Businesses can start making tax returns and accessing their own revenue account information over the Internet from September using a new Revenueonline service (ROS) developed by the Revenue Commissioners and Arthur Andersen.

Initially ROS will enable businesses to process VAT and employee PAYE returns online but from next April income tax and corporation tax returns will go live in phase two of the project.

Details of the service were announced yesterday at the formal signing of a contract between Andersen Consulting, which has been developing the service since January, and the Revenue. This contract is worth just under £2 million (€2.5 million).

The Revenue aims to have 50 per cent of all business tax returns filed using the ROS service by 2005 and plans to develop the service for all members of the public shortly.

In the short-term the system will use the direct debit facility offered by banks in conjunction with electronic filing. However, Mr Dermot Quigley, chairman of the Revenue, said it was "pressing" the banks to evolve a national electronic payments strategy as envisaged by the Government's action plan for the information society.

The banks were concerned about the issue of security on the Internet, said Mr John Leamy, strategy manager of ROS.

He said he was absolutely satisfied that the legal basis of electronic signatures using public key infrastructure software was established and no private tax information could be intercepted using such a system.

A tender for the provision of security software had already been advertised and would be in place by April 10th, said Mr Leamy. The Revenue hopes the issuing of security certificates necessary for Internet transactions under the ROS system could be a gateway for interaction with other government departments in the future.

"We are working closely with other departments on the matter," Mr Leamy added.

He said the benefits of the ROS system were considerable administrative savings costs in terms of time taken to process claims by the Revenue. The Minister for Finance, Mr McCreevy, said it would not surprise him if the legislation enabling the electronic filing of returns turned out to have as profound an effect on tax administration as the introduction of self assessment in 1988.