Brendan Smith (Cavan-Monaghan, Fianna Fail)
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To ask the Minister for Finance his views on the report of the Comptroller and Auditor General which highlighted considerable uncertainty surrounding the level of tax non-compliance and the audit processes employed by Revenue; and if he will make a statement on the matter. [42315/12]

Michael Noonan (Limerick City, Fine Gael)
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I am advised by the Revenue Commissioners that they are currently reviewing the Annual Report of the Comptroller and Auditor-General for 2011, published on Thursday, September 27th, which contains a comprehensive section on Revenue. Revenue has a strong focus on making sure that everyone complies with their tax and duty responsibilities by filing the required tax return and paying the right amount of tax on time. Revenue’s overall compliance strategy is to influence compliance behaviour in the community in general, including by making it as easy as possible for people to comply. In that regard, the Deputy will be aware of Ireland’s high ranking in a World Bank/PSC index on ease of payment of business taxes. The Revenue Commissioners also actively support compliance by reducing the administrative burden on businesses. A measurement carried out recently in accordance with the internationally accepted Standard Cost Model, and overseen and validated by external consultants showed a reduction of 25% in the compliance cost burden for business.

Some examples of initiatives that Revenue has delivered to support tax compliance include:

- The development of its well-regarded Revenue’s Online Service (ROS), incorporating the electronic filing of tax returns and tax payment. Its usage continues to grow (with increased use of Electronic Funds Transfer for tax payments). The number of payment transactions made via ROS increased by 35.6% in 2011 to 975,105, while the value of those payments increased by 16% to €32.1bn.

- The extension of mandatory electronic Filing – which now incorporates all public sector bodies, all VAT registered businesses and employers that employ more than 10 people

- The introduction of electronic Relevant Contracts Tax from January 1 2012 which, by streamlining processes has also had a very significant compliance impact:. This project

- Reduced the administrative burden on business and Revenue,

- Streamlined and modernised the administration of Relevant Contracts Tax

- Enhanced tax compliance,

- Reduced the opportunities for fraud,

- Improved cash flow for compliant subcontractors, and

- Removed approximately 1,000,000 pieces of paper from the system.

- Principal contractors now electronically inform the Revenue Commissioners of the payments made and the associated tax implications.

It is international best practice amongst tax administrations that making it easy to comply with tax obligations encourages good compliance and I am satisfied that the Revenue Commissioners are to the forefront in that approach. The following statistics are indicators of the achievements of the Revenue Commissioners in 2011 through its strategy of encouraging voluntary compliance:

- A 95% Return and Payment Compliance for Large Cases by the Due Month,

- A 95% average of tax collected by the due date for PAYE/PRSI,

- A 91% average of tax collected by the due date for VAT, and

- A 97% average of tax collected by the due date for Preliminary Income Tax (non-PAYE).

The other aspect of Revenue’s strategy to maximise tax compliance is the development of a comprehensive compliance programme. Here Revenue’s approach is to undertake a range of compliance interventions that are the most appropriate to target the specific risk or risks identified and to influence the compliance behaviour of the taxpayer by so doing. By carefully selecting the cases for intervention, and carefully choosing the type of intervention, Revenue strives to maximise the use of resources and minimise the compliance burden on compliant taxpayers. In his 2011 Report, the C&AG noted ‘that Revenue’s risk assessment is relatively effective in targeting higher-risk cases’.

Among the outcomes that Revenue’s compliance activities have delivered for 2011 are the following:

- In excess of 11,000 audits completed generating a yield of €440.5m,

- A further €81.3m collected from other assurance checks,

- 16 convictions for serious tax offences, and

- 366 published audit settlements to a value of €76m.

It is now widely accepted by Revenue administrations that there is no one absolute way to measure changes in compliance levels. Most modern administrations use a number of indicators that can be looked at as a package, to help them form a view on whether compliance levels are improving or otherwise. I am confident that the Revenue Commissioners are pursuing programmes that maximise voluntary compliance and deal in a very determined way with tax non-compliance.