Fairer taxation system a first step to ending fraud

NEWS during the last week can only have confirmed many of the prejudices of that group commonly known as "hard-pressed PAYE taxpayers".

First came the results of a CSO survey which suggested a high level of social welfare fraud. Then came the report from the Comptroller and Auditor General, which showed £1.95 billion in "outstanding taxes" and outlined waste and overruns in a number of Government departments. Evidence, at last, to support the bar stool economists' theory that the PAYE taxpayer is paying for everybody else.

There is, as ever, a story behind the figures. In the case of the social welfare survey, what can be said with confidence is that £120 million or more is being paid out to people working full time and claiming the dole.

Add in a proportion of those not living at the addresses given in their social welfare claim and a reasonable estimate of total fraud would be £250 million to £300 million a year.

Inevitably the spotlight has turned on the Minister, Proinsias De Rossa. But surely the civil servants in the Department of Social Welfare should be asked some of the difficult questions. The old idea that a Minister is responsible for everything that goes on in his or her Department is long outdated.

Looking at the tax figures, the C&AG's report shows £1.95 billion in outstanding taxes, with just £550 million a sizeable enough figure itself - likely to be collected.

The reasons given by the Revenue Commissioners for the large amounts of uncollectable tax are revealing in themselves. The main cause, the Revenue says, is exaggerated tax assessments issued in the era before self-assessment. However, if these assessments have now been reduced, this begs the question of why the money has not been written off a long time ago?

To be fair to the Revenue, collection procedures have improved considerably in recent years and the organisation is also opening up and giving much more information to tax practitioners and the public.

Some concerns remain from a reading of the C&AG's report. One is that no study has ever been carried out to examine the actual level of tax evasion. Is it that the results might be politically embarrassing?

Readers might also be unsettled by a little cameo from 1992. In February of that year the Revenue saw evidence of fraud in a particular case. It was May before the matter was referred to the Garda. Further information was sought from the Revenue in October of that year and this was supplied in December.

The tale continues: "Because of pressure of work involving other high-profile cases, the Fraud Squad decided in April 1993 to refer the matter to the local Garda Superintendent for follow-up action." A report was submitted to the DPP in June 1994. Two months later he advised that, due to the delay, a successful prosecution was unlikely. A bank the subject of the investigation owed money to had already sold his house and the individual subsequently told the Revenue he had no assets The amount of tax unpaid was £490,000.

It is, of course, dangerous to generalise from one case. But the report shows that, between 1990 and 1994, 20 cases relating to tax evasion and fraud were referred to the Garda by the Revenue. In the same period only one tax fraud case reached the courts. New approaches are clearly needed to combat major tax fraud.

Politicians will promise to "crack down" on tax and welfare fraud. But the reality is that there would be a political price for doing this; there is widespread public acceptance of, and sympathy for, much of the tax evasion and welfare fraud which goes on routinely.

Everyone would cheer when a major case of tax or welfare fraud was unearthed, but few would support the targeting of an unemployed person earning a few pounds on the side.

A fairer tax system, allowing people to keep more of what they earned and a welfare structure which encouraged people to return to work, would be the most powerful ways or reducing fraud. And politicians will, of course, promise to deliver this too.