Undeclared rental income targeted in Revenue crackdown

Tax officials are targeting millions of euro in undeclared income from landlords as part of a crackdown on the “shadow economy”.

Investigations into sections of the economy most likely to deal in cash show rental income accounted for the biggest individual yield last year.

The details are contained in internal Revenue Commissioners briefing documents prepared earlier this year and released to The Irish Times under the Freedom of Information Act.

Officials uncovered €42 million owed to the exchequer by landlords based on an audit of more than 700 property owners. The average yield per case was €56,000.

Officials found most liabilities in this area related to undeclared income; tax incentive reliefs claimed as losses; false claims or non-allowable expenses; and stamp duty clawbacks. The rental sector has grown dramatically over recent times, with more people renting homes now than at any point in the last 50 years.

'Shadow economy'
Other areas of the "shadow economy" which netted a large yield for the Revenue last year include the construction industry (€26 million, or an average yield of €46,000 per case); the motor trade (€9 million, or €42,000 per case); doctors (€4.6 million, or €33,000 per case); dentists (€1.3 million, or €20,000 per case); legal services (€2.5 million, or €22,000 per case).

The Revenue also targeted specific types of businesses such as “cash for gold” and fast-food outlets. In the case of “cash for gold” and jewellers, officials found compliance was not a major issue. A total of €600,000 in unpaid tax was uncovered on foot of 35 audits.

Officials were also involved in “streetscape surveys”, or unannounced inspections of streets, towns or events.

“These play a vital role in the promotion of tax and social welfare compliance generally through public visibility,” it said. “This ranges from detecting serious sales suppression in the hospitality sector to streetscape surveys in towns and cities.”

Last year, for example, officials inspected traders at events such as Electric Picnic, the National Ploughing Championships, the Volvo Ocean Race and the Fleadh Cheoil.

Among the issues Revenue employees found were unregistered traders, unregistered employees, gaming machines without licences and a lack of excise licences for wine.

Risk-ranking system
Other documents provide an insight into how Revenue targets companies and individuals for audit. The authority uses a computer programme called Reap, which it describes as an electronic risk-ranking system.

Most of the cases nationally selected for audit are those that rank in the top 20 per cent identified by the system.

Separately, records show database searches have identified almost 44,000 cases of PAYE workers who may also be in receipt of undeclared income or welfare payments.

An initial examination of these cases shows there are “likely to be cases in the database which are operating in the shadow economy, or whose assets would indicate undeclared income”.

Revenue plans to share its results with the Department of Social Protection as part of a joint investigation.

“While some of the cases may not have taxable income, there may be issues around welfare entitlements that the department would be very keen to examine,” it said.