Michael McGrath (Cork South Central, Fianna Fail)
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Question 64: To ask the Minister for Finance if the Revenue have any discretion in relation to the application of interest and penalties in the case of a business being late with the payment of certain taxes due to cash flow problems; if he acknowledges that the application of punitive interest and penalties could result in the business having to wind up; and if he is considering any policy change in this area. [36829/11]

Michael Noonan (Limerick City, Fine Gael)
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The Revenue Commissioners are charged with responsibility for the timely collection and recovery of a range of taxes and duties due to the Exchequer. I know that Revenue has a clear focus on making sure that every person and business complies with the requirement to file the relevant returns and to pay the appropriate tax or duty on a timely basis. That is an appropriate and correct focus for Revenue and one that I fully endorse.

In that regard Revenue provides a range of supports and services to individuals, businesses, tax practitioners and agents to facilitate and support a voluntary compliance culture. Where timely compliance is not forthcoming then in accordance with the powers and sanctions provided to Revenue by the Oireachtas, a range of sanctions can be applied by Revenue such as, for example, charging of interest on late payment of taxes and duties or the application and collection of penalties for failure to file returns on time. Interest on late payment of tax operates not only as a compensation for the Exchequer for the late payment of monies due to it but also as an essential support for timely voluntary compliance by ensuring a level playing field between those who meet their obligations on time and those who pay late or who may attempt not to pay at all.

Penalties for the late or non-filing of returns is recognition, for example, of the importance of compliance with an essential tenet of the self-assessment system i.e. that you file your return on time with Revenue. It underpins the voluntary compliance culture that is a welcome feature of the behaviour of the vast majority of individuals and businesses in this country. On the matter of businesses deciding to wind up, I am advised by the Revenue Commissioners that in their experience the marginal cost of interest or penalties is not a determining factor in the decision.

I know, however, that Revenue is conscious of the difficult economic and financial climate that prevails and how this can pose challenges for business and individuals in being timely compliant. Revenue responded to the difficult environment by actively encouraging businesses experiencing particular payment difficulties to work proactively with them when such difficulties start to arise to find an agreed way through those difficulties and quickly restore voluntary timely compliance. Revenue has, for example, published material for businesses experiencing tax payment difficulties on its website at www.revenue.ie. I commend Revenue for the work that it has done in that regard and in the practical support and assistance it is providing to viable businesses. I am aware that tax practitioners and representative bodies have recognised the Revenue efforts in this regard also.

Overall I am satisfied that the current regime of interest and penalty sanctions for late filing of returns and late payment of tax and duty achieves the correct balance in supporting timely compliance and securing the monies due to the Exchequer on a timely basis. I am satisfied that Revenue's actions in the charging and collection of interest and in the application of penalties for failure to file returns are reasonable having regard to the importance of timely compliance and the need to ensure a level competitive playing field across businesses and individuals.