Mary Upton (Dublin South Central, Labour)
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Question 97: To ask the Minister for Finance if there are proposals to provide additional staff and resources to the Revenue Commissioners Office in view of the findings of the Comptroller and Auditor Generals report that the number of audits completed fell from 16,321 in 2004 to 14,214 in 2005, with a consequent drop in the audit yield; and if he will make a statement on the matter. [39223/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I am advised by the Revenue Commissioners that the apparent drop in audit numbers referred to by the Deputy in fact arose from a re-categorisation of audits in 2005 and that when the re-categorisation is taken into account, the number of audits conducted under the Revenue Audit Code of Practice actually increased marginally in 2005 compared with 2004.

Audit Categories were re-defined during 2005 with a view to making it clearer that the appropriate intervention depends on whether the risk is perceived to relate to one or more tax or duty headings or to relate to specific issues or transactions (as opposed to tax or duty headings). In particular, some items which would have been classified as verification audits in 2004 were re-classified as Assurance Checks in 2005. Therefore, in order to make direct comparisons between 2004 and 2005, some 2500 VAT refund verification checks in 2005, now categorised as Assurance Checks, need to be taken into account. When this is done, the number of audits conducted under the Revenue Audit Code of Practice marginally increased in 2005 compared with 2004.

In total there were 98,981 Assurance Checks in 2005 with a yield of €50.41m, which means that the overall outcome from Revenue's Audit and Assurance activity in 2005 was ahead of 2004 both in numbers and in yield.

Assurance checks are interventions by Revenue officers that, although not now categorised as audits under the Code of Practice, may involve tests, verification checks, desk examinations, visits to premises, searches, site visits, and telephone contacts for supporting documentation. Many of these interventions have traditionally been called verification audits. All such interventions are initiated with the intention of assuring Revenue, without recourse to resource-intensive audit or enforcement activity, that the customer is broadly compliant for the taxes and duties that are the subject of the intervention.

Revenue's main focus in this area will continue to be on selecting cases for intervention on the basis of various risk indicators and other information available. This is the type of targeted intervention that gets best results and that is most likely to change the behaviour of the taxpayer into the future. The targeted approach is now greatly enhanced by the new computerised Risk Evaluation Analysis and Profiling System (REAP) recently developed by Revenue. This system, which categorises taxpayers in accordance with defined risk criteria, has been successfully piloted over the last two years and has been introduced nationwide during 2006. It allows for the screening of all tax returns against sectoral and business norms and provides a selection basis for checks or audits. This effectively means that 100% of self-assessed taxpayers will be risk assessed at least once a year.

Revenue constantly monitor the resources available to them for audit and other responsibilities. They advise me, however, that their developing audit and compliance focus is not so much on the traditional quantitative measures of activity but on identifying and tackling the riskiest cases and minimising contacts with compliant taxpayers. This enables their audit and other resources to be deployed to best effect, as is evidenced by the continuing success of the Commissioners in dealing in a very determined way with tax evasion.