Only a third of outstanding tax likely to be collected

The Revenue Commissioners expect to collect only one-third, or £560 million, of the £1,690 million in outstanding tax arrears…

The Revenue Commissioners expect to collect only one-third, or £560 million, of the £1,690 million in outstanding tax arrears, the Comptroller and Auditor General's report has said.

However, the report says there are a number of reasons for the gap between what is on the books as owed and what is in fact collectable.

Of the £1,690 million outstanding, £400 million is owed by firms which have ceased trading. Also, many of the amounts theoretically due are based on assessments, which are often based only on estimates.

The Commissioners are proposing to revise their write-off procedures so that much of the old uncollectable debts will be deleted from the records.

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This, they say, should lead to a greater focus on collecting current taxes and collectable arrears.

One of the main changes will be to write off cases which involve company liquidations at the beginning rather than the end of the liquidation process.

In the year to May 31st last, the Commissioners reduced the figure for outstanding tax arrears by £288 million.

Of this, £90.7 million was written off, including £38.2 million in VAT, almost £30 million in PAYE, £12.2 million in corporation tax and £8.7 million in income tax.

The report says that £587 million of the arrears relates to periods preceding the introduction of self-assessment for income tax more than 10 years ago and it is very doubtful it can be collected.

"The rate of recovery from post-self-assessment arrears of £246 million for the period 19881991 is extremely low," it says.

The Revenue Commissioners contacted taxpayers who had arrears on file at the time of the 1993 tax amnesty after the amnesty deadline had expired. They identified some £30 million of tax arrears that had been paid as part of the amnesty, for the period 1988-1991.

"With the very favourable terms on offer in the 1993 amnesty, this response suggests to the Revenue Commissioners that the possibilities for collecting tax for these years [the years covered by the amnesty] have been more or less exhausted," the Comptroller's report says.

The "estimated" element of the overall tax arrears is £488 million. The report says that owing to the "unsound nature" of the pre-1991 VAT estimates raised, estimates for these years are regarded by the Revenue Commissioners as "speculative" rather than quantified assessments.

The report says that the Revenue Commissioners' very strict guidelines on writing off tax debts, which necessitate arrears being individually reviewed and other criteria being satisfied before amounts can be deleted from the records, also contribute to the high level of outstanding tax on the books.

Although the Commissioners decided to change their outstanding debt procedures this year, they have vowed to put more effort into the task of reviewing doubtful debt.

The Comptroller was asked for his views on the Commisioners' proposals, and although he broadly agreed with their plans, he warned there was a risk that tax which could be collected might be lost to the State. "It is important that the write-off procedures are not seen as giving the message that if Revenue demands are ignored for long enough they will go away," the Comptroller said.

"It will therefore be necessary to devise new headings under which write-offs can be classified to ensure that Revenue's actions are, and are seen to be, fair, equitable and reasonable," he added.

Revenue Commissioners sources indicated last night that under the new procedures they will write off more than £100 million in the year to May 31st next.