Funds owed to the Revenue Commissioners - historic and current uncollected taxes - stood at £1.167 billion at the end of 1998. This means the Revenue is on schedule to reduce debt to its target of £1 billion (€1.27 billion) by the end of 1999.

Measures to cut the debt include the write-off of uncollectable taxes - £216 million was written off in 1998, down on the 1997 figure of £281 million.

The Revenue's chairman, Mr Dermot Quigley, said the debt was "real debt as opposed to fictitious debt".

Uncollected taxes accounted for 8 per cent of the net annual tax collected in 1998, down from 57 per cent in 1988.

At the end of May 1996, debts to the Revenue stood at £2 billion comprising historical debt of £1.6 billion and other current tax arrears. At that time, it set a target of a £1 billion reduction over a three-year period.

Mr Quigley said some of the high level of uncollected taxes in 1996 arose because in the pre-self-assessment era, the Revenue over-estimated some tax owed and because taxes owed by companies which ceased trading or went into liquidation were not written off.

Explaining that the Revenue had agreed policy and procedures for the write-off of uncollectable debt with the Comptroller and Auditor General, he warned it was not adopting "a soft approach". The only debt that would be written off was debt which was uncollectable, he insisted.