Annual Report 1997

Contents:

Boards Address

Chapter 1. Review of Performance

Chapter 2. Customer Service

Chapter 3. Compliance

Chapter 4. Audit, Prosecution and Enforcement

Chapter 5. Policy and Legislation

Chapter 6. Enabling us to do our business

Appendix 1 Main Legislative Changes in 1997

Appendix 2 Statutory Instruments in 1997

Appendix 3 Revenue Publications

1
To the Minister for Finance

We have the honour to submit our seventy-fifth annual report, for the year ended 31
December 1997.

1997 was a successful year for Revenue in very many respects. Tax receipts have
continued to grow, and at 13,963 million net, were considerably ahead of forecast.
Revenues Customer Service and Compliance Programmes have together improved the
timeliness of return filing and of payments, and our debt management programmes
have made significant inroads into the Revenue debt, especially in the elimination of
old uncollectible arrears. Revenues Euro Changeover Plan - focused at this stage
mainly on the business sector - is on target. We have also made very satisfactory
progress in preparing our systems for the Year 2000 - eliminating the so-called
millennium bug - which remains nonetheless a major challenge and priority.

Among the highlights of 1997 was the enactment of the Taxes Consolidation Act, the
product of a novel joint venture arrangement with the private sector. The preparation
and subsequent enactment of this legislation was a very significant achievement by any
standard and has been widely welcomed. 1997 can also be singled out as the year in
which our integrated strategy to bring illegal tobacco sales under control, involving
legislation, intelligence-gathering, enforcement activities and co-operation with our EU
partners, was extremely successful.

1997 was the first year of Revenues Statement of Strategy 1997-1999, our second
Corporate Plan and the strategies we adopted are showing results. In our Plan,
published in November 1996, we foresaw the need to adopt a tougher stance on tax
evasion, Black Economy activity and avoidance, and we put appropriate strategies in
place. As events have unfolded, we have prioritised these strategies even further, and
reallocated resources to ensure that they are progressed as a matter of urgency.
Revenue is actively pursuing all aspects of tax evasion arising from the McCracken
Tribunal Report, as well as more recent disclosures, and is co-operating fully with the
Moriarty Tribunal. We are also participating with the Department of Finance in a
review of Revenue powers to consider whether they are adequate in the light of
practical experience and emerging developments.

During the year, Revenue continued to play its part in the Governments Strategic
Management Initiative, both in terms of implementing SMI initiatives in the Office and
in contributing to the work of the SMI at central level. We are appreciative of the fact
that you, Minister, have approved the continuing application of our Corporate Plan as
Revenues Strategy Statement in accordance with the Public Service Management Act
1997. It was laid before the Houses of the Oireachtas on 30 April 1998. You also
agreed that Revenues Annual Report will be the formal reporting vehicle under the
Act. The first such formal report will be required in respect of 1998. However, even
this year, we have already begun to adapt our Report to fulfil this role and this Annual

2
Report therefore begins the process of reporting on our Strategy Statement. The
strategies we have adopted are underpinned by a process of detailed business planning
which has been in place throughout Revenue for some years.

Revenue is now 75 Years old. To mark the occasion we have recently had the honour
of a visit from Uachtaran na hEireann, Mrs. Mary McAleese. The President graciously
accepted the first copy of a book which we have published to mark 75 years of
achievement by the Revenue organisation and by Revenue staff in serving the Irish
people. The achievements of those 75 years, comes down ultimately to the
commitment, diligence and hard work of thousands of staff who have worked in
Revenue over the years and who work in Revenue now. We wish to pay tribute to the
service which Revenue staff have delivered in the past , and continue to deliver to-day.

Reflecting on 75 years of achievement, it is clear that a core strength of Revenue as an

organisation has been its ability to be flexible and to respond to changes in its
operating environment, changing demands from Government and the changing
expectations of its customers. We have successfully taken on new tasks, new taxes
and new technologies; we have shed unnecessary and outmoded practices and
reformed others; we have been to the forefront in building consultative structures with
key customer groups. This success gives us the confidence to say that we will go on
flexibly and responsively in meeting the further challenges ahead and in delivering our
mission of service to the community.

___________________ _____________________ ____________________

C.C. Mac Domhnaill D.B. Quigley F.M. Daly
Chairman Commissioner Commissioner

30 June 1998

3
 Chapter 1

Review of Performance
Analysis of Yield
1997 was another good year for Revenue with overall receipts exceeding
Budget estimates by some 998 million. As the table below shows, gross
receipts reached record levels in excess of 18 billion.

1997 saw an increase in yield in virtually all taxes and duties over the 1996
figures. Net receipts, having taken repayments into account, amounted to
13,963 million, or some 1,868 million higher than the corresponding
amount collected in 1996. Net receipts exceeded expectations across most
individual taxheads, with an increase of 531 million in overall Direct Taxes,
308 million in Indirect Taxes and 152 million in Capital Taxes over the
Budget estimates.

This reflects the even more buoyant than expected economic conditions
prevalent during 1997 but is also continuing evidence of the fruits of
Revenues policies for promoting voluntary compliance and streamlining
collection and enforcement procedures.

Table 1 - Total Amount Collected/Gross Receipts

1997 1996
Duties, Taxes and Levies m m

Customs 190 181

Excise 2,523 2,304

Value-Added Tax 4,822 4,092

Capital Acquisitions Tax 97 84

Capital Gains Tax 134 86

Stamp Duties 435 333

Residential Property Tax 4 15

Corporation Tax 1,770 1,496

Income Tax 5,688 5,013

PRSI and Health Contributions and

Employment and Training Levy 2,365 2,160
Total 18,028 15,764

4
Table 2 Total Revenue / Net
Receipts

Duties, Taxes and Levies 1997 1996 +Inc/-Dec

m m m

Customs 179.7 162.0 +17.7

Excise 2,522.6 2,304.3 +218.3

Value -Added Tax 3,706.8 3,109.3 +597.5

Capital Acquisitions Tax 88.7 81.7 + 7.0

Capital Gains Tax 132.4 83.7 + 48.7
Stamp Duties 424.3 332.3 + 92.0
Residential Property Tax 3.1 14.3 - 11.2

Corporation Tax 1,697.1 1,428.2 + 268.9

Income Tax:
PAYE 4,356.5 3,894.4 +462.1

Income Tax from Self-Employed and

certain other non-PAYE sources :
Direct payments 643.6 527.3 + 116.3
Less other non-PAYE repayments 46.8 47.4 + 0.6
Net Yield: 596.8 479.9 + 116.9
(see footnotes)

Deposit Interest Retention Tax 147.8 125.0 + 22.8

Withholding Tax 106.5 78.7 + 27.8
Income Levy 0 .7 1.3 -0 .6

Total: 13,963.0 12,095.1 +1,867.9

Footnotes on Table 2

The VAT receipts in 1997 are composed of 4,382.6 million on internal VAT, 439.5
million collected on imports, less refunds of 1,115.3 million.

Income Tax from the Self-Employed: The net yield from Income Tax under this
heading takes into account tax repayments made to non-liable individuals, charities
and pension funds for tax deducted at source under covenant arrangements or tax
credits attaching to company distributions. Such tax repayments are not related to
the tax paid directly by the self-employed but they have the effect of reducing the net
yield from that sector. Some of the tax thus repaid was initially collected under PAYE
or as Advance Corporation Tax and the gross figures for direct payments included in
the table provide a more complete picture of the direct yield from the self-employed.
Tax repayments in respect of BES and other investment incentives have already been
taken into account in the direct payments figure. The direct payments figure includes
tax payments made in respect of back-duty settlements.

Deposit Interest Retention Tax: This represents tax deducted from interest arising on
bank and building society deposits.

5
Withholding Tax: This is tax deducted under the provisions of Chapter I, Part 18,
Taxes Consolidation Act 1997.

Customs Duties and CAP import charges

Customs Duties and Common Agricultural Policy (CAP) import charges are collected
on a wide range of goods imported from most non-European Union countries, 90%
of the amount collected being paid to the EU as part of the Irish contribution to the
EU Budget known as Own Resources. The remaining 10% is retained by the
State as collection expenses.

In 1997 the amount collected on Customs Duties and CAP import charges came to
179.7 million as compared to 162.0 million in 1996.

Excise

Excise receipts of 2,522.6 million increased by 218.3 million or 9.5% on 1996

reflecting growth in consumer spending, as well as the impact of the Budget
increases in the duties on petrol, auto diesel and tobacco.

Once again Motor Vehicle Registration Tax (VRT) receipts in 1997 exceeded
forecast, this time by 21.9 million or 5.8%. Gross receipts for VRT amounted to
454.3 million, while repayments under the various repayment schemes amounted
to 58.5 million. These figures reflect a record year for new car registrations which
numbered almost 137,000.

The temporary 1,000 VRT scrappage repayment scheme accounted for 27.1
million of the 1997 repayment but contributed to the overall buoyancy of revenue.
Since the commencement of the scrappage scheme on I July 1995, more than
60,000 cars have been scrapped.

The scrappage scheme was initially due to end on 31 December 1996 but was
extended by the Minister for Finance for a further year to 31 December 1997. It is
widely acknowledged to have been an outstanding success, with the level of take-
up exceeding even the most optimistic forecasts. The scheme has been very
beneficial in several ways - for the Exchequer, the environment, the motor trade
and the consumer.

VAT

VAT receipts for 1997 amounted to 3,706.8 million. This figure was substantially
up on the 1996 yield by 597.5 million or 19.2%, reflecting continuing consumption
buoyancy and strong underlying growth in the economy.

6
Capital Acquisitions Tax

Capital Acquisitions Tax comprising inheritance tax, gift tax, discretionary trust tax
and probate tax produced an overall yield for 1997 of 88.7 million. This compares
with 81.7 million in 1996, representing an increase of around 9%. The
improvement is mainly attributable to the general rise in asset values experienced
during the period.

Capital Gains Tax

The yield of 132.4 million from Capital Gains Tax in 1997 was up by 49 million on
the 1996 outturn. Some 32 million of the excess can be attributed to the once-off
effect of a number of large settlements and the balance to increased activity.

Stamp Duties

In 1997 the yield from Stamp Duties was 424.3 million, an increase of 92 million
on 1996. The yield from property transfers increased by some 30% to around 253
million and the yield from share transfers increased by some 80% to nearly 74
million. These increases reflect the improvement in the property market in 1997 and
the positive general economic conditions that prevailed.

Residential Property Tax

The yield from Residential Property Tax, which was abolished with effect from 5
April 1997, amounted to 3.1 million. This compares with 14.3 million in 1996, the
last full year the tax was in operation.

Corporation Tax

The yield from Corporation Tax in 1997 was up by almost 269 million or almost
19% on the 1996 performance. The growth is attributable mainly to a general
increase in the taxable profits of companies.

Income Tax

The net receipts from Income Tax (including Income Levy) in 1997 were
up some 629 million or 13.7% on the 1996 figure. An ongoing sizeable increase in
numbers at work, increased employee remuneration, an increase in tax payments
by self-employed taxpayers and an increase in DIRT receipts were the main factors
which influenced the outcome.

7
8
Monitoring our performance

While tax yield is an essential indicator of our performance a multiplicity of customer

service and compliance programmes lie behind the yield figures. Revenue is intent
on professional management of performance and on the optimum use of resources.
For this purpose we engage in monthly and annual examinations and comparisons
of the various business programmes and measure performance against targets set
out in our business plans. This work is crucial in order to improve the manner in
which day-to-day operations are carried out, the services we provide to customers
and, ultimately, to maximise the efficiency of the organisation.

Internal Audit

In an organisation of Revenues size and complexity the internal audit function is an

essential element within the framework of delegated authority and accountability
operating in the Office. The Internal Audit Branch operates as a service to the Board
and senior management by checking compliance with management controls,
examining and evaluating the adequacy and effectiveness of such controls and
making recommendations for improvement where necessary. The findings of all
audits carried out by the Branch are made available to the Comptroller and Auditor
General.

The Branch is also involved in the auditing of EU Own Resources (Customs duty) in
association with European Commission auditors.

9
External monitoring of our performance

The Comptroller and Auditor General (C&AG) conducts ongoing examinations and
audits of receipts and expenditure, and of Revenues systems, procedures and
practices, as well as value for money audits of particular operations. In December
1997, the Comptroller and Auditor General reported the results of a value-for -
money examination of the collection and control of Value Added Tax. The principal
findings of the report were:

Collection procedures for VAT are efficient, with an overall compliance level of
90% for all traders, and almost 100% in the case of businesses with large VAT
liabilities.
VAT audit activity is well planned and is good value-for-money.

As part of the audit, the C&AG sought the views of business representatives and
their positive comments are particularly gratifying.

External monitoring of Revenue also includes continuous performance reporting to

the Minister for Finance. As Accounting Officer, the Chairman of the Revenue
Commissioners appears regularly before the Committee of Public Accounts to deal
with matters arising from the Report of the Comptroller and Auditor General and
other matters relating to Revenues activities. In 1997, for example, the Chairman
appeared before the Committee of Public Accounts on five occasions.

Revenue officials also appear before a number of other Oireachtas committees,

including the Joint Committee on Finance and Public Service, the Joint Committee
on the Strategic Management Initiative and the Joint Committee on Enterprise and
Small Business.

In 1997, members of the Public Account Committee visited Revenues Computer

Centre at Johns Road and were briefed by staff on the critical nature of Revenues
investment in Information and Communications Technology.

External auditing of Revenue is undertaken as well by the EU Commission and the

European Court of Auditors. Audits are conducted in respect of such matters as
Customs, VAT Own Resources and Common Agricultural Policy (CAP) matters, to
establish the basis on which Irelands contribution to the EU Budget is made, and to
verify compliance with related EU legislation. In 1997, Revenues controls of CAP
goods for export refund purposes were the subject of positive comments by the
Commissions auditors. Furthermore, a recently published report of the Court of
Auditors covering 1993 indicated that, while a number of Member States had
substantial disallowances of Community funding for CAP export refunds because of
weaknesses in physical controls of beef, no such disallowances were imposed on
Ireland because physical controls by Irish Customs were found to be satisfactory by
the auditors.

10
 Revenues Corporate Plan 1997-1999

Main achievements and initiatives in 1997

A key benchmark for Revenue each year is collecting the taxes and duties set
out by the Minister for Finance under the national Budget targets. The 1997
Budget target was exceeded by 7.6%.

The level of debt owing to Revenue was reduced by 361 million.

Revenue devised and adopted its strategy on Economic and Monetary Union
(EMU) and announced a strongly pro-business stance in relation to the
changeover to the Euro.

Timely payment compliance from our largest paying customers increased by

some 6% overall.

Revenue entered the final phase of a major modernisation of our computer

systems which is aimed at consolidating taxpayer records and integrating all
processing activities. When completed this will deliver substantial efficiencies for
Revenue as well as better service for the taxpayer.

Action to make our computer systems handle the Year 2000 and the Euro
commenced and is on target.

Revenue designed and implemented a new prosecution policy for cases of

serious tax evasion.

The Customs National Drugs Team seized drugs with an estimated street value
of over 7 million.

Revenue audits yielded 149.3 million from 20,786 cases.

Legislation to tackle the problem of the illegal trafficking and selling of tobacco
was incorporated into the Finance Act, 1997, with an intensification of on-street
measures and a new initiative to secure European cooperation.

Revenue officers seized 14 million smuggled cigarettes and 3 tons of roll-your-

own tobacco valued at 2.5 million. A further 44 million cigarettes, valued at
almost 7 million, was seized across the EU as a direct result of Irish Customs
intelligence.

A new Tax Treaty with the United States was signed, as well as four other new
treaties.

The Taxes Consolidation Act, 1997 was enacted. This was the first consolidation
of tax statutes for over 30 years and brought within one Act all Income Tax,
Corporation Tax and Capital Gains Tax legislation.

11
 Measures were introduced to tackle VAT avoidance, particularly on property
transactions.

Revenue initiated a review of the organisations structures with a view to

achieving better alignment between structures and front-line business activities.

The Revenue Mobile Service was launched.

Revenue published a Customer Service Policy Statement.

A Revenue Information Office and a Vehicle Registration Office were opened in

Tallaght.

Automatic tax clearance was introduced for those who have previously applied
and whose affairs are in order.

The Revenue Training Policy document was launched.

Preparations commenced for the implementation of the Freedom of Information

Act, 1997.

Revenue introduced a simpler and more user friendly Form P35 (Employers).

The Customs and Excise Tariff of Ireland was produced on diskette.

Revenue installed Friskimmachines (baggage scanner) to enhance drug

detection capacity at Dublin, Cork and Shannon Airports and Rosslare Harbour.

12
Cost of Administration as a percentage of Gross Receipts

Table 3: Cost of Administration as a percentage of Gross Receipts

1993 1994 1995 1996 1997

1.39% 1.23% 1.26% 1.10% 1.02%

Chart 3
Cost of Administration

Gross Receipts 15,663.0 million *

Cost of Administration 160.3 million

Cost of Administration

* This figure does not include PRSI, Health Contribution and Employment and Training Levy

1997 saw a reduction in the cost of administration as a percentage of gross

receipts.

This percentage is just one very broad indicator of performance and is influenced by
buoyant tax receipts as well as improvements in the efficiency of the Office.
Notwithstanding this qualification, it is a concrete indicator of the cost of running the
Office relative to the taxes and duties collected by it on behalf of the Exchequer.
The volumes of business handled by Revenue have increased dramatically in
recent years. Revenues ability to handle this expanded business, with lower staff
numbers, is a reflection of our successful exploitation of information technology and
of the steps taken to improve efficiency and effectiveness.

13
Volume of Business

Table 4 - Volume of Business

Items processed Volume in 1997

Income Tax
Returns 273,000
Repayments 143,000

Capital Gains Tax

Returns 17,000

Corporation Tax
Returns 67,000
Repayments 14,000

P35 Returns - Employers 132,000

- Employments 2,000,000
- No of Refunds 9,006
- Value of refunds 14.8 million

PAYE Reviews 441,000

Relevant Contracts Tax

C2s Issued 21,000
Repayments 52,000
RCT47s process 116,000

New Registrations 28,190

Income Tax 22,290
VAT 19,482
PAYE and PRSI 9,226
Corporation Tax 1,411
Relevant Contracts Tax

"New Business" Visits 6,455

All Taxes
Correspondence 3,742,492
Personal Callers 736,000
Telephone Callers 3,661,000

Number of payment items received in the Collector-Generals office 2,059,000

Value of payment items received in the Collector-Generals office 14,300.0 million

Number of VAT claims received 165,902

Value of VAT claims repaid 1,053.9 million

Number of tax clearance applications received 62,000

Customs and Excise Declarations

Number of Single Administrative Documents 741,000
Number of new and used vehicles registered 230,000
Capital Taxes
Inland Revenue Affidavits and Probate Tax Returns 16,000
Gift / Inheritance and Discretionary Trust Tax returns 13,000
Applications for Residential Property Tax clearance certificates 4,069
Returns in relation to Companies Capital Duty and Composition Duty 7,620
and Levies
Instruments presented for marking and stamping 400,000

14
Activity New registrations for VAT

Target 100% registered within 10 days.

Result 93% registered within 10 days.

Activity New registrations for all taxes (excluding VAT)

Target 100% registered within 5 days.

Result 85% registered within 5 days.

Chart 4 - Customer Contacts

In 1997 we dealt with 8.14 million contacts from our customers

Postal 3,742,492
Telephone 3,661,176
Personal 736,129

(These figures do not include return and payment items.)

9%

Postal
46% Telephone
Personal
45%

Revenues Internet Site

Internet Hitson the Revenue website (www.revenue.ie) were estimated at 120,000

for 1997.

15
Chart 5

Collector-General Payment Items * 1996 V 1997

250,000

P 200,000
A
Y
M
E 150,000
N
T

I 100,000
T
E
M
S 50,000

0
February
January

August
June

October
March

April

July

December
May

September

November
Items processed
1997 = 2,058,529 ) an increase
1996 = 1,839,510 ) of 12%

The largest amount of payments in a single day to the Collector-General was 592 million
The highest number of items processed in a single day by the Collector-General
was 42,969.

16
 Chapter 2

Customer Service

For Revenue, providing quality customer service means meeting our

customersneeds through the fair and efficient administration of the tax and
customs codes and through simplification, thereby minimising our customers
compliance costs. Providing quality customer service is thus an integral part
of Revenues strategies to promote maximum voluntary compliance by our
customers. Revenue firmly believes that such voluntary compliance is
necessary for an effective tax collection system. In particular, it allows more
resources to be devoted to anti-evasion activities. The delivery of quality
service is also central to the Governments Strategic Management Initiative,
the objectives of which are fully embraced by Revenue.

The key outputs of our Customer Service Programme are:

Making it as easy as possible for all of our customers to deal with
Revenue.
Providing consistent service to high standards across the full range of our
activities, and continuously adapting our service to meet the changing
needs of our customers.
An improvement in customer satisfaction followed by an increase in the
level of compliance and revenue yield.
Reinforcement of a partnership approach in dealing with customers
through further development of our consultative programmes.

In 1997, the main achievements in our Customer Service Programme

included:
The provision of a new fast-trackStamp Duty assessment and
marking service for personal callers in the Dublin Castle Stamp Duty
Office.
Development of new procedures to streamline the payment of motor
mileage allowances by employers to employees without the necessity
to deduct PAYE.
Development of simplified and streamlined procedures for
reimbursement of subsistence expenses to employees and directors.
Redesign and simplification of the main self-assessment tax return.
Publication of an easy to understand booklet on what to do about tax
when someone dies.
Publication of a pocket-sized information card covering key facts in
relation to Capital Taxes.
Installation of laser terminals at Vehicle Registration Offices to enable
Vehicle Registration Tax to be paid by Laser Debit Card.
Development of an automatic tax clearance facility.

17
 The opening of new offices in Tallaght to cater for customers in
Tallaght and the surrounding areas.
Development of the Revenue Internet site - www.revenue.ie
Revenue information is now available on Teletext - page 651 RTE 1.

Customer Service Initiatives

Target Assign an officer with overall responsibility for

customer service policy and quality standards by end
January 1997.

Result Achieved

A central plank of the Governments Strategic Management Initiative is the provision

of quality services to the customer and the reduction in bureaucracy and red tape.
During 1997, the SMI Customer Service Working Group, which was chaired by the
Chairman of the Revenue Commissioners Cathal Mac Domhnaill, assisted in the
development of quality service principles and efforts aimed at prioritising quality
service as a strategic issue for all Government Departments.

On 9 May 1997, Revenue produced a CODE OF PRACTICE as part of a civil

service-wide customer service initiative. It outlined in a general way, as a prelude to
the setting of precise customer service standards for all areas of Revenue, the
standard of service customers could expect in their dealings with Revenue.

Target Adopt Office-wide customer service policy

statement by mid 1997. Adopt customer service
standards, and establish a process to measure
performance against those standards by end 1997.

Result Partially Achieved. Customer Service Standards

adopted October 1997, - Published January 1998.
The development of performance measurement
systems in all areas of the Office is ongoing.

Throughout 1997 we engaged in extensive consultation both within Revenue and

externally to canvass as wide a range of views as possible on our customer service
provision and to discuss the contents of a proposed customer service standards
booklet. A draft of the booklet was sent to the Ombudsman, the National Adult
Literacy Agency and the National Social Services Board for their observations. The
booklet was launched by the Minister for Finance at the official opening of our new
offices in Tallaght.

18
Comments and Complaints

Revenue welcomes feedback - good and bad- on its performance. Our complaints
procedure was formalised in 1997 with the addition of a new element - the facility to
complain to a central area in Revenue when attempts to resolve complaints locally
are unsuccessful.

Since May 1997, comment cards are available in all our local offices. An analysis of
the 142 comment cards received up to 31 December 1997 shows that the vast
majority of those who completed cards were very pleased with the quality of service
provided, as can be seen from the following tables.

Highly Very Fairly Slightly Not at all

Was the information provided of help to 73% 21% 1% 2% 3%
you?

Excellent Good Fair Poor Unacceptable

The way your complaint / enquiry was 87% 7% 3% 1% 2%
handled was?

The response time to your complaint / 79% 11% 4% 4% 2%

query was?

The officers manner was? 88% 7% 3% - 2%

Yes No
Was your complaint / enquiry 96% 4%
answered?

Were you satisfied with general 94% 6%

standard of service?

19
New Revenue Offices in Tallaght

In line with our customer service approach and to make Revenue services more
convenient for the taxpayer a decision was taken to open two public offices in
Tallaght, which covers not only Tallaght itself but a large catchment area of South
Dublin, West Wicklow and Kildare.

The Revenue Information Office offers a comprehensive service to all taxpayers

who call there, no matter where they live or work. With on-line access to Revenues
main computer records, staff can bring a callers tax affairs up on screen ensuring
an immediate response.

The Vehicle Registration Office handles the registration of vehicles and deals with
all aspects of Vehicle Registration Tax including providing a dedicated central
Telephone Enquiry Office for VRT. In a new development for Revenue the Tallaght
Vehicle Registration Office provides Internet E-mail access for customers. This
facility removes the problem of distance for customers who may have a query and
are not able to call to the office in person.

The new office enables Revenue to service the growth in customer demand which,
since 1993, has been showing strong growth. For example, new vehicle
registrations in Dublin increased from 36,034 in 1993 to 62,256 in 1997 and used
vehicle registrations increased from 11,325 to 16,628 during the same period.

20
Virtual Revenue one-stop-shop

Revenue has established a web site on the Internet (www.revenue.ie). For now, the
site is being used as a communications tool. The most frequently sought Revenue
leaflets and tax forms are now on the site and can be downloaded by users.
Revenue has plans to put the INTRASTAT software on the site so that traders will
be able to download INTRASTAT return forms as required. Traders can then send
the completed returns on disk to Revenue. While full Internet interactivity is not yet
possible on the site, customers can now e-mail queries to relevant addresses which
are listed in Appendix 3 of this Report.

Projects in co-operation with other departments

Revenue and the Department of Social, Community and Family Affairs jointly issued
notices to 120,000 employers in March 1997 setting out the various tax and PRSI
rates which were to be applied for the tax year commencing on 6 April 1997. This
was the first such joint initiative and was aimed at reducing the volume of official
correspondence issuing to businesses.

Electronic Filing and Information Exchange

Revenue has had very successful electronic filing facilities in place for importers and
exporters since 1991. We have now commenced a detailed study of electronic
filing arrangements for other tax returns and payments which will involve using the
Internet as well as other technology. The study will include consultation with
business and other representative bodies.

The Customs Automated Entry Processing (AEP) system enables Irish importers
and exporters to clear their goods within minutes through the submission of
electronic Customs declarations. The lodgement of hard copy documentation has
been eliminated.

The use of this Direct Trader Input (DTI) has shown further growth in 1997 as
follows:

Table 5 - Direct Trader Input

1997 1996
Declarations Processed 740,691 617,485
DTI Take Up Import 92% 90%
Export 63% 60%

We also have disk exchange arrangements in place in the INTRASTAT and P35
(see Table 7) operations. Most INTRASTAT information is provided in electronic
format. A further 200 traders changed to this method in 1997. A software package,
IDEP (INTRASTAT Data Entry Package ), developed by Eurostat to produce an
electronic INTRASTAT declaration on diskette, is available from the VIMA Office,
Dundalk.

Electronic exchange of PAYE data has been in place for a number of years. Further
enhancements to promote electronic exchange of PAYE data have now been put in
place in 1997. On a trial basis, we provided accountants with diskettes containing

21
specially written software to assist them to make electronic P35 returns for clients
with manual payrolls.

Table 6 P35 returns filed electronically

Year ended Year ended

5 April 1997 5 April 1996

Number of returns 5,500 3,000

Number of employments 1.2m 1.0 m
% of total employments 57% 51%

1997 also saw the full introduction of an automated scanning system which is
capable of reading hand-written P35 returns. This innovative technology makes an
important contribution to our ability to process returns speedily and efficiently.

VAT Repayments

In December 1996 we introduced a facility whereby VAT repayments can be paid

directly to a Bank or Building Society Account nominated by a trader. This new
repayment method has proved to be a faster, more efficient and secure way of
making repayments. By the end of 1997, 50% of our customers (75% by value of
claims) received their repayments by this method. This method will be used for
making all VAT repayments to VAT registered traders from mid 1998.

22
Consulting Our Customers

Customer Panels

A Small BusinessUser Panel was set up by Government during 1997. The Panel
consists of representatives from Revenue, Chambers of Commerce of Ireland,
Construction Industry Federation, Department of Social, Community and Family
Affairs, Irish Coalition of Service Industries, Irish Small and Medium Enterprise
Association (ISME) and the Small Firms Association (SFA). The objective of the
Panel is to explore with the representatives of the Business Groups how the
administration of PAYE and Social Welfare by small businesses can be simplified.

A panel of employers was set up at the end of 1997 to facilitate the introduction of a
computerised P45. New stationery has been designed and issued to a number of
employers for evaluation.

Discussions with SMEs

Revenue has an ongoing series of meetings with representatives of ISME and SFA
on the particular needs and concerns with the tax system generally. The
introduction of automatic tax clearance and the simplification of procedures for
claiming subsistence expenses were announced by Revenue Commissioner Dermot
Quigley in his address to the Annual Conference of the SFA in June 1997.

Customs Consultative Committee

The Committee, which is composed of representatives of Revenue and of trade

organisations, provides a forum for consultation and exchange of views on issues
affecting the Customs treatment of imports and exports. It met three times in 1997.
Following discussions at the Committee, workshops were organised for the trade to
consider ways of simplifying customs procedures dealing with Inward Processing,
Customs Warehousing and general import and export issues. A number of
proposals made at the workshops have been fed into the Customs Code Committee
in Brussels and others are in the course of implementation.

Following consultations within the Committee:

A new booklet providing comprehensive information on customs procedures in
relation to imports and exports was issued in 1997. The booklet has been well
received and is proving to be a useful reference for the trade.
A new simplified entry procedure applies from 1 January 1998 to expedite the
clearance of low value import consignments.
A text file version of the Customs and Excise Tariff was developed which could
be used to electronically update tradersin-house tariff systems. This request
followed on from the successful launch of the electronic version of the Tariff on
diskette in July. The text file version was issued to the trade in January 1998
following successful trials by a number of traders.

23
The Tax Administration Liaison Committee

The Tax Administration Liaison Committee (TALC) continued its ongoing role in 1997 as a
liaison forum for Revenue and practitioners in relation to tax administration issues. TALCs
plenary committee had eight general liaison meetings in 1997 and its various sub-groups
also met throughout the year in relation to more specific areas of the tax system. TALCs
work programme was particularly focused on the proposed implementation by Revenue of
the Freedom of Information legislation and aspects of the Self-Assessment system.
Following an initiative by TALC a revised and simplified form in relation to stamp duty on the
transfer or sale of unquoted shares was introduced.

Customer Satisfaction with Customs

The move to a Customs audit regime in conjunction with the introduction of

paperlessdeclarations presented traders and staff alike with an entirely new
approach to Customs work. The majority of importers/exporters were familiar with
Revenue Tax audits but for many, a Customs audit was a new dimension to their
interaction with Customs.

In order to ascertain the level of satisfaction with the new system a survey was
conducted in September 1997 on the 118 traders already audited - 78% of these
responded.

The results of the survey concluded that:

98.8% agreed that sufficient preparation time was allowed for the audit.
96.6% agreed that the purpose of the audit was clearly explained.
98.8% agreed that the audit was conducted in an efficient and professional
manner.
93.5% stated that where advice or information was given the quality was
good/excellent.
96.6% of traders were satisfied with the audit.

24
 Chapter 3

Compliance

The objective of our Compliance Programmes is to achieve and sustain the

optimum level of voluntary compliance with tax law. This implies a cost
efficient collection system which promptly collects all taxes and duties due
and addresses the debt on record, with support and endorsement for the
compliant taxpayer and effective action to deal with those who are not
meeting their obligations. It involves optimising the number of payments and
declarations received on time. Ultimate compliance is all taxpayers paying
the correct tax on time.

The key outputs of our Compliance Programmes are:

Achieving or exceeding the annual Budget target.

Identification and registration of all who have a liability to taxes or duties.

Timely submission of statutory Returns, Declarations and Entries.

Reducing the amount of arrears and debt on record.

Fostering all aspects of voluntary compliance with improved customer

services.

In 1997, the main achievements in our Compliance Programmes

included:

The reduction of Revenue debt by 361 million.

A significant improvement in compliance levels for return filing for

Income Tax, Corporation Tax, VAT and EmployersP35.

A significant improvement in payment compliance rates.

The introduction of automatic tax clearance for compliant taxpayers.

25
Target To achieve the Government Budget target.

Result Target exceeded.

A record 18 billion gross was collected in
1997. This represents an increase of 7.6%
over the Budget target.

Activity Processing of Income Tax returns submitted on

time

Target 100% processed by 1 April 1997.

Result Largely achieved

97% processed by 1 April 1997.

Activity Processing of Corporation Tax returns submitted

on time

Target 80% processed within 20 days,

remainder processed within further 20 days

Result Target exceeded

99% processed within 20 days,
100% processed within further 20 days.

Activity Processing of PAYE Tax returns submitted on time

Target 80% processed within 20 days,

remainder processed within further 20 days

Result Target exceeded

97% processed within 20 days,
100% processed within further 20 days.

26
Returns Compliance Campaigns

Returns Compliance underpins the success of the Self-Assessment system by

ensuring that every non-compliant taxpayer is pursued for outstanding returns and
payments.

An early responsecampaign to tackle late filers and persistent non-filers was

launched in 1997. These cases are being worked under a rapid pursuit programme
and are being pursued to audit, prosecution and enforcement where appropriate.
Over 15,000 visits were carried out by Revenue staff. This programme resulted in
significant improvements for Income Tax return filing in 1997 as follows:

41,204 additional returns were submitted for 1995/96.

19,608 returns for prior years were received during 1997.

7,602 cases were identified as not trading or were considered to have no liability.

Tax districts throughout the country targeted the worst defaulters first i.e. those with
returns outstanding for 5 years. These cases are potentially more difficult to finalise.
Some 10,000 Income Tax cases were actually finalised in 1997. This included the
receipt of 19,608 returns for old years.

A Corporation Tax habitual non-filers programme commenced in the late Summer of

1997 and 2,865 cases were finalised by the end of 1997. 2,596 of these were
identified as non-trading. The worst defaulters were targeted as for our Income Tax
programme.

27
28
Activity Processing of Income Tax returns submitted late.

Target 80% processed within 20 days of filing; 100%

processed within 40 days of filing.

Result Target exceeded

97% processed within 20 days of filing; 99%
processed within 40 days of filing.

Employer (P35) Compliance

As illustrated in the table below, P35 compliance continued to improve with 96.5%
of employers filing their returns by 31 December. These accounted for 99.8% of all
employments.

Table 7 - Employer(P35) Returns Compliance at year end from 1992/93

to 1996/7 inclusive

Year At the following 31 December

Employers * Employments**

1992/93 93% 99.1%

1993/94 94% 99.3%

1994/95 94% 99.4%

1995/96 95% 99.4%

1996/97 96.8% 99.8%

* percentage of employers who have submitted returns;
** percentage of total employments in respect of which employers have
submitted returns.

Activity Processing of CG50 applications.

Target 100% processed within 5 days.

Result Largely achieved

97% processed within 5 days.
CG50 is an application for a capital gains tax clearance certificate. This certificate is required
where the consideration for the disposal of certain assets exceeds 100,000 [150,000 for

29
disposals on or after 27/3/98]. If the vendor does not produce a clearance cert the purchaser
must deduct 15% from the payment and remit to Revenue.

Activity Processing of C2 application.

Target 50% processed within 20 days; 100% within 40 days.

Result Achieved
50% processed within 20 days; 100% within 40 days.
C2 authorises a principal contractor to pay a sub-contractor without deduction of tax.

Activity Processing of RCT47 applications.

Target 100% processed within 5 days.

Result Largely achieved

98% processed within 5 days.

RCT47 is an application for a relevant payments card for a principal contractor to record
payments made to a sub-contractor without deduction of tax.

Arrears Compliance Campaigns

During 1997 we continued to target our activities on cases where the risk to
Exchequer receipts from non or late payers was greatest. That approach played a
vital part in achieving the record collection receipts in 1997 and the significant
improvement in payment compliance. Timely payment compliance from our larger
paying customers increased by some 6% overall in 1997.

Debt Management

Target Of the Revenue debt of 2 billion* as at May

1996, 1 billion to be eliminated by end 1999.

Result On target to achieve

*comprises historical debt of 1.6 billion as well as more current arrears.

Revenue is fully committed to ensuring that our debt management strategies bring
about an increase in timely payment compliance leading to an ongoing decrease in
the rate of accumulation of new debt, both in absolute terms and as a percentage of
gross collection each year. At the same time older nominal debt, which is based on
unrealistic estimates and where there is little prospect of collection, must be
eliminated from the record so as to ensure that resources are not wasted in its
pursuit at the expense of current collection. Progress on the debt management
programme is reflected in the fact that the overall Revenue debt continues to
decrease and now represents 10 per cent of net annual tax collection as against 57
per cent in 1988. This reduction is being achieved by a focused debt management
approach which includes maximising collection, and arrears review programmes
with discharge of unreliable estimates and write off of uncollectible tax, the latter in

30
accordance with general policy and procedures agreed with the Comptroller and
Auditor General in the early part of 1997. This strategy has involved, inter alia, the
deployment of additional resources into the task of reviewing doubtful debt and
ensuring collection where this is possible.

The amount of debt written off in 1997 under the new procedures was 281 million
reflecting the build-up of old uncollectible debt under the earlier write-off criteria.

Table 8: Total arrear as a % of taxes collected

Year Total arrear Taxes collected Total arrear as a %
of taxes collected
1988 3,501m 6,100m 57%
1989 2,985m 6,242m 48%
1990 2,718m 6,763m 40%
1991 2,538m 7,247m 35%
1992 2,437m 8,037m 30%
1993 2,215m 8,524m 26%
1994 2,057m 9,427m 22%
1995 1,978m 9,870m 20%
1996 1,690m 11,468m 15%
1997 1,329m 12,794m 10%

Table 9 shows the progress made in reducing the Revenue debt.

Table 9:
The annual Revenue debt for the years 1995 to 1997
( at end of each calendar year updated as at 31 May following)

Tax 1995 1996 1997 Cumulative

Reduction
m m m m
Income Tax 720 673 555 165
Corp. Tax 268 231 184 84
VAT 451 331 249 202
PAYE 231 194 135 96
PRSI 231 194 138 93
CGT 69 56 48 21
Other 8 11 20 (12)
Taxes
Total 1,978 1,690 1,329 649

31
Case-working through technology

In recent years Revenue has progressively introduced a new case-working

approach, involving all areas of the Office, to tackling payment and return non-
compliance and to debt management. This case-working approach has been
facilitated by a very significant investment in the latest available technology and in
quality training for our staff. Rather than relying on automatic computer driven
processes the case-working approach allows us to identify payment and/or return
compliance problems in specific cases immediately they occur, to closely monitor
cases and to directly intervene in cases by personal contact with the taxpayer when
payment delays or problems arise. Our case-working approach ensures that where
debt problems exist or materialise, we are in a position to respond at an early stage
to those problems and to work with the customer towards their resolution. In 1997,
the collection case-working approach impacted on approximately 48,000 of our
customers.

The new technology - Active Intervention Management (AIM) - was designed by

Revenue. New features were added in 1997 to:
Establish better links with external agencies such as Sheriffs and Solicitors who
enforce payment of debt through seizure of goods or through the courts.
Better manage the issue of tax clearance certificates required for businesses
seeking Government contracts or certain licences.

The case-working approach allows for the swift identification and targeting of cases
for the most appropriate enforcement action. In phasing in the new procedures
Revenue initially give customers every reasonable assistance to regularise their
affairs. However, where this approach is not successful, the full rigours of the
available enforcement provisions are applied.

32
Tax Clearance

Target Introduce automatic tax clearance for people

whose tax affairs are in order.

Result Achieved.

1997 saw the phasing in of the automatic renewal of tax clearance certificates for
compliant taxpayers by Revenue. This important customer services initiative means
that taxpayers who hold a current tax clearance certificate for the purpose of a
public sector contract and whose tax affairs remain in order are not required to
apply for renewal, but instead will obtain automatic tax clearance prior to expiry of
the current certificate. It is proposed to extend this initiative to other categories
requiring tax clearance during 1998.

Target Explore expansion of the Tax Clearance System to

other businesses.

Result Progressed. Tax Clearance extended in 1997 to

cover credit or mortgage intermediaries and
licensed moneylenders.

33
 Chapter 4

Audit, Prosecution and Enforcement

Well focused Revenue Audit, Prosecution and Enforcement Programmes
have a major role to play in achieving and maintaining the optimum level of
voluntary compliance with tax law and in ensuring that taxpayers who are
unwilling to comply voluntarily with the law are compelled to do so.

Under these Programmes, we vigorously pursue non-compliance, be it for

failure to furnish returns, failure to furnish correct returns, failure to comply
with statutory obligations or the more blatant forms of evasion. We are
committed to maintaining public confidence in the equity of Revenue
administration by adopting a tough stance on tax evasion and avoidance, the
Black Economy and all illegal activities. In particular, we will initiate the
prosecution of offenders in cases of serious evasion or fraud as well as cases
who do not file timely returns.

The key outputs of our Audit, Prosecution and Enforcement Programmes are:

Operation of risk-focused audit programmes which test the accuracy of

returns, declarations and entries.

In-depth investigation of persons or groups engaged in evasion of taxes

or duties.

Enhanced and consistent enforcement performance.

Initiation of prosecution in a number of suitable cases each year.

In 1997, the main achievements in our Audit, Prosecution and

Enforcement Programmes included:

The design and implementation of an effective prosecution policy for

serious cases of tax evasion.
The selection of 18 cases of serious tax evasion for criminal
investigation.
A significant number of cases being referred for prosecution for
failure to file tax returns.
Total receipts of 149m from effective audit programmes with more
emphasis on bigger cases.
The introduction of a system to closely monitor phoenix syndrome
companies.
The introduction of the Revenue Mobile Service.
The implementation of a package of legislative and operational
measures, nationally and internationally, to tackle the problem of

34
 illegal importation and sale of tobacco products resulting in record
levels of seizures by Customs officers of smuggled tobacco
products.

Tribunals and Tax Evasion

Revenue is actively pursuing all aspects of evasion arising from the McCracken
Tribunal report, as well as more recent disclosures. These investigations are
proceeding as a matter of priority. Revenue is also participating with the
Department of Finance in a review of Revenue powers to consider whether they are
adequate in the light of practical experience and emerging developments. Revenue
is co-operating fully with the Moriarty Tribunal.

Criminal Assets Bureau (CAB)

Revenue is co-operating fully with the CAB in its operations, by providing

information and support and, directly, through the Revenue officers working in the
CAB. There are now 8 Revenue officials in the CAB.

35
Audit

High Net Worth Individuals

During 1997, a review was undertaken which focused on a sample, some chosen at
random, of the top tier of high net worth individuals. The project examined the
profile of the sample by reference to income, residence and effective rate of tax (i.e.
tax paid as a percentage of income), to identify the likely tax risks. The review will
assist in the identification of cases for audit and the audit approach to be adopted.

The study also showed that this sector received disproportionate advantages from
tax incentives. This resulted in important changes being introduced by the Minister
for Finance in the December 1997 Budget, including the placing of restrictions on
the amount of capital allowances on buildings which an individual investor can claim
against non-rental income.

Table 10 - Results of Main Audit Programmes

1997 1996
Audit Type No. Yield m No. Yield m
Comprehensive 3,635 55.4 3,969 60.3
VAT 7,764 38.9 8,424 33.0
PAYE Employers 5,095 14.1 5,358 19.5
Relevant Contracts 1,856 8.1 1,582 8.0
Tax
Investigation Branch 77 3.7 90 6.0
Anti-Avoidance 20 2.4 29 2.4
Capital Acquisitions 315 3.3 315 2.6
Tax
Residential Property 2,024 1.2 1,590 0.9
Tax

Audits/Additional Tax 20,786 127.1 21,357 132.7

Arrears Collected 22.2 (estimated) 10.0
Total Audit Yield 149.3 142.7

While the total number of audits was slightly down in 1997 the total receipts
increased as compared with 1996. The reduction in numbers largely reflected
greater concentration on bigger cases (which take longer to audit) as well as
temporary re-assignment of auditors to important compliance work.

36
Anti-Avoidance

During the year to 31 December 1997, 20 cases involving tax avoidance were
resolved yielding a return to the Exchequer of 2.4m.

The general anti-avoidance provision, Section 811 Taxes Consolidation Act 1997,
the aim of which is to defeat the effects of transactions which have little or no
commercial reality but are intended primarily to avoid liability to tax, was invoked in a
number of cases during the year. Revenue is being challenged in the High Court in
each of these cases.

Arising from work undertaken by Revenue, a number of amendments which closed

loopholes and clarified the legislative intention were incorporated in the Finance Act
1997. Details of the amended sections covering, Industrial Buildings and Structures,
Double Rent Deduction and Exit Charge are set out in Appendix 1.

Customs Audit Programme

Revenues 1996 Annual Report announced the establishment of the Customs Audit
programme to ensure continued compliance with Customs legislation following the
introduction of paperlesselectronic import/export declarations. The Customs Audit
Units became fully operational in 1997 and the results for the year are shown below.

257 audits were completed by the end of the year of which:

35% showed no problems.

52% resulted in additional yield of Customs duty which amounted to 4.5 million.

5% resulted in repayment of Customs duty overpaid totalling 171,000.

8% resulted in non monetary discrepancies (statistical, prohibitions

infringements).

FEOGA Audit

The FEOGA Audit Unit audited the commercial records of 54 companies which had
received export refund payments of 480 million in respect of agricultural exports
during the period audited. This amount represented approximately 90% of total
export refunds paid by the Department of Agriculture and Food.

37
Target Use cross functional team working
between Taxes and Customs and Excise
staff in appropriate operations.

Result Achieved.

Joint Tax and Customs Audit

The Tax and Customs audit programmes operate closely and exchange information
about specific cases. This exchange resulted in three joint Tax and Customs audits
which checked that business transactions were treated consistently under both
codes. There was a substantial Customs yield in one of the cases. The other two
cases resulted in only small yields but the combination of approaches proved to be
a valuable experience.

Prosecution

Policy for Tax Offences

Target Design and implement an effective prosecution policy,

based on written guidelines which will aid managers in
identifying suitable cases for prosecution at the early
stages of an audit or investigation

Result Well advanced

Following consultation with the DPP and extensive training for the staff concerned
new arrangements are now in place in Revenue to pursue prosecution of serious
cases of tax evasion. As part of this, early in 1997 Revenues Tax Investigation
Branch was reorganised, resulting in a more focused approach towards the
identification and prosecution of serious tax offenders. Three of the five operational
units in Investigation Branch are now concentrated almost exclusively on advancing
possible cases for prosecution on indictment (as distinct from summary prosecution
which has traditionally been used e.g. for failure to file returns).

An Admissions Committee was established to evaluate possible prosecution cases.

It co-ordinated an intensive countrywide drive to ensure that the most suitable cases
are referred on an ongoing basis for consideration for prosecution. There is clearly
a heavy burden of proof involved in securing conviction for an indictable offence in
these cases. During 1997, auditors identified 43 cases of apparent serious tax
evasion and referred them to the Admissions Committee. 18 of these cases were
selected for criminal investigation. The remaining 25 cases were dealt with by way
of monetary settlement by Auditors or by Investigation Branch.

The implications of the new prosecution policy have been the subject of consultation
with tax practitioners and written guidelines are being finalised.

38
Arrangements with the Director of Public Prosecutions (DPP)

A senior officer from the Office of the DPP is now available to Revenue for the
purpose of case referral and for consultation. Officers from Revenues Prosecution
Policy Unit and Investigation Branch have regular meetings with him to discuss
individual cases and to discuss evidential and other issues which have arisen or are
likely to arise. Under the new arrangement, in order to speed up the process, cases
are investigated by Revenue officers, referred to the Revenue Solicitor where
suitable and passed direct to the DPP, rather than being routed through the Gardai.

Results

Three earlier cases, two of which were investigated by the Garda, progressed to
Circuit Court stage during the year. One of these resulted in a conviction after a
plea of guilty; in another, the taxpayer pleaded guilty and was awaiting sentence;
and the third was sent forward for trial. Another case had reached District Court
level. By the end of the year the Director of Public Prosecutions had given directions
to prosecute in a further 3 cases and some 17 others were actively being
progressed towards the Courts.

Monetary settlements

Because of the burden of proof involved and the resource-intensive nature of the
work only a small number of criminal prosecutions are likely to arise each year. The
bulk of cases arising from investigation or audit will continue to be the subject of
monetary settlements with continuation of arrangements for voluntary disclosure.

Target Use all available means to publicise the operation

and impact of the Returns Compliance, Audit,
Investigation Programme, particularly as regards
prosecution activity at local and national levels.

Result Achieved.

39
Prosecutions for Customs and Excise Offences

In 1997, 297 people were prosecuted for various Customs and Excise offences
compared to 267 in 1996, an increase of over 11%. This is due in the main to
increased convictions for cigarette smuggling and illegal selling of cigarettes. The
number of charges for smuggling was up 94% on the previous year while
convictions for illegal selling offences increased by 655%.

Prosecutions for cigarette smuggling and illegal selling of cigarettes

Table 11- Convictions and penalties for 1996 and 1997

1996 1997 1996 1997

No. of Penalties No. of Penalties No. of cases No. of cases of
Convictions Convictions of Imprisonment
Imprisonment

Cigarette
Smuggling 17 6,275 33 44,865 NIL 5
Illegal
Selling of
Cigarettes 11 6,850 72 53,050 - -

Prosecutions for other Customs and Excise offences

124 people were convicted in court, with fines imposed totalling 82,650, for the
illegal use of duty-rebated Marked Gas Oil (MGO), commonly referred to as
agriculturalor green diesel. This includes convictions for related offences such
as obstructing Revenue personnel and giving false information. In a further 645
cases, compromise sums amounting to 159,725 were accepted in lieu of legal
proceedings. A further amount of 12,100 was accepted for the release of a
number of vehicles which had been seized in connection with marked gas oil
offences.

7 people were convicted and fines amounting to 20,300 were imposed for betting
offences. Compromise sums totalling 1,500 were paid in 4 other cases. At
Mullingar District Court on 11th July, 1997, a bookmaker and her assistants pleaded
guilty to approximately 30 counts of suppression and evasion of Betting Duty. A fine
of 30,200 mitigated to 15,100 was imposed.

Convictions were also obtained in three cases involving the smuggling of oil and
alcohol products. Penalties of 2,500 were imposed.

40
Prosecutions for Vehicle Registration Tax (VRT) offences

Number of convictions 28
Fines imposed 22,850

Prosecutions for unlicensed trading

Table 12 sets out details of the numbers of convictions for breaches of the licensing
regulations during 1997 as well as details of compromise sums paid.

TABLE 12 - Proceedings for unlicensed trading

Licence Type Number Fines imposed Number of Compromise
Convicted compromise Settlement
cases Amount
Liquor 32 17,900 23 2,350
Hydrocarbon Oil 28 17,250 22 2,300
Vendors
Amusement Machine 1 1,000 _
Licences

41
Failure to file returns

Target Review available sanctions with a view to

developing a rationalised system which both
penalises the defaulter in an appropriate way
and ensures submission of the relevant
Return or Declaration.

Result Review Initiated in 1997 - to continue

through 1998

Sanctions against those who do not comply are of varying severity. These include
surcharges, interest, penalties and publication of the taxpayers name. In addition
prosecution for failure to file a return may be initiated through the Court. Details of
the prosecution cases taken for failure to file returns are set out below.

Table 13 - Prosecutions for non-filing of returns

Income Tax Corporation Total

Tax

Cases awaiting hearing 1/1/97 493 161 654

Revenue Solicitor warning letters 2,253 748 3,001
issued
Legal Proceedings Instituted 591 329 920
Convictions 223 68 291
Proceedings outstanding 31/12/97 861 422 1,283

P35 returns

Target Focus on employers who have been identified as non-

compliant in previous years for early compliance action.

Result Achieved

In tackling non-compliance in relation to the P35 return, Revenue targeted for early
action those employers who had been identified as non-compliant in previous years.
Amongst the sanctions used were individual statutory penalties of 1,200. These
were imposed in 544 cases where employers failed to submit fully completed
returns before the April 30 deadline. In cases where penalties were imposed by the
Courts, defaulters also had their names published.

42
INTRASTAT returns

During 1997 legal proceedings were initiated in cases where there was persistent
failure to file INTRASTAT returns.

28 convictions and 30,300 in fines were imposed by the Court.

In 3 cases compromise payments totalling 7,000 were accepted.

Black Economy

Activities undertaken in 1997 specifically focused on Black Economy activity

included the following:

Revenue commenced a nationwide operation to monitor tax compliance in the

construction industry. This operation is designed to ensure that the correct tax,
PRSI and Levies is accounted for in relation to persons employed in the industry.
The operation was undertaken in response to concerns that individuals who were
clearly employees were being categorised as subcontractors. Action is being
taken to deal with abuses detected.

Revenue identified over 700 phoenix syndromecases (businesses which close

down owing substantial amounts of tax and re-open under another company
name) for action in relation to the taxes outstanding and close monitoring of the
successor company.

Revenue established a new Mobile Service to enforce Vehicle Registration Tax

(VRT), prevent smuggling and detect illegal use of rebated diesel. The new
service will assist in tackling the Black Economy by the gathering of intelligence
and the identification of traders operating outside the tax net. It will also be
involved in targeted compliance activities in areas such as VAT fraud and illegal
tobacco sales.

Revenue participated fully in the Black Economy Monitoring Group. During the
year the Group was strengthened by the participation of the Small Firms
Association, to reflect the concerns of this segment of the economy. The Group,
which meets regularly, monitors trends in Black Economy activity, with a
particular focus on distortions in competition which are of concern to the Social
Partners.

Offsets of VAT liabilities against Relevant Contracts Tax (RCT) repayment claims
from non-resident sub-contractors amounted to 1 million during the year. This
represents a 64% increase over amounts offset in 1996.

Joint Inspection Units (JIUs) are operated in conjunction with the Department of
Social, Community and Family Affairs. The JIUs carry out joint inspections at
employerspremises, mainly with a view to targeting cases where there is
evidence of non-operation of PAYE/PRSI on the part of the employer and
working and signingon the part of employees.

43
 Specific action to detect unregistered traders.

During 1997 the Special Enquiry Branch, together with Local Enquiry Units,
continued to detect unregistered cases and previously undeclared sources of
income in the programme to counter Black Economy activity, details of which are
contained in Table 16. The Customer Service approach adopted by Revenue in
recent years in relation to the registration of new businesses together with the effect
of Tax Clearance requirements has resulted in greater registration compliance.

Table 14 - Special Enquiries

1997 1996
Number of cases detected not previously on record 1,000 1,353
Number of persons already on record with unreturned 2,169 2,280
income
Total number of detections 3,169 3,633

Referred to Investigation Branch 2 5

Referred to Audit 518 633

Revenue Mobile Service

Target Develop the Customs Mobile Task Units (MTUs)

as an Office-wide resource for the collection of
information, gathering of intelligence, combating
the Black Economy and general compliance
operations by mid 1997.

Result Achieved.

Following a review of the Customs & Excise Mobile Task Units, a new restructured
Revenue Mobile Service (RMS) was established. The new service which consists of
120 officials based in 14 strategic locations throughout the State was set up in
October 1997.

In addition to the traditional areas of Customs & Excise enforcement such as

Vehicle Registration Tax, hydrocarbon oil (green diesel) sampling and anti-
smuggling duties, the RMS will be a key force in tackling the Black Economy
through intelligence gathering and the identification of traders operating outside the
tax net.

44
Target Take effective action against phoenix syndrome
companies including closer monitoring of successor
companies, the possibility of a relevant form of
security and, in appropriate cases, initiation of legal
action against directors.

Result Achieved. Over 700 cases were identified for close

monitoring of the successor company

Enforcement Action
Collection Enforcement

Sheriff and Solicitor enforcement are the most commonly and effectively used
enforcement options to collect taxes due. A new computerised system, whereby all
outstanding tax liabilities in a particular case are consolidated, was commenced in
the second half of 1997 for solicitor and sheriff referrals. This contributed to a 23%
reduction in the number of individual referral items. Additionally, the number of
taxpayers who responded to contact from the Sheriff by paying tax to the Collector-
General directly continued to increase. Use of the power of attachment continued to
be an important enforcement tool used by Revenue. Other forms of enforcement
are considered as appropriate in individual cases.

Table 15 - Collection Enforcement

1997 1996
Solicitor Items referred 4,179 4,005

Payments made 9.9 million 8.9 million

Sheriff Items referred 63,057 82,234

Payments made 58 million 60 million

Attachment
Number of cases where 172 148
attachment was used

Yield from Attachment 2.8 million 1.4 million

45
Vehicle Registration Tax (VRT) Enforcement

A nationwide intensive enforcement programme to identify and eliminate breaches

of Vehicle Registration Tax (VRT) continued throughout 1997 and was very
successful.

Number of vehicles challenged by Revenue 33,696

Number of detections involving a minor delay in registration 3,006

Number of vehicles seized 356

Value of vehicles seized 1.7 million
VRT recovered 362,000

Penalties imposed for the release of seized vehicles 117,163

Cases reported for prosecution 68

Number of compromise settlements in lieu of proceedings 10

Amount Paid 12,265

Drugs and smuggling

Customs National Drugs Team

The street value of drugs seized by the Customs National Drugs Team (CNDT)
during 1997 amounted to 7 million, some 1.32 million of which was seized as a
result of joint operations with the Gardai. Co-operation with both domestic and
foreign enforcement agencies contributed significantly to seizures at home and
abroad during the year and to the quality of intelligence gathered on international
drug trafficking. In the course of the year, the CNDT participated in a number of
joint exercises with foreign agencies related to targeting and intelligence gathering.

Confidential Freefone - 1800 295 295.

During 1997, 5,800 calls were received on the Customs Confidential Freefone.
Several of the calls proved useful and facilitated the gathering of further intelligence
on drug trafficking activities.

46
Customs Officers discovered 600 Kgs of Cocaine concealed on board MV SEAMIST
in Cork Harbour on 29 September 1996. The drugs and the vessel were seized and
five people were arrested and charged with offences under the Misuse of Drugs Act.

At the trial in Cork in 1997 the skipper pleaded guilty and was given a 17 year jail
sentence. The other accused were not convicted. The street value of the drugs was
estimated at 47m.

Fight against Tobacco Fraud

As part of a co-ordinated Revenue response to the problem of illegal importation

and sale of tobacco products, and following discussions with the Minister for
Finance, the Department of Justice, the Garda and the legitimate trade, the
following measures were included in the 1997 Finance Act.

Fines were increased and the option to impose custodial sentences was
introduced both for illegal importation and for street selling offences.

The relevant powers of Revenue Officers and the Garda were strengthened.

A new offence was introduced to facilitate prosecution for the wholesaling of

unstamped tobacco products.

Technical amendments were made to close legal loopholes which were

hampering prosecutions.

At the level of the European Union, Revenue was successful in persuading the
European Commission and the other Member States to agree to set up a High Level
Group to examine the problem. The remit of the group was extended to include
fraud in the alcohol sector. Its objectives were to:

Examine the nature, extent and impact of fraud in the two sectors.
Identify factors which contribute to or facilitate this fraud.
Recommend improvements/solutions aimed at reducing and preventing fraud.

The Group was charged with reporting to the EU Directors General of Indirect
Taxation early in 1998 leading to a package of measures being endorsed by the
Council of Finance Ministers (ECOFIN) in 1998.

47
Cigarette Seizures

During 1997, Revenue officials detected and seized in excess of 14 million

smuggled cigarettes and 3 tonnes of roll your own tobacco with a total retail value of
2.5 million. Included in this were two large seizures, one at Southbank Quay,
Dublin of 4.8 million cigarettes with a value of 725,000 and the other seizure of 1.2
million cigarettes valued at 128,000. In the latter seizure the driver was arrested
and criminal charges are pending.

In addition, a further 44 million cigarettes, valued at almost 7 million have been

seized across the EU, as a direct result of Irish Customs Intelligence. As a result of
the measures taken significant progress has been made in curbing illegal sales of
cigarettes.

Table 16 - COMMERCIAL TOBACCO SEIZURES - 1997

TYPE NUMBER OF QUANTITY/ ESTIMATED DUTIES

SEIZURES NUMBER RETAIL VALUE (EXCISE & VAT)

Cigarettes 823 14,217,489 2,140,777 1,640,033

CIGS
Roll your 379 3,010 KGS 421,600 313,772
Own
Total 1202 2,562,377 1,953,805

Commercial Memoranda of Understanding Programme

The CNDT continued to develop the Memoranda of Understanding Programme

(MOU) with the commercial sector to assist in the battle against illegal imports.

The programme, which has been designed to facilitate mutually beneficial standards
of service and information flows between Customs and the trade, was initiated in
1993. A further 4 agreements were concluded during 1997, bringing the total
agreements concluded to date to 38, covering a wide range of business interests.
An MOU signed with the Irish Road Haulage Association in 1997 was significant in
that it encompasses the prevention of smuggling of all contraband, whereas all
previous agreements were directed exclusively at drugs smuggling.

48
Joint Surveillance Exercises

In 1997 the Member States of the European Union, including Ireland, carried out
three successful Customs joint surveillance exercises.

Tangible results of the operations, in terms of seized drugs and goods liable to
Excise Duty, were impressive. In total 541 kilos of cocaine, 2,949 kilos of cannabis,
163 million cigarettes and 67,000 litres of alcohol were seized.

In addition to these tangible results other beneficial outcomes include:

Enhancement of the communications system for sharing details of
detections among Customs services.
Reinforcement of goodwill and personal contacts between Customs
officers of participating States.
Increased operational co-operation with non-EU Customs services.

General Smuggling

1,871 cases of attempted smuggling were detected in 1997. Certain of these cases
were dealt with by means of compromise settlements, the total proceeds from which
came to 271,801.

Table 17 - Additional Categories of Goods Seized by Customs.

Type Quantity
Spirits 5,181 (Litres)
Beer 7,592 (Litres)
Wine 7,683 (Litres)
Hydrocarbon Oil 9,517 (Litres)

Yachts 2
Steroids 2,732 (Items)
Computer Parts 500 (Items)
Counterfeit Clothing 221 (Items)
Pornography : Videos 5,163
: Other (books, 20,850
magazines, etc.)

49
 Chapter 5

Policy & Legislation

Revenues role in the formulation of tax policy is to provide soundly based

advice to the Department of Finance and to recommend changes on the
basis of our expertise in tax matters and our experience in administering the
tax code. In this role we advocate changes that can be managed effectively,
which promote simplification of tax law and which foster voluntary compliance
and minimise compliance and administration costs. For this purpose we
participate in the Tax Strategy Group chaired by the Department of Finance.
We draft the annual Finance Bill, and other legislation as needed, in which
we seek to put in place a clear, precise, robust and effective body of tax law
and we brief the Minister during the legislative process in the Oireachtas.
The EU and the imminence of Economic and Monetary Union have a
significant impact on tax and customs matters, and Revenue is actively and
directly involved in developing the relevant policies and administrative
arrangements. We are also responsible for maintaining and extending
Irelands network of tax treaties, which are important in facilitating investment
and international trade.

The objective of our policy, legislation and administration programme is to

influence the development of taxation policies at national and international
levels, and to administer such policies in a way which is consistent with
Government and EU policy, which results in a fair, efficient and simplified tax
system and which contributes to national competitiveness.

The key outputs of our Policy and Legislation Programmes are:

Quality advice on tax and customs policies and reliable Revenue

statistics, analysis and forecasts.

Precisely drafted and robust legislation which is accompanied by clear

intelligible briefing material and which leads to a consolidated and
accessible body of tax and customs legislation.

Information which minimises the uncertainty about the impact of tax and
customs law on business decisions.

Influence on EU and other international policy making bodies in directions

which reflect Government policy.

A network of double taxation treaties which facilitates investment and

international trade in goods and services.

50
 Fair, efficient and streamlined procedures which help to minimise
compliance costs and which provide taxpayers and their representatives
with a clear understanding of their obligations under tax and customs law,
and which result in maximum voluntary compliance and revenue yield.

In 1997, the main achievements in our Policy and Legislation

Programmes included:

The enactment of the Taxes Consolidation Act which brought

together all existing Income Tax, Corporation Tax and Capital Gains
Tax legislation in one Act.

Our early announcement that services in euro will be available to

businesses from 1 January 1999.

The negotiation of 5 double taxation treaties, including a new treaty

with the United States.

Publication of Guidance Notes on the 1997 Finance Act.

Participation in EU and OECD discussions on codes of conduct for

business taxation.

Taxes Consolidation Act, 1997

Target Publish draft Consolidation Bill on Income Tax,

Corporation Tax and Capital Gains Tax.

Result Exceeded. Bill published and enacted.

The Taxes Consolidation Act, 1997 was enacted into law on 30 November 1997.
The Act, which is the largest single enactment in the history of the State comprising
1104 sections and 32 Schedules, consolidates the law relating to income tax,
corporation tax and capital gains tax. The Consolidation project commenced in
June 1995 and was carried out by way of a joint venture between Revenue, the
Office of the Parliamentary Draftsman and private sector consultants. The
Consolidation Act was widely welcomed by the Oireachtas and the various tax and
accountancy bodies. The goal of having the legislation enacted before the
December Budget was achieved, thus facilitating the drafting of the 1998 Finance
Bill by reference to the Consolidation Act.

51
Consolidation of legislation is consistent with the principles of good quality
regulation, in particular the need to reduce the quantity and improve the quality of
legislation, to which Revenue is committed under our Statement of Strategy. One of
the main benefits of this consolidation is the reduction of the volume of direct tax
legislation by almost one-half. Other benefits are that:

All direct tax legislation is now available in a single up-to-date Act, in a

coherent, orderly and more simplified format.

The legislation is more accessible and user-friendly to the business community,

tax practitioners, tax administrators and members of the Oireachtas. This is of
particular importance for smaller firms of tax practitioners and smaller
businesses.

As part of the consolidation process, a significant amount of deadwood and

obsolete material was eliminated from the tax code and there has been
considerable simplification in the text.

All future changes to the taxes involved should be capable of being slotted into
the Consolidated Act by amendment.

Our tax legislation is now more coherent to foreign investors and their advisors.

The task of future simplification of the tax system will be facilitated.

Target Publish notes for guidance on the Taxes

Consolidation Act.
Result Progress made: to be completed by mid-1998 to
follow the 1998 Finance Act.

Target Prepare a programme for consolidation of Indirect

Taxes legislation.

Result Partly Achieved. Future direction of consolidation

to be determined in 1998.

Economic and Monetary Union

Economic and Monetary Union (EMU) is one of the most important developments
for the Irish economy since we joined the European Union in 1973. The introduction
of the Euro will present a significant challenge for businesses, which will have to
deal with the practical complexities of switching their financial and accounting

52
systems to the new currency, while also addressing the strategic business issues
presented by the creation of a more integrated and competitive Euro zone.
Following extensive consultations with private sector bodies Revenue formulated a
changeover plan which is designed to offer business the maximum flexibility
possible as to how and when they may make the switch. We announced this plan
in April 1997, when we published our booklet Preparing for the Euro - a guide for
business on the taxation and customs aspects of the changeover to the Euro.

This changeover plan is strongly pro - business in that it offers businesses the
facility to conduct their tax, customs and statistical affairs in Euro if they so wish
from 1 January 1999. This will ensure no additional compliance costs for businesses
which make an early switch to the Euro for whatever reasons.

Revenue is committed to keeping business informed of the tax and customs

aspects of the changeover. In addition to the booklet which we produced in April
1997, we issued a leaflet - Planning for the Euro - to 140,000 businesses in
November 1997. As well as informing business of our changeover plans, this leaflet
also carried general advice on the changeover from the Forfas EMU Business
Awareness Campaign.

Revenue Services in Euro

From 1 January 1999 Revenue will accept payment of any tax, customs duty or excise duty
in either Irish pounds or Euro.
From 1 January 1999 (6 April 1999 for Employers PAYE/PRSI) businesses who so wish may
keep accounts and submit returns and declarations in Euro.
Taxpayers who elect to switch to Euro will receive tax and duty repayments in Euro.

Tax competition

Globalisation is creating new challenges in the field of tax policy. Although it has
had a positive effect on the development of tax systems, being one of the driving
forces behind tax reform, there has been concern internationally that it can also lead
to countries adopting tax strategies which may have harmful spillover effects for
other countries.

Revenue was centrally involved throughout 1997 in one of the most important
recent studies undertaken by the Committee of Fiscal Affairs (CFA) of the OECD.
The study concerns harmful tax competition as an emerging global issue and
Revenue has participated as a member of the small co-ordinating Bureau along with
three other countries, the United States, Japan and France. The Bureau is
responsible for managing the study and writing the report.

Given that Ireland offers generous tax incentives for manufacturing and financial
services activities, the project has important implications for future Irish economic
and business policies. As a Bureau member, Revenue has been able to play a key
role in shaping the outcome of the project and reflecting vital Irish interests. Work
on the project will continue in 1998.

Revenue also participated in the High-Level EU Monti Group, chaired by

Commissioner Mario Monti, which drew up a Code of Conduct on Business taxation.
The Code was approved by EU Finance Ministers in December 1997 and
represents a satisfactory outcome in an area of major concern to Ireland.

53
Electronic Commerce

During 1997, electronic commerce emerged internationally as a major taxation

issue. Global commerce using electronic communication technology and, in some
cases, involving electronic delivery of products, has significant implications for tax
policy and administration. Tax authorities find themselves faced with the challenge
of preserving tax bases and maintaining adequate administrative and control
arrangements without obstructing the development of this new way of doing
business.

At EU level, where the main focus is on VAT and Customs implications, Revenue
has taken a leading role in the debate, and hosted a meeting of an EU Working
Group in December 1997 at which representatives of the private sector provided an
insight into the technical environment of the internet and electronic commerce. The
tax implications are also being examined in detail by the OECD where, again,
Revenue has been playing a leading role. The OECD discussions are expected to
result in a set of principles, or framework conditions, concerning the taxation of
electronic commerce.

In parallel with the international discussions, the domestic implications of electronic

commerce are also being examined within Revenue. Recognising the importance
of this subject, this work was intensified towards the end of 1997 when Revenue
established an office-wide group to coordinate examination of the electronic
commerce issues across all taxheads, in order to ensure a comprehensive study
and a coherent response.

World Customs Organisation

A major contribution was made by Revenue Commissioner Dermot Quigley in the
field of International Customs through his role as Vice-Chairman of the World
Customs Organisation (WCO) and Regional Representative for the 45 countries of
the Organisations European region.

One major recent initiative of the WCO has been the development of a vision
statement, which has been drawn up in consultation with the organisations
membership. The vision statementattempts to create a model of the environment
in which Customs will operate during the next decade or so and to anticipate the
nature of the response which the new trading circumstances of the future will
require of the WCO. Irish Customs co-ordinated the views of the Members of the
European region in the preparation of the draft Statement.

Tax treaties

New double taxation treaties with the United States, South Africa and the three
Baltic States (Latvia, Lithuania and Estonia) were negotiated by Revenue and
signed by the Government in 1997. This brings Irelands treaty base to 33
countries.

54
Revenue was also involved in negotiations with Belgium, India, Mexico, Romania
and the United Kingdom in relation to existing and new treaties during 1997.

Further new treaty partners continue to be identified in liaison with other

Government Departments and relevant business interests.

Target Conclude negotiations on at least 6 double taxation

treaties or treaty protocols in 1997, subject to the
co- operation of our treaty partners.

Result Negotiations concluded on 5 treaties.

Ireland and the United States double taxation treaty

The US tax treaty is Irelands most important. The US has for many years been
Irelands largest single source of inward investment. There are over 450 companies
established by US investors in Ireland employing over 65,000 people. US
companies account for a quarter of the workforce employed in manufacturing
activities. There is also significant investment into the US from Ireland.

Unlike its predecessor, the new treaty covers Irish Capital Gains Tax, has
provisions for settling disputes concerning its interpretation and allows for
corresponding transfer pricing adjustments. It also has enhanced provisions in
relation to the exchange of information between the tax authorities of both
countries.

The new treaty is expected to have a generally positive impact on US investment in

Ireland and will allow the majority of Irish based investment into the US to continue
to qualify for treaty benefits (principally lower withholding taxes on dividends,
interest and royalties).

VAT at EU and OECD levels

In May, 1997 Revenue, in collaboration with the EU Commission, organised a

Seminar at Dublin Castle to disseminate details of a theoretical cash-flow
approach to the possible application of VAT to financial services if that were desired
sometime in the future. The Seminar was attended by practitioners in the field of
banking, financial services and insurance, and VAT practitioners from the
accountancy profession and from within Revenue itself. The Seminar was a
development from comprehensive studies carried out by the OECD on the
implications for national fiscal authorities arising from the ongoing expansion and
increased complexity of international financial services. These, by their nature,
have not been amenable to the application of VAT up to now, mainly because of the
difficulty in establishing a basis of taxation.

55
Arising from the OECD examination, the EU Commission sponsored pilot studies on
the practical application of the cash-flowapproach. The Commission decided that
before any firm conclusions could be reached, their studies should be extended to
other businesses in the financial services sector throughout the EU, including one
major institution in Ireland. These studies are due to end in mid 1998 and the
Commission intends to issue a report on the outcome in the latter half of that year.

56
 Chapter 6

Enabling us to do our business

Revenues business is supported by well developed corporate and business
planning processes which are in place throughout the organisation. These
processes have enabled Revenue, virtually seamlessly, to implement the
various initiatives arising from the Governments Strategic Management
Initiative.

Revenue has three Business Support Programmes, as follows:

Information Technology.
Human Resource Management.
Corporate support services.

By definition, these programmes are concerned with the provision of services

to support our business programmes. Consequently, the objectives, key
outputs, performance targets and results for these programmes have less of
an external focus than our business programmes. Their achievement,
however, is critical to the success of the business programmes.

The objectives of our Business Support Programmes are:

To support and enable the achievement of Revenues Business and

Support Programme objectives as effectively as possible through the
appropriate use of technology.

To maximise, through the effective management of our human resources,

the efficiency, effectiveness and competency of the organisation and to
foster a performance-oriented ethos achieved through teamwork and
partnership.

To provide responsive, efficient and effective support for the Office, with
responsibility and control devolved as far as practicable to line managers,
within agreed service standards.

The key outputs of our Business Programmes are:

Planning, accounting and financial management processes that enable

Revenue to plan strategically within a multi-annual framework.

Delivery of the right IT solutions on target and within budget.

Quality computer operations services twenty four hours a day, seven days
a week.

57
 Enhanced services and support structures for IT in remote offices, and for
effective end-user computing.

Human resource management strategies and programmes which are

aligned with the objectives of the organisation and fully support our
business with a performance oriented ethos achieved through team-
working and partnership.

Office-wide, comprehensive management information systems which

improve the range, quality and dissemination of information to the Board
and managers.

A comprehensive, professional, responsive, and effective legal service to

advise and support the Board and the Divisions.

Good, safe and healthy working environment; customer friendly and

accessible public facilities; effective, responsive internal services, with
agreed service standards and with responsibility and control devolved as
far as practicable.

The main achievements in our Business Support Programmes in the

year 1997 included:

The ongoing implementation of the SMI modernisation programme, in

the context of the SMI process in the Civil Service generally.

Reworking Revenues Business Planning and reporting processes in

the light of a new Corporate Plan 1997 to 1999.

Significant progress in the modification of our IT and Office systems

for Year 2000.

Similarly, the adaptation of our IT and Office systems for the

introduction of the Euro.

The ongoing development of the first phase of Integrated Taxation

Processing which will bring all our systems together with great
benefit for Revenue and our customers.

The implementation of Freedom of Information legislation.

The reorganisation of Revenues training function.

Participating in the design of an M.Sc in Taxation launched by Dublin

City University.

58
 Completing a restructuring agreement under the PCW in respect of
Inspectors of Taxes.

Planning and Reporting

Target Design and implement a co-ordinated Management

Information System building on the Corporate Information
Facility (CIF).

1. First phase (pilot) live by March 1997.

2. Enhancement design progressed through 1997.

Result Achieved

Arising from the launch in November 1996 of Revenues Corporate Plan - A

Statement of Strategy 1997-1999, Business Planning and Reporting systems were
redesigned to give an improved focus to corporate priorities and better management
information to the Revenue Board. Drawing a distinction between corporate
priorities and development activities, where detailed reports for the Board are
required, and day-to-day business activities which are largely delegated to Division
Heads, the planning and reporting systems are designed to:

Cascade the high-level Corporate Plan down through the Organisation to

influence and provide direction for the work of staff at all levels.

Ensure the strategies set out in the Corporate Plan are progressed.

Monitor achievement of Performance Indicators set out in the Corporate Plan.

Provide a framework of management information for the Board and the

organisation as a whole.

Provide a framework for resource allocation decisions.

The appointment of Strategy Managers is a significant feature of the new Planning

and Reporting framework. These officers are given responsibility for co-ordinating
and reporting on activity in relation to strategic priorities which cut across the
organisation.

Nine Strategy Managers have been appointed with responsibility for:

Customer Service Policy.

Prosecution Policy.

Revenues preparations for the Year 2000.

Developing Performance Measurement systems.

59
 Electronic Filing.

The elimination of 1 billion of Revenue debt.

Revenues preparations for Economic and Monetary Union.

Implementation of the Freedom of Information Act, 1997.

Organisation Review

Information Technology

Information Technology is critical to Revenues operations, and to the task of

collecting the amount of revenue we do and servicing the number of customers we
deal with. Our investment in IT has helped contain staffing costs and enabled us to
transform our work programmes and to cope with the huge increase in the volume
of business. We are improving our support systems for case-working and decision-
making. Developments in IT are helping us to create a better working environment
for our staff and helping them to perform more effectively. Information Technology
is increasingly the factor which makes the difference in service, competition and
quality in both Government and the private sector. The challenge for us is to keep
pace with, and where appropriate lead, such developments, so as to underpin the
effectiveness of our business programmes.

Revenue operates one of the largest computer installations in the country. The
table below gives an indication of the scale of our computer network in over 130
offices countrywide, and the extent of ongoing development and upgrading
undertaken in 1997.

Commissioned in Number at year

1997 end
Personal Computers 1,059 4,860
NetWare Fileservers 10 57
UNIX Servers 4 22
NT Servers 2 6

Better business/IT alignment

Businesses must continually align their IT goals with their business objectives.
Revenue has now consolidated various internal fora into a single high level group
chaired at Commissioner level to decide on IT priorities in the context of a dynamic
external environment.

60
Target Establish a high-level User Computing Group with a non-
IT Chairperson with terms of reference to include
recommendations on allocation of IT resources.

Result Achieved.

Integrated Taxation Processing

Work on the various components of the Commissioners' tax modernisation

programme, CONTAX, continued apace. New features were added to Active
Intervention Management (AIM), which provides Revenue officials with the
procedures and tools to identify and manage delinquent tax accounts. These
included options to:
better link with external agencies such as Sheriffs and Solicitors who enforce
payment of debt through seizure of goods or through the courts
manage the issue of tax clearance certificates required for businesses seeking
government contracts or certain licences.

Work also progressed on the development of Integrated Taxation Processing,

which will provide integrated assessment, billing and accounting across all taxes
using a common framework. The Common Registration system and the
management information systems were also enhanced. Modern enterprise
management software was acquired to manage Revenue's diverse computer
platforms and networks and to track software assets.

Year 2000

Revenue is critically reliant on its IT systems to meet its core business objectives of
collecting taxes and duties and delivering them to the Exchequer. Not surprisingly,
ensuring that all of our computer systems are Year 2000 compliant is a priority for
the Office.

In 1997, over 1,400 computer programs maintained by our Information Systems

Division, comprising almost 2.5 million lines of COBOL code, were identified as
needing modification. This excludes other programs which are Year 2000 compliant
or due for replacement before the critical date. Also, 288 applications developed
and maintained by end users were identified as requiring adaptation. Detailed plans
have been prepared for making the necessary changes and significant progress
was made.

61
Table 18: Year 2000 compliance

Completed in For Completion in For completion in

1997 1998 1999

Percentage of
centrally-maintained 21% 66% 13%
programs requiring
modification for Year
2000.
Percentage of user- 42% 53% 5%
maintained programs
requiring
modification for Year
2000.

Matthus Seminar Information Technology and the Customs Mission

The Matthus programme has become a key vehicle for fostering co-operation
between the Customs Services of the EU and more recently has included partner
countries from Central and Eastern Europe. The focus of this co-operation was
turned towards the Information Technology (IT) field when Ireland hosted a seminar
on the theme of Information Technology and the Customs Missionin Dublin Castle
in December 1997.

Experts in IT from 22 countries and the European Commission gathered in Dublin to

work towards a vision for Information Technology strategy in the Customs services
of Europe into the coming millennium.

The objectives of the seminar were to :

Identify current trends in the use of Information Technology in Customs.

Look at means of co-operation both in how we develop systems and how we use
them to support our common goals as EU Customs services.
Exchange ideas on best practice in Customs support systems.
Examine the impact of Data Protection legislation at both national and
Community level.

Opening the seminar, Revenue Commissioner Frank Daly spoke of the landmark
achievements of Customs services in the field of electronic administration, and
described how IT assists in maintaining the balance between providing a fast
efficient service to our customers while at the same time effectively protecting
society from illicit activity.

The seminar recognised that the globalisation of industry requires an integrated

response from Member States and that IT is a critical component of that response.
The seminar provided the countries present with an insight into international best

62
practices in IT and a clear vision of future directions. A valuable contribution to the
seminar was made by Ms Josephine Eviston, IT Director of Irish Express Cargo, a
representative from the freight forwarding industry, who described the benefits to
trade of Irelands on-line Customs declaration processing system (AEP).

Document Imaging

A document imaging system was installed at the Central Vehicle Office, Rosslare, in
December, 1997. The new system was introduced to tackle ongoing problems over
the filing and retrieval of VRT declarations which make up the Register of Vehicles
maintained by Revenue under VRT legislation. Since 1993 some 900,000
declarations and accompanying documents have been lodged with Revenue. The
new system enables Revenue to scan and store on compact disc the original
declaration - a reproduced copy of which is admissible as evidence in any court
proceedings.

Target Develop a strategy for telecommunications and telephone

services, linked to IT and Business Plans.

Result Deferred in light of developments in telephony for

the civil service

Computerisation of the Central Transit Office

The purpose of the Transit regime is to facilitate the movement of goods within the
EU and the Common Transit area (the EFTA and Visegrad countries) under a
system of customs control which safeguards the duties and taxes at risk. In Ireland,
60,000 outward (departure) and 35,000 inward (destination) transit movements are
registered annually. The primary function of the Central Transit office (CTO) is to
manage and coordinate enquiries into the discharge of those transit movements
initiated in Ireland and to assist the authorities in other contracting States in relation
to the movements initiated in those States.

Prior to April 1997, this work was performed manually. However, the increasing
volume of transactions together with the need to improve inquiry and response
times put the manual systems under severe pressure. In April 1997, with financial
assistance from the European Union, a computerised transit system went live which
provides:

A more efficient enquiry and follow-up system.

A better service to our customers.
Enhanced identification of risk areas.
Improved control over guarantees (securities).
Management and trade statistics.

63
Human Resource Management

With over 6,000 staff in a multiplicity of grades spread throughout the country, the
effective management of human resources is of central strategic importance to
Revenue.

Target Investigate suitable organisational arrangements to enable

the retention of the skills and competencies required to
meet the needs of the organisation and to facilitate the
development of our staff.

Result Investigation complete in relation to IT staff and on-going

in relation to other grades.

Training

Training is vital to the achievement of the objectives of the Corporate Plan and, in
1997, we maintained our commitment to invest at least 3% of payroll costs in
training and development of our staff. Our training programmes and activities
covered a wide range of areas including technical training, customer service skills,
management training and information technology skills.

Table 19 - Training Programmes

Competency area Training days

Technical Tax 9,278
Technical C&E 1,364
Interpersonal Skills 4,467
Computer End User 2,529
Computer Technical 2,588

For the first time ever, Revenues training policy was articulated in a document
which was issued to all staff. A single Training Branch was established with
organisation-wide responsibility for the design, delivery and implementation of
training policies and programmes. As well as giving our training programme a more
cohesive corporate focus, the benefits include cost effective training, rationalisation
of facilities, and wider selection of training available to all staff.

A significant feature this year was the delivery of training courses based on needs
identified by auditorsexperiences. For example, a VAT on property course was
designed to highlight the tax risks associated with the high volume of transactions in
property, and Capital Gains Tax and Corporation Tax courses dealt with commercial
transactions which can give rise to significant liabilities under the provisions of the
legislation.

64
As part of the training support for the development of Revenues prosecution policy,
more than 80 key staff were given intensive training in enforcement, legal and
prosecution matters, which included practical sessions in a
purpose-built replica courtroom in our Training Branch.

Target Put in place structures to promote and develop good

internal communication at all levels placing particular
emphasis on participation.

Result Partially achieved. Internal Communications review

team set up in 1997.

Computer Based Training is becoming an increasingly important element of our

training programme. Computer Based Training allows more frequent delivery of
training, without a commensurate increase in resource costs. Training can be
delivered just in time, in the workplace and with the active involvement of local
management. Some 700 staff received Computer Based Training in 1997.

We continued to support staff who engaged in continuing education, by refunding

academic fees. The scheme is targeted at areas of study that can help achieve
our organisational objectives, and in 1997 fees amounting to 186,500 were paid in
respect of 243 staff.

A highlight of 1997 was the launching by Dublin City University of an M.Sc

programme in Taxation. The new programme was designed in a joint venture
between Dublin City University, Revenue and the taxation professions. Designed to
set tax issues in a broader economic, corporate and social context, the study of
taxation is integrated with subjects such as corporate strategy, human resource
management, economic policy, business development and the changing domestic
and international environment. Students are drawn from the private sector -
including accountancy and legal firms - and the public sector. Revenue has
sponsored eight of its staff to take the course and is committed to similar numbers
in future years.

HR Policy and Administration

Our HRM systems operate within the framework of the overall civil service personnel
environment. In the context of the Strategic Management Initiative, the Government
has identified the need for significant change in the existing systems and structures
for human resource management in the civil service to support the programme of
change set out in Delivering Better Government. During 1997 Revenue participated
in a high level Working Group, comprising public and private sector experts, to
formulate and recommend new approaches for the civil service across a range of
HRM activities. We also participated in project groups, working with consultants, to
devise a new performance management framework for the civil service as a whole.
This work has continued into 1998.

65
In the light of this work, Revenue decided to defer a number of our strategies, to
avoid duplication and ensure that our approach would remain consistent with the
civil service framework.

Target Define the HRM roles of central and line

management, devolve appropriate responsibility and
accountability to line managers, and produce
guidelines for the exercise of devolved responsibility
and accountability.

Result Deferred to await SMI developments

Internally, review teams were set up to develop HR policies for Revenue. This work
is ongoing in 1998. Its purpose is to identify and analyse the specific HR needs of
Revenue and, drawing on the policy directions of the SMI, to design a
comprehensive HR policy and implementation plan appropriate to Revenues
business.

Target Put in place a modern computerised Personnel database

and management information system.

Result Deferred for the Civil Service as a whole to end 1998.

On the industrial relations front, a restructuring agreement was concluded under the
local bargaining clause of the Programme for Competitiveness and Work (PCW)
covering the grades of Inspector of Taxes, Inspector of Taxes Higher Grade and
Senior Inspector of Taxes. Negotiations on a similar agreement in respect of Tax
Officers and Higher Tax Officers ended without agreement. Following referral to an
Adjudication Board, this agreement was subsequently successfully concluded in
early 1998.

Target Establish a central change management consultancy

service to advise on best practice(through skills
transfer as necessary) from private and public sectors
in implementing change programmes.

Result Deferred to 1998.

During 1997 Revenues Human Resources Division processed over 1,900

applications for 28 competitions. The table below gives an indication of the volume
of Personnel Branch business generally in 1997:

66
Table 20

Category Number of Staff

Staff joining Revenue on recruitment, 185
transfer or promotion
Promoted or transferred from Revenue 105
to other Departments
Promoted internally 167
Retired 43
Resigned 50
Commenced Career Break 67
Commenced Job-Sharing 148

The total number of staff on career break and job-sharing at the end of 1997 was
188 and 670 respectively.

Target Complete Revenues Integration policy by the integration of

the Departmental Taxes structure with the rest of Revenue

Result Progressed. The Taxes Departmental Clerical Assistant

grade was integrated into the general service grading
structure.

Corporate Support Services

Target Develop and implement a computerised Office-wide

procurement system incorporating best practice in public
procurement.

Result Partly achieved. The system was acquired, and

implementation is proceeding through 1998.

Freedom of Information

Considerable work was undertaken throughout 1997 to ensure that we would be

ready for the implementation of the Freedom of Information Act in April 1998. Our

67
approach reflects our commitment to openness and our drive to provide a better
service to our customers. Our aim is to ensure that information can be accessed
with the greatest ease possible.

Revenue undertook a major review in 1997 of all internal rules, procedures,

practices, staff instructions and guidelines with a view to publishing up-to-date and
comprehensive manuals within the legislative deadlines of the Freedom of
Information Act.

Corporate Identity

Target Implement first and second phases of Corporate Identity

project.

Result Substantial progress made. Implementation ongoing in

1998.

In recent years, Revenue has put very significant emphasis on the entire Revenue
organisation having a corporate focus and common purpose. This has been
reflected in the development of a single corporate mission, for example, and was
brought forward by means of corporate planning and corporate objective setting.
Almost as a natural evolution of the process the need for a common identity, which
would reflect the single organisation focus, had become evident.

In 1997, we adopted a corporate identity including:

A re-defined logo based on the gates of Dublin Castle, Revenues Head Office.
The incorporation of the Government Harp in Revenues corporate identity,
reflecting our role as part of Government and the civil service.
New corporate stationery.
Common corporate colours and naming system for stationery across Revenue.

The new identity was rolled out during 1997 and work will continue during 1998 and
beyond on signage, buildings, information leaflets and other publications.

Target Produce a Press and PR policy discussion ocument.

Result Achieved.

68
 Appendix 1
Main Legislative Changes in 1997
CAPITAL TAXES

Capital Acquisitions Tax

The Finance Act, 1997, introduced certain changes to Capital Acquisitions Tax:

further extension in both Agricultural and Business relief to 90%

amended conditions for granting exemption in respect of heritage property

increased relief in respect of a dwelling taken by an elderly person from a deceased

brother or sister

re-enactment of the provisions granting Capital Acquisitions Tax and Probate Tax
exemptions on the transfer of property between former spouses following the granting
of a divorce.

Stamp Duty
Changes to legislation contained in the Finance Act, 1997, included:

higher rates of duty in respect of instruments transferring residential property above

certain thresholds

extension of young trained farmer relief

extension of exemption on transfers of American Depository Receipts (ADRs)

re-enactment of the provisions granting exemption from Stamp Duty on the transfer of
property between former spouses following the granting of a divorce.

Residential Property Tax

abolished with effect from 5 April 1997.

DIRECT TAXES

Capital allowances and room ownership schemes

Capital allowances were denied to certain packaged schemes in the case of a hotel investment
involving a room ownership scheme.

Capital allowances for buildings used for third level education purposes

Capital allowances were granted in respect of capital expenditure incurred on certain buildings used
for the purposes of third level education. The expenditure must be approved by the Minister for

69
Education and Science and covers both construction expenditure and expenditure on the provision of
machinery or plant for projects undertaken in the 3 year period from 1 July 1997.

Capital allowances for cars

An increased capital value threshold of 15,000 by reference to which capital allowances are granted
for new cars provided on or after 23 January 1997, was introduced.

Capital allowances for farm pollution control

A new scheme of capital allowances for capital expenditure by farmers on buildings or structures
necessary for the control of pollution was put in place. The scheme applies for 3 years from 6 April
1997.

Corporation Tax Rate

The standard rate of corporation tax was reduced from 38% to 36%. Tax credits on distributions
(other than dividends out of manufacturing income of companies) were reduced in line with the rate
reduction. The reduced rate of corporation tax, first introduced in 1996, which applies to the first
50,000 of a companys income in an accounting year, was reduced from 30% to 28%.

Double Rent Deduction

The Finance Act 1997 sought to end the abuse of the double rent deduction whereby parties became
connected after the lease was drawn up.

Employee share ownership trusts

Arising from the Partnership 2000 commitment, a number of tax reliefs were introduced for a new
form of employee share ownership trusts (ESOTS) which have been approved by the Revenue
Commissioners. ESOTS are a more flexible vehicle compared to Approved Profit Sharing Scheme
(APSS) for the acquisition of shares by employees in that, in particular, the trust may borrow to
purchase shares rather than relying solely on company contributions. The reliefs are as follows:

(i) The company establishing an ESOT may claim a corporation tax deduction for:

contributions to the trustees of an approved ESOT,

the costs (legal etc.) of setting up an approved ESOT,

(ii) dividend income accruing to the trustees of an approved ESOT will be exempt
from the income tax surcharge in respect of the undistributed income of
discretionary trusts

(iii) the trustees of an approved ESOT will be exempt from capital gains tax on any gain arising on
the disposal of securities where those securities are transferred to the trustees of an (APSS).

Employerspension contributions

The law was clarified to ensure that only pension contributions actually paid by employers to
occupational pension schemes would qualify for tax relief but not those contributions for which
provision had only been made.

Evidence of authorisation

Provision was made to enable the Revenue Commissioners introduce a more efficient administrative
system for the identification of officers who have been authorised by the Revenue Commissioners to

70
exercise functions (including powers and duties) under certain statutory provisions. Each officer
involved will be issued with an identity card detailing the provisions under which he/she has been
authorised and the I.D. card will be taken to be evidence of the officers authorisation for the purposes
of those provisions.

Exemption from corporation tax of Irish Takeover Panel

The income of the regulatory body under the Irish Takeover Panel Act, 1997 known as the Irish
Takeover Panel was exempted from corporation tax.

Exemption for Disability Benefit

Disability benefit payable for 3 weeks in the tax year 1997-98 and for 6 weeks in subsequent years was
exempted from tax.

Exemption of harbour authorities and port companies

A new corporation tax regime for port companies was introduced.

Prior to the Finance Act, 1997, harbour authorities were exempt from tax in respect of income from
the normal provision of harbour facilities. The port companies which replace these harbour
authorities and other companies controlling harbours will now be exempt from corporation tax for the
calendar years 1997 and 1998 and will subsequently be brought within the charge to tax on a phased
basis. The phasing-in arrangements will involve a 2/3 reduction in taxable income in the year 1999
and a 1/3 reduction in the year 2000. For the years 2001 onwards, these companies will be fully
within the charge to corporation tax. Harbour authorities which are not replaced by port companies
will remain exempt.

Exit charge

Provisions were introduced to counter a capital gains tax avoidance scheme involving a company
disposing of assets after ceasing to be resident in the State. The scheme provides that, subject to
certain exceptions, when a company ceases to be resident in the State, it will be treated as having
disposed of its assets at that time thus giving rise to a charge to capital gains tax.

Expenditure on Significant Buildings

The relief was extended to cover expenditure on approved contents, burglar alarm systems and public
liability insurance. In addition, provision was made for the carry forward of unrelieved expenditure
for up to 2 years.

Film Relief

Amendments were made to the scheme of relief generally known as section 35 relief which allows
a deduction for investment in the share capital of certain Irish film production companies. The
principal amendments are:

an increase in the levels of finance which can be raised in respect of a particular film
project

an increase in the investment limits for corporate investors

an incentive to carry out post-production work in Ireland, and

a number of changes related to the administration of the relief.

71
Income Tax Exemption

The income tax exemptions limits were increased as follows:

for single and widowed persons by 100 to 4,000

for married couples by 200 to 8,000

persons aged 65 years or over but under 75 to 4,600 (single) and 9,200 (married),

persons aged 75 or over 5,200 (single) and 10,400 (married).

Income Tax Rate Structure

The standard rate of income tax was reduced from 27% to 26%. The band of taxable income charged
to tax at the standard rate was widened from 18,800 to 19,800 for married couples and from 9,400
to 9,900 for single or widowed persons.

Industrial Buildings and Structures

The rules relating to industrial buildings allowances (i.e. where a building is disposed of for less than
its tax written-down value) were clarified to remove any doubt that (a) a lease made at a small
premium is not an event which triggers a balancing allowance and (b) where a balancing allowance is
made, the written down value is reduced by the amount of the allowance.

Personal Allowances

Personal allowances were increased as follows:

married allowance from 5,300 to 5,800

widowed allowance from 3,150 to 3,400

single allowance from 2,650 to 2,900

age allowance was doubled to 400 for a single person and 800 for a
married couple.

New PAYE Registration Threshold for Domestic Employees

The PAYE registration threshold for employers was raised from 6 to 30 per week
where a person is employed to work in the employers residence. The provision applies only where
he/she has one domestic employee in his/her employment.

Pre-trading expenses

Pre-trading expenses incurred in the 3 year period prior to commencement and which are revenue in
nature will be deductible in calculating profits or gains of a trade but will not be available for offset
against other income.

Profit Sharing Schemes

A number of improvements were made to the provisions relating to Approved Profits Sharing
Schemes (APSS). This results from the commitment by the Government and the social partners in
Partnership 2000 to support a more favourable tax treatment of employees share schemes and profit

72
sharing as a means of deepening partnership and securing commitment to competitiveness at the level
of enterprise.

Publication of names of defaulters

Changes were made in the compilation and publication arrangements, under Section 1086 of the
Taxes Consolidation Act, 1997 which require the Revenue Commissioners to compile and publish in
their Annual Report, lists of certain tax defaulters. The Commissioners will now compile these lists
on a quarterly basis and publish each list in Iris Oifigiil within 3 months from the end of the quarter.
The Commissioners may also publicise the lists in any other manner they consider appropriate.

Relief for agreed pay restructuring

A new income exemption was introduced for certain lump sum payments paid to employees under
agreed pay restructuring schemes which are certified by the Minister for Enterprise, Trade and
Employment. The restructuring must involve pay reductions of at least 10% of basic pay which
remain in force for at least 5 years. The maximum tax-free lump sum per employee is 10,000.

Relief for corporate donations

The tax relief for companies, which make gifts to:

(i) The Enterprise Trust, and

(ii) First Step

was extended in both cases to the end of the decade.

Relief for fees paid for training courses

A new income tax relief was introduced for tuition fees paid by individuals for approved training
courses of less that 2 years duration in the areas of information technology and foreign languages.
Tax relief, which is standard rated, is subject to the fees exceeding a de minimis of 250 and is
available up to a maximum of 1,000.

Relief for gifts made to third level institutions

A new tax relief was introduced for gifts of money made to certain third level institutions which are
used for the purposes of projects approved by the Minister for Education and Science. The relief
applies to both personal and corporate donations with a minimum qualifying donation of 1,000.

Stock Relief

The existing 25% scheme of stock relief for farmers was extended for a further two years to 5 April
1999, while the special temporary regime of 100% stock relief for certain young, trained farmers was
also renewed.

Tax Clearance for Moneylenders

The tax clearance system was extended to cover a moneylenders licence or a credit or mortgage
intermediarys authorisation.

Tax deductions scheme for sub-contractors

Changes were made in the scheme providing for:

73
 an extension of the definition of forestry activities

an extension from 6 months to 10 years in the time limit for taking summary
proceedings in respect of offences under the scheme

the application of civil penalties for non-compliance with requirements of the scheme.
This will enable the names of those not complying with these requirements to be included
in the published list of tax defaulters.

Taxation of strips of securities

Provision was made for a tax regime for a form of financial instrument known as a strip of a security.
Strips of an interest bearing security are created when the right to receive each interest payment as
well as the redemption of capital can be traded separately. The section removes tax barriers to dealing
in strips of such securities while ensuring against avoidance of tax in relation to such dealing.

Taxation of Dublin Docklands Development Authority

The profits and gains of the Dublin Docklands Development Authority were exempted from both
corporation tax and capital gains tax. This Authority is the successor body to the Custom House
Docks Development Authority.

Urban Renewal Reliefs

A number of changes were made to the general urban renewal scheme.

the deadline was extended for 1 year, subject to conditions, in connection with the general
urban renewal scheme to 31 July 1998, excluding the Temple Bar and Custom House
Docks areas

a number of new enterprise areas were designated

provision was made for the designation by the Minister for Finance after consultation
with the Minister for Transport, Energy and Communications of areas immediately
adjacent to 7 regional airports.

Dublin Docklands Area

A scheme of tax reliefs was provided to encourage the renewal and redevelopment of the Dublin
Docklands Area. Provision is made:
for the designation of areas of the Dublin Docklands Area by order. This can be for the
purposes of some or all of the tax incentives on the basis of specified criteria

for accelerated capital allowances for the construction or refurbishment of industrial

buildings such as factories

for accelerated capital allowances for the construction or refurbishment of commercial

premises including offices and multi-storey car parks

for a double rent allowance for industrial buildings, commercial premises, and hotels
which are leased. However, in the case of hotels, the double rent allowance is only
available where the capital allowances on the hotel are disclaimed, and

for allowances for the construction or refurbishment of residential accommodation for

owner-occupiers.

74
Temple Bar Area

A scheme of tax reliefs to encourage the renewal and redevelopment of the Temple Bar Area of
Dublin was introduced in the Finance Act, 1991. That legislation was particularly complex in format.
With a view to its inclusion in a consolidated body of legislation later in 1997, the scheme of reliefs
was rewritten on a stand alone basis, in so far as this was feasible.

INDIRECT TAXES
Excise Duty
The following changes were made in the Finance Act 1997:

the rates of duty on petrols and auto-diesel were increased by amounts ranging from 1p
to 2p per litre, inclusive of VAT

the rates of duty on leaded and superunleaded petrol were increased by 4p per litre,
inclusive of VAT

the rate of duty on cigarettes was increased by 7p per packet of 20, inclusive of VAT, with
pro rata increases for other tobacco products

a package of measures designed to combat, in particular, the illegal importation and sale
of tobacco products was introduced. It includes increased fines, the possibility of
imprisonment, measures to facilitate legal proceedings and increased powers for Garda
and Revenue officers.

Value-Added Tax

Important changes were made to VAT law in the 1997 Finance Act, to tackle VAT avoidance
schemes in property transactions. These schemes were based on commercial leases taken out by
VAT-exempt companies. The effect of the changes was to:

treat assignment and surrenders of leases in the same way as the creation of a lease is
treated for VAT

value an assignment or surrender accordingly

ensure that the VAT was collectible

close avoidance schemes based on artificially low rents agreed at less than arms length.

The new rules on property entered into force on 26 March 1997.

International Telecommunications Charges

There were also important changes in the 1997 Finance Act concerning the way these charges are
treated for VAT purposes. Technological progress in this sector had not been matched by changes in
the VAT rules. As a result, all EU Member States agreed that the rules need to be changed. The
amendments to the Act were the result of an agreement of all EU governments to seek the same
derogation from the EU Sixth VAT Directive. Prior to the rule changes, these services were provided
from outside the EU to customers inside the EU without payment of VAT. The main rule changes
were:

a user, other than a private individual, buying telecommunications services from outside
the EU must now self-account for and pay VAT on those services

the same now applies where a user, other than a private individual, buys the service from
another Member State

75
 where a non-EU service provider supplies a service to private individuals in the State, the
service provider must register here.

The new rules had effect from 1 July 1997.

Other important changes related to:

new registration requirements and a reduced VAT rate for retail sales by farmers of
horticultural products

the operation of the retail export scheme

the operation of discount and voucher schemes

confirmation that exemption from VAT applied to certain pre school and child care
activities

confirmation of the Budget increase in the rate of VAT on the supply of livestock, live
greyhounds and the hire of horses from 2.8% to 3.3% and a corresponding increase in the
farmers flat-rate addition.

Vehicle Registration Tax (VRT)

The following changes in VRT legislation were made in the Finance Act, 1997
vehicles built using a monocoque or an assembly serving an equivalent purpose to a
chassis are now considered unregistered vehicles in addition to vehicles built up from a
chassis. This applies only where the chassis, monocoque or assembly is either new and
unused or is derived from another unregistered vehicle

a new provision was inserted to enable the Revenue Commissioners to scan and store
electronically (or otherwise) images of VRT documentation and to allow the
authenticated copy records that have been retrieved from the storage medium to be
admissible as evidence in court proceedings.

Relief for Donations of Heritage Items

Donations of Heritage Items (with valuations) which were donated to the national collections in 1997
under Section 1003, Taxes Consolidation Act, 1997:
Archival material including deeds, maps, drawings and memorabilia relating to the
Fitzwilliam & Pembroke Estates in Dublin & Wicklow (13th - 20th centuries) - 320,000

Collection of 5 modern Irish paintings by of Jack B. Yeats, William John Leech and
James Humbert Craig - 125,000

76
 Appendix 2
Statutory Instruments in 1997

Number Title Effect

202 Tobacco Products (Tax Stamps) Prescribes the form of tax stamp for tobacco
Amendment Regulations, 1997. products and the standards of adhesion to
packets.

313 Finance Act, 1997 Provides for the operative date of Sections
(Commencement of 101 and 113 of the Finance Act, 1997.
Sections 101 and 113) Order, 1997. Section 101 amended section 8(3) of the
VAT Act to provide that farmers selling
agricultural produce by retail will be treated
as taxable persons subject to registration
limits. Section 113 amends the Sixth
Schedule to the VAT Act to provide for
application of the 12.5 % rate of VAT to
certain horticultural products.

316 Value-Added Tax Provides for an increase in the threshold

(Eligibility to Determine Tax Due by specified in section 14(1)(b) of the VAT Act
Reference to Moneys Received) Order, for eligibility to use the moneys received
1997. basis of accounting for VAT. The Minister
increased the threshold from 250,000 to
500,000 on 17 July 1997.

389 Control of Excisable Products Amends the rules in relation to the

(Amendment) Regulations 1997. procedures used for the
intra-community movement of excisable
products (Accompanying Document).

77
 Appendix 3
Revenue Publications
Numbrer Title
IT 1 Allowances, Reliefs & Tax Rates

IT 2 Taxation of Married Persons

IT 3 Tax Free Allowances

IT 4 Understanding PAYE Tax Tables

IT 5 Refund of DIRT

IT 6 Medical Expenses Relief

IT 7 Covenants to Individuals

IT 8 Tax Exemption & Marginal Relief

IT 9 One Parent Family Allowance

IT 10 Guide to Self-Assessment for the Self-Employed

IT 11 Employees Guide to PAYE

IT 12 Disabled Persons & Income Tax

IT 13 Personal Injury Compensation Payments

IT 15 The Seed Capital Scheme: Tax Refunds for New Enterprises

IT 16 Third Party Returns (Automatic Return of Certain Information)

IT 17 Special Savings Accounts and other Special Investment Products

IT 18 Incapacitated Child Allowance

IT 19 Professional Services Withholding Tax (PSWT)

IT 20 Benefits from Employments

IT 21 Lump Sum Payments on Redundancy / Retirement

IT 22 Taxation of Disability and Short-Term Occupational Injury Benefits

IT 23 Main Features of Income Tax Self-Assessment

IT 24 Taxation of Unemployment Benefit

IT 25 Employees and Contractors in the Construction Industry

IT 26 Urban Renewal Relief

IT 27 Tax Relief on Service Charges

IT 28 Tax Relief for Designated Third World Charities

78
IT 29 Tax Reliefs for Renewal and Improvement of Certain Resort Areas

IT 30 Expenditure on Approved Buildings and Gardens in the State

IT 31 Tax Relief for Tuition Fees Paid to Approved Colleges

IT 32 Revenue Audit - Guide for Small Business

IT 33 Tax Relief for Home Alarms

IT 35 Blind Persons Allowances & Reliefs

IT 38 Gift / Inheritance Tax Self-Assessment Return

IT 39 Gift / Inheritance Tax A Guide to completing the

Self Assessment Return ( Form IT 38 )

IT 45 Allowances for Over 65s

IT 46 Dependent Relative Allowance

IT 47 Incapacitated Person - Allowance for Employing a Carer

IT 48 Starting in Business A Revenue Guide

IT 49 VAT for Small Business A Revenue Guide

IT 50 PAYE / PRSI for Small Employers A Revenue Guide

IT 51 Employees Motoring Expenses

IT 52 Taxation Treatment of Finance Leases

IT 53 Domestic Employer Scheme

IT 54 Employees Subsistence Expenses

IT 55 The Business Expansion Scheme:

Relief for Investment in Corporate Trades

IT 57 Relief for Investment in Films

IT 58 Revenue Job Assist Information for Employees

IT 59 Revenue Job Assist Information for Employers

CGT 1 Guide to Capital Gains Tax

CGT 2 Capital Gains Tax Self-Assessment

CGT 3 Roll-over Relief for Individuals on Disposal of Certain Shares

RES 1 Explanatory leaflet on the legislative provisions relating to the residence in Ireland
of individuals for tax purposes

HET 1 Relief for Donations of Heritage Items

79
CAT 1 Gift Tax

CAT 2 Inheritance Tax

CAT 3 Probate Tax

CAT 4 Capital Acquisitions Tax Business Relief

CAT 5 Agriculture Relief - 1997 Finance Act

CAT 6 Capital Acquisitions Tax

Review and Appeal Procedures

CAT 7 Capital Acquisitions Tax

Elderly Brother/Sister Residence Relief

CAT 8 Capital Acquisitions Tax

Heritage Property Relief

CAT 9 Tax Reliefs for Business A Revenue Guide to Recent Developments

REV 1 What to do about tax when someone dies

CCD 1 Companies Capital Duty

RP 1 Residential Property Tax Self-Assessment Return

RP 2 Notes on Residential Property Tax

RP 3 Residential Property Tax Help Leaflet

RP 4 Residential Property Tax Review and Appeals Procedures

RP 5 Residential Property Tax Certificate of Clearance

SD 1 Stamp Duty

SD 2 Stamp Duty Relief on Transfers of Land to Young Trained Farmers

SD 3 Stamp Duty Review and Appeal Procedures

CG 1 Tax Clearance Scheme

CG 2 Due Dates Payments and Returns

CG 3 Payments to the Collector-General

CG 4 Change of Address

CG 5 VAT Claims and Payments

CG 6 P35 - End of Year Returns

C&E 2 Person Transferring Residence to Ireland

C&E 4 Duty / Tax Free Allowances for Travellers

C&E 5 Appeal Procedures relating to Customs Matters

80
C&E 6 Appeals Procedures relating to Payment of Excise Duty

C&E 7 Paperless Declaration (Customs AEP System)

VRT Vehicle Registration Tax - 1,000 Repayment

VRT 1 Vehicle Registration Tax

VRT 2 Vehicle Registration Tax - Temporary Exemptions

VRT 3 Vehicle Registration Tax Tax Relief on Transfer of Residence

VRT 4 Vehicle Registration Tax Tax Relief on Transfer of Residence (Duty Free Cars)

TCU 1 Binding Tariff Information (BTI)

CHY 1 Applying for Relief from Tax on Income and Property of Charities

CHY 2 Applying for Relief from Income Tax and Corporation Tax for Certain Sporting
Bodies

CHY 3 Tax Relief for Covenantors (for teaching the Natural Sciences)

CHY 4 Tax Relief for Covenantees (for teaching the Natural Sciences)

CHY 5 Tax Relief for Covenantors (for the Conduct of Research)

CHY 6 Tax Relief for Covenentees (for the Conduct of Research)

CHY 7 Trading by Charities Exemption from Tax

REV 95 Directory of Revenue Addresses

CS 1 Code of Practice For the delivery of service to the customers of the Revenue
Commissioners

CS 2 Customer Service Comment Card

CS 3 How to complain to Revenue

Artist Exemption Information

Artist Exemption Claim Form

Artist Exemption Non-Residents

Direct Debit - VAT

Direct Debit - PAYE / PRSI

Direct Debit - Preliminary Tax

Employers Guide to PAYE

Guide to Value-Added Tax

Preparing for the Euro

81
 Euro Business Link Planning for the Euro

VAT on Property
Finance Act 1997 Changes A Revenue Guide

Guide to Customs & Excise Import & Export

Customer Service Standards

Notice on the Format of Vehicle Registration Plates

Statements of Practice
Number Title
SP-CAT/1/97 Capital Acquisitions Tax - Indexation

SP-VAT/1/97 Horticultural Retailers

SP-VRT/1/97 Repayment of VRT in respect of vehicles

acquired for leasing or hiring or providing
instruction in the driving of vehicles

Public Notices
Number Title
Notice No. 1095 Importation of Tourist Publicity Material

Notice No. 1179 Relief from Customs Duty and VAT on Gift Consignments and
consignments of negligible value imported from outside the European
Union.

Notice No. 1759 Vehicle Registration Tax - Private Importations / Acquisitions

Notice No. 1775 Tax Relief on Transfer of Business Activity

Notice No. 1837 Tax Relief on a Vehicle Acquired on Inheritance

Notice No. 1851A Tax Relief for Disabled Drivers

Notice No. 1851B Reliefs from Vehicle Registration Tax and Value-Added Tax on
(Passenger) Vehicles, and Excise Duty on fuel, used by severely and permanently
disabled persons as passengers.

Notice No. 1851C Tax Relief for Disabled Organisations

Notice No. 1875 Relief from import charges when transferring residence from outside the
European Union.

82
Revenue E-Mail Addresses -

Freedom of Information Unit

E-mail [email protected]

Indirect Taxes Policy and Legislation Division

E-mail [email protected]

International Customs Branch,

E-mail [email protected]

Revenue Customer Service Unit

E-mail [email protected]
[email protected]
[email protected]

Revenue European Monetary Union Unit

E-mail [email protected]

Revenue Press and Public Relations Unit

E-mail [email protected]

Revenue VRO Tallaght

E-mail [email protected]

Collector-General, Limerick
E-mail [email protected]

Collector-General, Dublin
E-mail [email protected]

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