Brian Cowen (Laois-Offaly, Fianna Fail)

I propose to take Questions Nos. 5 and 6 together.

I am taking it that the questions both relate to overpayments by PAYE taxpayers. The PAYE system, which has worked well for almost 45 years, is a "cumulative" deduction system designed to ensure, as far as possible, that an end of year return or adjustment is unnecessary in the vast majority of cases, provided that all due credits and allowances are reflected in the employee's tax credit certificate and that any non-PAYE income has been "coded-in" to the certificate. Where all due credits or allowances have not been given during the tax year, it is reasonable to expect the employee will look for a balancing statement after the end of the tax year. With regard to a number of reliefs such as medical expenses, it may be appropriate to wait until after the end of the year to claim a tax rebate.

I am advised by the Revenue Commissioners that they have no reason to doubt that the vast majority of PAYE workers receive their full entitlements each year. These entitlements are, in the first instance, reflected in the tax credit certificates issued at the beginning of each year. Revenue is in the process of issuing more than 2 million certificates to PAYE taxpayers for the 2005 tax year. These certificates reflect the most up-to-date information Revenue has on an individual and a leaflet giving details of the credits or reliefs to which taxpayers may be entitled accompanies them.

Where circumstances change in the middle of the tax year, for example, a marriage or a change of job, the employee will normally contact Revenue and arrange for a new tax credit certificate to issue. A number of PAYE taxpayers wait until after the end of the tax year to claim due allowances or credits, to return non-PAYE income or to make sure that there has been no underpayment or overpayment of PAYE tax. For the 2003 tax year, the latest year for which such figures are available, 287,258 PAYE taxpayers, representing 17% of the total PAYE taxpayer base of 1.6 million for that year, have so far made claims or requested reviews of their tax position, of which 8% indicated under payments, 17% resulted in no change and 75% resulted in repayments. A sum of €185 million has been repaid in respect of claims received and processed for 2003 and, on the basis of experience of late claims in previous years, this figure could be expected to eventually increase to an estimated €306 million when all future returns or claims for the 2003 tax year have been submitted. These figures should be seen in the context of the total PAYE revenue of €7.2 billion in 2003.

It is not possible or reasonable to extrapolate from the these figures estimates of overpayments or under payments for the full PAYE population. This is because claims or requests for review are, by definition, much more likely to come from those who know they have entitlements to reliefs for which they have not claimed in the first place, for example, medical expenses.

The tax code provides that no repayment can be made in the absence of a valid claim or return by the taxpayer. Without such a claim or return, Revenue may not have the full picture to determine entitlement to a rebate. For example, taxable payments from the Department of Social and Family Affairs or dividend income may not have been "coded-in" to the tax credit certificate or the taxpayer may have been self-employed for part of the year.

Revenue is engaged in a comprehensive modernisation of its PAYE computer system, which will include the ability to make amendments and claims over the Internet and much closer computer links with the Department of Social and Family Affairs. When the roll-out of the new system commences later on this year, it will provide a greatly improved level of service for PAYE taxpayers including, subject to defined parameters, a facility for automated reviews of liability where Revenue is satisfied that the figures are correct. The Finance Bill, which will be published next Thursday, will include provisions to underpin this new service.

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