The amount of taxation revenue outstanding was just over £1 billion to the end of May, with the Revenue Commissioners expecting to collect about £560 million of it, the report says.
The remainder cannot be collected because either companies owing tax have gone into liquidation or the estimates of some people's liabilities from previous years are no longer sustainable.
A Revenue spokesman said last night it was not writing off any tax and would collect as much as it could. The level of outstanding tax had been falling in recent years, and had dropped from £1.12 billion due in May 1999. In 1988 there was £3.5 billion in taxation outstanding.
The report says the Revenue's collection of arrears has improved from 46 per cent in May last year to 53 per cent this year. About £200 million in income tax is outstanding, plus £101 million in capital gains tax and £84 million in VAT payments.
The report adds: "It is expected the continuing audits by Revenue into DIRT compliance by the financial institutions will yield significant payments of arrears, interest and penalties".
The report also examines the role of the Revenue's special inquiry branch, which the C & AG says has "a unique intelligence-gathering role", including observing businesses.
However, due to the increase in information coming from businesses and the public, the processing of it has fallen behind. For example, information on people involved in unit trusts has not been captured on a database for several years, although senior staff continue to monitor certain cases. Also, not all information has been transferred to PC from paper.
While the Revenue uses extensive sources for information, it should pay more attention to the Internet, e-commerce and share transactions, the report says. The lack of co-ordination between the Revenue's special inquiry branch and its local inquiry units is criticised.
Health boards are also criticised for not providing information on landlords whose tenants receive rent subsidy. The former Eastern Health Board is heavily criticised, while the Northern Area Health Board provided information on only 25 per cent of landlords in its area, says the report.
The Revenue carried out 17,428 audits, down 767 on the year before. One reason for the reduction was that many of its auditors were working on special projects, like the DIRT and Ansbacher investigations, and could not carry out audits. Also, some higher tax officers took a training programme during the year and could not complete their ordinary number of audits.
Three people faced charges for tax evasion in the courts in 1999. One was fined £15,000, another £1,000, and the third was acquitted.