Revenue audits find nearly 40% under-pay tax

C&AG report highlights level of non-compliance faced by Revenue Commission


Nearly 40 per cent of people assessed by the Revenue’s random audit programme in 2015 were found to have under-paid their tax.

Of those found to have under-paid, the average liability was €18,500, including penalties and interest, according to the Comptroller and Auditor General’s report (C&AG).

The report said the Revenue’s random audits over the period from 2008 to 2015 consistently showed around one third of taxpayers underpaid their tax.

The Revenue’s compliance programme audits around 400 randomly selected taxpayers and businesses each year.

While the audits focus on a particular year if non-compliance is detected the Revenue may extend to review to previous years.

The yield from audits and other non-audit interventions, as reported in the Revenue’s annual reports, has increased from €492 million in 2012 to €642 million in 2015.

The outcome of the Revenue’s recent programme indicates the audit gap, the amount it loses each year as a result of non-compliance by those registered with Revenue, is around 2 per cent of the total estimated liability.

The C&AG’s report noted that Revenue does not currently produce estimates of the audit gap.

However, it said such an estimate would be useful to allow Revenue better assess and report on its effectiveness in managing taxpayer compliance.

Audit settlements in excess of €33,000 are published on the quarterly tax defaulters’ list.

The C&AG’s report reveals the number of published cases has been steadily declining since its peak in 2012.

The number of convictions obtained in cases found suitable for prosecution has fallen from 50 in 2012 to 28 last year.

The report also noted Revenue did not estimate the tax gap, a wider measure of difference between tax due on all economic activity and the amount actually collected.

“The Revenue considers that the science of estimating such a gap is insufficiently developed to provide a useful reliable estimate of tax non-compliance levels,” it said.

However, while acknowledging that the tax gap was challenging to measure, it urged the Revenue to examine the possibility of implementing certain techniques to gauge the level of non-compliance.