Mr. Niall Cody:

Cases can be appealed to the High Court on a point of law but not really on a point of fact. A relatively small number go to the appeal courts. They tend to be the types of cases the Deputy and I were talking about.

Bernard Durkan (Kildare North, Fine Gael)
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I have many questions. I will not go through them all as we are scheduled to finish in 15 minutes, but a lot of damage can be done in 15 minutes. I welcome our guests and thank them for their helpful assistance in various cases we have to deal with regularly. I will go quickly through the issues that caught my attention. I want to clarify one thing about corporation profits tax and the so-called ongoing debate about the future level. I thought it was settled at 15%. It is not an ongoing question of how long is a piece of string. There is no further discussion on that and that point needs to be clearly and solidly made.

Mr. Niall Cody:

Absolutely.

Bernard Durkan (Kildare North, Fine Gael)
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That is good. I am glad to hear that. Notwithstanding the increased level of payment of the relatively strong corporation profits tax, has Revenue seen any difference or is there any resistance on the part of foreign direct investment companies in relation to the new regime? How do they feel about it? Will it become an incentive or encouragement to move locations?

Mr. Niall Cody:

Again, this is not my area of responsibility or competence but I listen carefully to what the IDA says. The Deputy mentioned earlier the need for certainty. Ireland is a hugely attractive place. The results show that and the idea of that certainty of 15% being a fixed figure is important. If we can get agreement to the finality, individual countries will not be taking unilateral actions. For a small open economy, a multilateral agreement that gives certainty to businesses and allows them to plan is in our interest. That is positive for us.

Bernard Durkan (Kildare North, Fine Gael)
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I agree. The second-hand car market was mentioned. When a car is traded in, dealers should take account of where it is going and the trade-in price or whatever. They will have to plan accordingly and will do so in order not to lose half a fortune in the course of it.

Gaming and e-gambling bring the concept of gambling much closer to the gambler or the speculator or whatever we call it. Is Mr. Cody satisfied that sufficient resources are available to the Department to ensure gambling does not become a kind of pandemic racing out of control? The availability of the technology to the person who is speculating in that area is much greater and more sophisticated than it was and it has ways and means of encouraging participation, which we need to keep a close eye on.

I stay away from policy. I noticed, incidentally, that the job of the Committee of Public Accounts is explicitly to stay away from policy. It does wander into that area but there are very strict regulations insofar as it wanders into that area and I am quite sure Mr. Cody has reminded the committee of that. If he has not, I have had to do so on several occasions.

I will finish with this possibility. Where businessmen or women decide to move to a different location in the country for business purposes or whatever compelling reason, they will rent a house and rent out their existing house because they are not going to buy a house for a short time of two, three, four or five years or whatever the case may be. My speculation is there should be a contra figure where the expenditure on one side is offset against the income on the other side. That does not apply at the moment and I have come across a few cases like that. I fail to understand why that cannot be done. I am not suggesting Mr. Cody should go into the policy part of this but I have views on it. We have all dealt with these issues from time to time and there are some compelling cases where taxpayers should not have been at a loss due to having to move their business for all kinds of reasons. They would have had an income and would have lost on both counts. Such people pay for an extra house or accommodation and they lose the income from the house they have rented out.

I will not go through the rest. I will be good as we only have ten minutes left. There are oodles of cases. I would love to have at least an hour to go through them but Mr. Cody will be glad to know I will reserve them for another date. I am sure the Chair agrees.

Mr. Niall Cody:

I thank the Deputy. I do not know whether that was a threat to invite me back for another day-----

Bernard Durkan (Kildare North, Fine Gael)
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Absolutely.

Mr. Niall Cody:

-----or a promise. If that is wanted, it is not a problem. On the second-hand cars, the issue does not relate to trade-ins and purchases. It is specifically about second-hand cars being brought in from Britain. That is the issue.

Regarding gaming and resources, as we said, we are not responsible for the regulation of gaming and gambling. There are many views about aspects of the Gambling Regulation Bill 2022. This is me breaking the rules and straying into policy areas. It is important the gambling sector be regulated in an up-to-date manner. If everyone cannot have all their interests dealt with in the one go, the reality is, if there is a gambling regulator, it can always be revisited at various times. If this opportunity is not taken, I am afraid we might spend another 14 years talking about what we should have.

On the idea of being able to offset rent from a property against rent a person might have to pay to rent a property, I will take the Deputy's advice and not speak about policy matters.

Bernard Durkan (Kildare North, Fine Gael)
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I should also have mentioned the area of technology. Is Mr. Cody satisfied Revenue has access to sufficient technology and the necessary funding to provide for the various scales and levels of different taxation of all levels of business to ensure the minimum interruption and gaps?

Mr. Niall Cody:

We will need significant investment in our technology. I believe we will need it all. The reality is that the Revenue online system, which was groundbreaking, is 22 years old in technology. That would have been, and still is, world leading. It has been upgraded. Things have been done to it but basically the Revenue online system in the context of technology systems is an old-age pensioner. We have investment plans over the next number of years. We have always received great support from the Departments of Finance and Public Expenditure and Reform but the reality is this is a multi-year project. The challenge is that we cannot do two years and then have a break. This is a constant. We also have to implement every year's budget changes and finance Bill changes as well. We use opportunities to do elements of our technology refresh as we are implementing schemes or changes in the budget.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The Revenue Commissioners are responsible for customs as well. Recently a number of Deputies were approached by fuel distributors who deal with coal, gas, briquettes and so on. With the changes coming in with regard to how much of those reserves can be used in Ireland, how are the Revenue Commissioners capturing the cross-Border activity that is going on? It seems to be a growth area. People are coming into towns and villages, selling fuel door to door, which is illegal here. The fuel distributors are complaining to us that it has an awful impact on their business. How do the Revenue Commissioners reassure those legitimate business owners and operators that they are alert to this and are pursuing individuals or companies engaged in illegally selling that product around the country?

Mr. Niall Cody:

I hate to start the answer like this but I will do so anyhow. The primary responsibility for addressing illegal fuel lies with the local authorities in regard to licensing, and the Department of the Environment, Climate and Communications. They have responsibility for the allowing of sale of illegal coal. With regard to cross-Border activity, because of the Northern Ireland protocol, there are no Border controls between Northern Ireland and the Irish market. There is no legal basis for us to have Border controls on fuel coming in. Our responsibility in respect of fuel relates to the solid fuel carbon tax. The challenge we have is there are essentially two regimes that have a significant price differential. There is no carbon tax in Northern Ireland and there is a reduced rate of VAT. We have no role in regard to smoky coal for example. We are concerned about the tax challenges relating to it. Last Friday, I sat in on a meeting about the policing of the solid fuel carbon tax and the plans we have started. There were new regulations from the Department of the Environment, Climate and Communications last October. We already engage with the local authorities. Next year we want a programme of controls in which we will invite the local authorities to accompany us on multilateral vehicle patrols to establish whether there are people coming down with loads. I am worried that there are retailers who source their fuel knowing that it is not subject to control. There a business is selling fuel it has sourced from a wholesaler in Northern Ireland. We want to do a programme analysing where sales are. We talked about this. The legitimate wholesale trade can see where retailers are not sourcing their fuel from it. We would be interested in any of that intelligence and it will be dealt with in a confidential manner. When the solid fuel carbon tax was introduced in legislation, one of the challenges was that it was to be commenced by ministerial order. The desire at the time was that there would be a carbon tax on both sides of the Border that would be brought in at the same time. It never happened in the North. The price differential now is significant. The challenges are that some fuel merchants in the North are doing sales and deliveries in the South. They are doing it on housing estates. We are interested in building up intelligence on that to see how we can enforce a debt. However, it is not like customs. If someone was bringing in tobacco illegally from France through Rosslare we would seize the goods and the vehicle. If someone is bringing in smoky coal from the North we have no powers to do what a border would normally involve. It is a challenge when you have two regimes, one of which has a big price differential, but you do not have border controls. I am most worried about the idea that businesses are selling fuel they have sourced in the North. Then there is a wider issue. There is a VAT issue and an income tax issue. It is not just about solid fuel.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I suggest that this is going on.

Mr. Niall Cody:

I know it is going on.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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You can buy online now from a company that will deliver pallets of coal to your house.

Mr. Niall Cody:

I know.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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This is a timing issue as well. The busiest time of the year is now and into the first quarter of next year. That is their busy time when they make their money for the rest of the year. I have received a number of calls from retailers selling coal about wholesalers in the North coming down, door to door, in some cases with a link online to contact and order coal. On one hand, we cannot fault people who are under pressure financially but the damage they are doing to coal and fuel merchants is now reaching a point where they are not prepared to tolerate it any more. What they do about it then is they come to people like me and other Deputies. They are currently undertaking a report about the situation. However, if the evidence is anything to go by it is a serious business being undertaken which is illegal, wrong and depriving the country of its tax-----

Mr. Niall Cody:

There are also health issues.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The knock on from that is “And by the way, can you get me X in the North?”, and then other products are coming in. I understand the issue with the Border. However, I am concerned about the small businesses that are affected by bigger wholesalers coming in and giving prices that cannot be matched.

Mr. Niall Cody:

The enforcement agency in this area is the local authority. There is a big health issue as well, including around the environment and the impact of smoky fuel. The Environmental Protection Agency, EPA, produced an interesting report two weeks ago about the level of enforcement activity by local authorities. There is a range of enforcement. It comes down to individual interest, whether it is chief executives or others. We want to engage with each local authority. My colleagues will be aware that I share the Chair’s concerns. The assistant secretary who was involved in that area is retired now. He campaigned long and hard for the commencement order not to be made. This comes down to a price differential. The likelihood of change happening in Northern Ireland is limited and it is exacerbated now by the energy crisis and the fact that probably solid fuel tends to be the fuel of necessity for many people who are poor.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Revenue will trigger the engagement with the local authority on this matter. Certain actions will then be taken, presumably from there.

Mr. Niall Cody:

The issue is that it is a very difficult challenge to get it. I saw some of the price differential. I will not say it is half the price-----

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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It is double the money.

Mr. Niall Cody:

It is not half the price, but it is close to it.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I know that this kind of action will also impact on the families that are less well off and feeling poor at this time of the year with the number of obligations, necessities or the family life that they have.

Mr. Niall Cody:

From the Chair’s engagement with fuel sector representatives, did they voice any concern around retailers sourcing fuel from the North and selling it off record?

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Yes. They are running a book.

Mr. Niall Cody:

In some ways, that is nearly more damaging. There is always an element of cross-Border shopping in the Border counties, depending on price differentials. It goes both ways. It becomes very challenging. We would have seen this with fuel laundering when we were closing down fuel plants in Portlaoise or Waterford. When it permeates out down through where we are from, if it goes that far, that will not be a wholesaler selling door to door. That will be sold through-----

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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There is a network or retailer.

Mr. Niall Cody:

The sector has intelligence. They know who has stopped buying. Much of the work that we did on fuel fraud had to do with getting supply chain information. I refer to part of the solution to this and some of the stuff we were talking about. For example, no coal is produced in Ireland. It all has to be imported It is either coming in from legal shipments or illicitly. There trade often knows much more about what is happening on the ground than we will ever know. Sometimes the trade is quick to make representation but slow to provide details.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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They are at that tipping point now. They are open to giving information because it is having such a negative impact on their business.

Mr. Niall Cody:

We would be open to that discussion.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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That seems to be the end of our deliberations. I thank Mr. Cody and his officials for coming in. I wish them a happy Christmas and thank them for the work that they are doing.

Mr. Niall Cody:

Many happy returns.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The meeting is now adjourned until next year. It is great to say "next year".