A Catalogue Of Lost Revenue

The annual report of the Comptroller and Auditor General makes depressing reading as Mr John Purcell catalogues a long list of…

The annual report of the Comptroller and Auditor General makes depressing reading as Mr John Purcell catalogues a long list of waste, overspending and fraud. As in other years, the report concentrates on auditing weaknesses and inadequacies which cost the State uncounted millions of pounds. He draws attention to the massive overtime bills run up by the prison services and particularly within the Garda Siochana in recent years. And, without explicitly referring to the matter, he contrasts the treatment handed out by the revenue system and the courts to large-scale tax evaders and to social welfare fraudsters.

The report, yet again, confirms the impression gleaned from the McCracken Tribunal report that the Revenue Commissioners has been less than wholly effective in discharging its functions. The number of successful prosecutions for tax evasion and other irregularities remains at a derisory level-- three such cases in 1997 - and the State is still awaiting a "Lester Piggott" case. Even where prosecutions were initiated, modest fines, with suspended prison sentences and disqualification as a company director, flowed from those cases. The contrast with the social welfare system was striking. There, a total of 119 criminal court proceedings were completed and 75 persons, including employers, were fined for abuse of the unemployment assistance and unemployment benefit schemes. Seven prison sentences were imposed, six being suspended.

Revenue audit is a key element in the tax collection system but the number of audits has fallen for each of the past three years, with a consequent reduction in funds raised. It gets worse. Preparatory audit work is all performed manually and Mr Purcell remarks dryly: "It would appear that the screening process could be more efficient and effective if computer power was harnessed to process the vast amount of computerised information held on taxpayers." Quite!

In the area of Capital Acquisitions Tax, covering probate, inheritance, gift and discretionary trust taxes, a three-person audit unit discovered £3.4 million in under-declared tax and it was estimated that underpayment occurred in 70-80 per cent of audited cases. When it was suggested that more staff might be employed in this area, the Revenue responded that the number was adequate, considering overall resources and demands. Given that overtime payment amounted to £4.6 million within Revenue in 1997, however, it would appear that under-staffing may have as much to do with its poor performance as its audit mechanisms.

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An indication of fraud being practised within the business sector was the C&AG's finding that VAT taxpayers contributed almost £74 million more than their recorded liabilities. Mr Purcell felt a significant portion of this arose from bookkeeping errors. But the Revenue's accounting officer was not unduly concerned, remarking that while it was impossible to say how much of the apparent overpayment was genuine, he was satisfied that the vast majority of cases did not represent actual overpayments. The comment bore all the hallmarks of a gamekeeper's attitude towards poachers. It would be wrong to blame the Revenue Commissioners for the taxation mess. The organisation exists within a political and social culture that has been extremely casual in its approach to tax cheats. And while that situation has changed markedly in recent years, it is now up to the Government to encourage it to operate in a rigorous and effective manner.