The Office of the Revenue Commissioners collects taxes and protects the border. The European Union/International Monetary Fund Programme of Support foresees annual revenues of EUR42bn by 2014. The Revenue Commissioners are tasked with collecting more than 90% of this money.

The recently released Comprehensive Review of Expenditure is focussed on cost reduction, but also stresses the dependence of fiscal consolidation on the revenue side of the equation. The paper reviews the Revenue’s strategies from a cost reduction standpoint and also considers opportunities for revenue raising. It is in the latter area that the Revenue believes it can make its biggest contribution to the government’s objective of achieving sustainable public finances.

Also emphasized is the need for the Revenue to give attention to recession specific risks to prevent base erosion, fraud and evasion, smuggling and tax debt default. The paper says such risks include growth in the shadow/cash economy, tobacco smuggling and oil laundering, extraction fraud/false repayment or losses claims, deliberate under-declaration of income and profits and complex aggressive tax planning structures being offered by practitioners in pursuit of business. It warns that these risks have the potential to become entrenched, if not adequately controlled.

Turning to the self-assessment portion of the paper, the Revenue states that it has reduced its administrative costs by almost 20% since 2008, while this year’s employment control framework (ECF) puts staffing back to the level it was in 1976. In the run up to the recent economic crisis Revenue’s taxpayer base (PAYE employees, self assessed income tax payers and companies) had been steadily growing, up 35% from 2001-09. To respond to this growth staff allocation increased by 2.9% from 6,407 staff in 2001 to 6,592 in 2008. Investments in IT infrastructure and improved processes led to a 31.5% increase in the total number of taxpayers per head of staff.

However, since 2008 the total customer base declined by 1%, while staffing has reduced by 655, with another 560 staff expected to retire by 2014. These factors have meant an 11% increase in the ratio of taxpayers per head of revenue staff. The Revenue considers that its ECF of 5,678 foreseen for 2014 is already risky, and too steep a reduction in the context of the real risks to compliance. In addition, it argues that further ECF reductions make that risk much closer to a certainty. The report concludes that increased non-compliance would more than outweigh any savings on staff and, in fact, many revenue administrations recruit additional staff in a recession because of the increased risks.

The paper therefore states that while it can deliver on the numbers proposed of 5,678, it can do so only over a slightly longer period – by around 2015/16. It will also be done on the following basis: that it gets sanction to recruit openly and from within to replace critical skills at the same time as it reduces numbers; and that it may replace expensive IT consultants with graduate recruits in a “spend-to-save” proposal. In addition, in the area of non-pay expenditure, the paper states that the Revenue needs an ongoing adequate IT budget to enable it to continue to take transactions out of the system, thereby releasing staff for compliance work, and to enable it to improve risk analysis so that it can target non-compliance more efficiently.

Despite this staff reduction, the report shows that the Revenue has maintained its focus on maximising the collection of receipts and increasing the level of collection for each euro invested. The cost of processing each item is continuing to reduce, while electronic service channels continue to generate savings in frontline staff numbers. Satisfaction with the Revenue remains positive, with 91% of survey respondents satisfied or very satisfied.

The paper states that a move to a cumulative basis of collection for the universal social charge (USC), currently administered on a “week 1” basis, could improve receipts by around EUR50m per annum. With supporting legislation and adequate ICT resources, the Revenue feels this could be in place by 2012. For an employer such a move would mirror PAYE arrangements and provide a platform for further reducing their compliance burden. The IT cost of development is EUR2.2m.

A widespread mandatory electronic filing of returns and payments regime has been provided in recent Finance Acts. This new approach is currently in mid stage and will be fully implemented by 2014. The Revenue is also developing an online protocol for the capture of accounts information, using XBRL, which it says will deliver benefits in terms of reduced administrative burden on business and allow better risk analysis and intervention targeting for individual tax entities across industry sectors. Bringing forward the certain filing dates for tax and duties would improve revenue cash flow, but this is unlikely to be implemented earlier than 2013.