Paul Murphy Challenges Revenue on Corporate Resources and Rulings

Just to start, I understand that you operate on the basis of different divisions, and there's five national operational divisions, which effectively are the ones that are pursuing tax compliance with different types of individuals and companies. There's a large corporates division, high wealth and financial service division, medium enterprise division, business division and personal division. Could you give me a rough estimate of how many staff are working in each of those divisions? Personal division and business division both have around 1,000 staff. Large corporates division probably, I'd say, something around 300. And so, HW, FS, the Highland Financial Service division is slightly less than LCD and medium enterprise division probably around 550. They're approximate, and I can give the actual figures. Yeah, no, no, that's useful. I mean, what I'm interested, that kind of gets to what I was interested in there, which is the large corporates division. So, large corporates make up heading towards 20% of our total tax revenue, I think. But they're only making up, let's say, 10% of the staff. Could you do with more there in terms of...? I suppose when we restructure, what we talk about is we realigned our structure from four geographic regions in 2018. We always had a large corporate division. I felt at that time, we felt at that time that just the scale of the large corporate sector and the complexity had just grown so much that the geographic regional system was no longer appropriate. So, what we did at that stage, large cases division looked after large corporates plus high wealth individuals. We divided those two, but we have increased the resources on large corporates and high wealth by, I'd say, 60, 70% in that period. And that was purposeful. Now, what you would have in the divisions is large corporates and high wealth individuals would have a high level of principal officer assistant principal grade. Personal division would have a significant number of clerical officer and executive officers. So, what we're trying to do is kind of make sure we're adequately resourced to address those issues. So, if you take large corporates, it's organised on a sectoral basis. So, what we would have is a fairly constant review of the large corporate sector by dedicated resources to give that overview of what's happening. And there are areas in the financial services sector that actually are structured in such a way legally that there is very little tax. And certainly at this committee and with the Comptroller and Auditor General over the years, we would have had a concern that we just didn't under tax. And certainly at this committee and with the Comptroller and Auditor General over the years, we would have had a concern that we just didn't understand enough of the funds and all the rest of it. So, we set up a dedicated branch and kind of at the time, we were very concerned to understand what was happening in the economy, even if it doesn't necessarily – and I remember dealing with parliamentary questions about how many audits did we do in Section 110 companies. And the figures looked really small, because audit is not the appropriate intervention there, because they are structured in a way not to have a tax liability. But understanding – and in 2015, we published our first detailed analysis of corporation tax. And every year since, we published detailed analysis of corporation tax. And there you can see – Can I just – one related question is – obviously, advanced tax decisions became something that the public became aware of, because you had the Apple case. And ultimately, like the essence of the Apple case was two advanced tax decisions from revenue saying to Apple, we'll treat these companies in a certain way that ultimately was found to be very substantial state aid. Are there other advanced tax decisions with other multinationals? I'm obviously not asking you to name them. But how many of these advanced tax decisions are out there? We give rulings on the interpretation of the legislation to businesses on request, on full disclosure of the facts of the case. And so, kind of, at the time of the Commission opinion, one of the things that we agreed to do at that stage is publish the amount of opinion. So we publish in our annual report, the number of opinions. And just, of the last annual report, there are 80 opinions. Okay. And we publish that every year. And, like, I think it's this week, a tax and duty manual that we issued to practitioners. One of the other agreements there is that each ruling is time-bound, maximum of five years. And they have to re-apply. Yeah. And what we don't do, we don't give, all we do is we give a view of what the legislation that is in place means. Yes. Yes. Let me move on. Just one of the striking things when you look at the number of audits and investigations is that this has been coming down significantly since 2016. We're over 6,000. By 2021, we're just over 1,000. 2023, we're under 1,000. The yield hasn't come down to the same extent. It came down initially, and then it comes back up. What explains the very significant reduction? It goes back to our realignment of our structure. And one of the particular concerns I had with the geographic regional system is that if you count the number of audits, you can do 10 audits of a small business, which would take, you probably wouldn't do one of a large corporate in the same period of time. So what we did was we structured our resources to deal with the risk. Okay, so it's more focused now effectively. It's more focused on both identifying risk, which applies across the case base, but also complexity. Kind of like you can have, if you have, if you have a systems, an IT systems mistake in a large entity in relation to VAT, that can lead to a significant liability, not to any attempt at evasion. So the structure and the resources, and we have had some really significant, it's been the subject of various reports by the Comptroller and Auditor General on audit activity, where the Comptroller's staff would look at the 20 biggest audits in a year. And that's always a really interesting chapter for everybody. Just to move on in relation to the chapter on rental taxation, taxation from rental. There was what seems to have been a very effective project focusing on landlords with three or more properties between 2020 and 2024. Division carried a total of 884 interventions around 46% of the cases, about half, yielded over 7 million in additional tax interest and penalties on average each one, on average about 18,000 euros. Firstly, were those randomly picked or were those picked because there was some red flags that suggested that they may be effectively over estimating their expenses? The bulk of our interventions are risk-based. Yes, and that's the case with that targeted project as well. And that's the case. And why did you wind this program down? I wouldn't say we've wound it down. We were actually engaged over the last two years in a very intensive work in relation to landlords. I have a particular concern, and the team will know this, I have a particular concern about trends in the last while around fairly egregious practices in the rental sector. And we have some really intensive interventions, some of which have led to considerable court action and legal challenge. They're complex, they're difficult, but they're... But why wouldn't you... I agree with all that, and I'm happy that that's happening. But why would you wind down that project to this other one? Why wouldn't you keep going with both? We don't really call it winding down of the project, that we're always... All our interventions are based on risk. And what we will focus on at any particular time is more specific and, I think, more high-risk cases. And again, it's a matter of... It's a matter of managing all our resources across all the activity... Yes. But let me just quote you from the Comptroller Order General. In 2020, Revenue's personal division commenced a targeted project on landlords that ran until 2024. Is that project still continuing? It is, yes. It is. There is... There is a significant work by personal division on landlords, and also looking at the... So that project is not finished, that project is continuing? No project. When I say a project, like kind of part of the risk... One of the biggest risks in the personal division for non-compliance is in relation to rental, because most of... Most of the taxpayers in the rental income are primarily PUE and non-business trading. Yes. And then they have properties. But some of the more egregious ones are not in personal division at all. Yes. But just so I could get clear on this, is it wrong to describe this as a project then? I would... I wouldn't consider it a project now. I'd say it's a core part of personal division risk. But was there a project from 2020 to 2024? It starts... All these efforts start as projects to see what is the risk? Okay. What do we learn? What are our learnings? And I know the principal officer in charge of the compliance area and that is very much dedicated to tackling, implementing the learning that the branch has had. There were also a branch that were very new in compliance activity. And in a way, that activity probably wasn't taking place to the same extent up until that start. Yes. I didn't intend to get stuck on this particular issue, but I'm just slightly confused because the control order owner is very clear that there was a particular project in relation to over-declaring expenses and that project had ended. Yes. And then I'm not clear from you if that's accurate or not. Has that project ended? The project has that phase of the project and now we're engaged in identifying cases who haven't declared any rental income at all. Yes. But the issue of the focus on the expenses is that that focus is over. No, no. If you look... When we look at a landlord... Yes. And if you look at a landlord who isn't declaring rental income at all, once you get into the intervention, it's an issue about their income plus their expenses. Yes. Like that becomes a core part... Okay. And you're saying, in fact, both sides are now included in the way that you pursue it now. But we are really looking at... Just to focus on another issue that's raised, which is the matching of properties. And, you know, there's hundreds of thousands of properties not matched from the RTB. Explain to me what that means. That means a landlord is appearing in the RTB register, but it's not appearing on your system as having paid tax for that rental income. Not necessarily. Like, one of the challenges in matching names and address in Ireland is that the unique number and the air code became part of the solution for that. Yes. But we would have had it when we were... But you don't agree that you've rejected the recommendation that landlords should have to submit air codes? No, absolutely. I think that what we, in our correspondence with the Comptroller and Auditor General, we did identify the idea that the Residential Tenancies Board is the competent authority in relation to rental income. And I know that since the report was published in the context of housing have talked about landlords reporting the actual details of the tenancy and that the Residential Tenancy Board are to introduce a public rental price register. Yes. And... And if it did that, that would make your life a lot easier. And as a taxman, the taxman, like, I'm a taxman all my life, as a taxman, I would like absolute, complete information on every transaction that takes place. But, like, we need legislation to give effect to that and that there's a whole other constituency will talk about the burden on business and kind of, like, kind of... And at the moment... If we had full... And we have a data-sharing agreement with the Residential Tenancy Board, and I know and I think that the Chief Executive of the Residential Tenancies Board has talked about their new IT system and enhancing the data-sharing agreement with ourselves, then we're really interested in anything like that. The only problem is that there are, and you know this very well, there are rogue landlords that are neither on the Residential Tenancy Board register and aren't on ours, and we're actively looking at them, and it's a real challenging position. That's it. OK. Thanks a lot. A little bit more for you.