Mr. Seamus McCarthy:

As members are aware, the Revenue Commissioners are responsible for the collection of taxes and certain 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 2022 Revenue account was certified by me on 17 April 2023 and received a clear audit opinion.

Tax receipts payable to the Exchequer in 2022 amounted to a net €82.4 billion. This represented an increase of €14.9 billion, or 22%, on 2021. The tax heads that contributed most to the overall increase in receipts were: corporation tax, which was up €7.3 billion; income tax, which was up €4 billion; and VAT, which was up €3.4 billion. Non-Exchequer receipts collected by Revenue on behalf of other agencies amounted to a net €22.3 billion, an increase of 28% year on year. Pay related social insurance, or PRSI, contributions represented the largest category of such receipts. PRSI net receipts increased by nearly 19% on 2021.

In parallel with the audit of the Revenue account, I carry out examinations to assess the adequacy of Revenue’s systems for the assessment, collection and allocation of the revenues raised. Chapters 20 to 22 present the results of such examinations.

Revenue has been responsible for collection of the local property tax on residential properties since its introduction in 2013. The tax is administered on a self-assessment basis, with taxpayers required to declare the value of their property, in most cases within broad valuation bands, at a specific statutory valuation date. Reported payment compliance rates for the tax are very high. Any outstanding amounts of unpaid tax remain as a charge on the property and are often collected when a transfer of the property takes place, for example, through a sale or an inheritance. The net amount collected in 2022 was €500 million. This included arrears of tax of €51 million in respect of liabilities for 2021 and prior years.

Between 2013 and 2021, the tax liability was determined by the declared value or value band of the property as at 1 May 2013. Legislation enacted in 2021 required a new declaration of property values as of 1 November 2021, to apply for the 2022 to 2025 tax years. The legislation also provided for changes to the valuation bands and the associated payment amounts and brought an end to certain exemptions from the tax that had previously applied.

The examination found that the widening of the valuation bands provided for in the legislation did not fully reflect the increase in the sales prices of residential properties that occurred between the May 2013 and November 2021 valuation dates. While the differential suggests that a significant up-rating of valuations at November 2021 might be expected, this does not appear to have occurred. The report made a number of recommendations aimed at strengthening Revenue’s controls over local property tax, including those around the claiming of exemptions and payment deferrals.

The tax debt warehousing scheme was announced in May 2020 to support taxpayers whose businesses and incomes were significantly affected by public health restrictions associated with the Covid-19 pandemic. The scheme allowed eligible tax liabilities to be deferred interest free for a period and, if required, to benefit thereafter from a reduced interest rate until payment. Those availing of the warehouse facility were obliged to keep their tax returns up to date.

The amount of tax debt warehoused peaked at just over €3 billion in the first quarter of 2022. Many businesses subsequently paid off or reduced their debts. Nevertheless, at the end of July 2023, there were approximately 60,000 businesses or individuals still with warehoused debt totalling €1.9 billion. More than 3,400 of the taxpayers still availing of the scheme each had debts of €100,000 or more. Revenue had identified uncollectable debts totalling €85 million, mainly due to reasons such as business liquidations, examinerships, bankruptcy and cessation of trading. A total of 956 taxpayers had been removed from the scheme for these reasons.

The current scheme rules require taxpayers with outstanding warehouse liabilities to either agree a phased payment arrangement with Revenue or pay off their debt by 1 May 2024. However, as at the end of July 2023, just 4% of the outstanding value of the debt was subject to an agreed payment plan. Members are aware that potential changes to the scheme are currently being contemplated.

Corporation tax is payable on profits generated from income or gains. Subject to certain restrictions, companies can use eligible losses to obtain relief from the payment of corporation tax. The level of corporation tax losses brought forward has been relatively stable over recent years. At the end of 2021, approximately €242 billion of accumulated losses were available for offset against profits. This represents a significant potential reduction in future corporation tax receipts, of the order of €30 billion. Three major compliance projects on corporation tax losses undertaken by Revenue’s large corporates division since 2019 have yielded an additional €47 million in corporation tax receipts.

Finally, I will address the Appropriation Account for 2022. 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 2022 was €492 million. Salary costs of €351 million account for over 70% of the spend. Taking account of appropriations-in-aid of €64 million, net expenditure under the Vote amounted to €428 million. At the end of 2022, there was a surplus of €14 million for surrender to the Exchequer. I issued a clear audit opinion in relation to the appropriation account. However, I drew attention to the non-compliance with procurement rules disclosed by the Accounting Officer in the statement on internal financial control.