Tuesday, 1 February 2005
Dáil Eireann Debate
I am taking it that the questions both relate to overpayments by PAYE taxpayers. The PAYE system, which has worked well for almost 45 years, is a “cumulative” deduction system designed to ensure, as far as possible, that an end of year return or adjustment is unnecessary in the vast majority of cases, provided that all due credits and allowances are reflected in the employee’s tax credit certificate and that any non-PAYE income has been “coded-in” to the certificate. Where all due credits or allowances have not been given during the tax year, it is reasonable to expect the employee will look for a balancing statement after the end of the tax year. With regard to a number of reliefs such as medical expenses, it may be appropriate to wait until after the end of the year to claim a tax rebate.
I am advised by the Revenue Commissioners that they have no reason to doubt that the vast majority of PAYE workers receive their full entitlements each year. These entitlements are, in the first instance, reflected in the tax credit certificates issued at the beginning of each year. Revenue is in the process of issuing more than 2 million certificates to PAYE taxpayers for the 2005 tax year. These certificates reflect the most up-to-date information Revenue has on an individual and a leaflet giving details of the credits or reliefs to which taxpayers may be entitled accompanies them.
Where circumstances change in the middle of the tax year, for example, a marriage or a change of job, the employee will normally contact Revenue and arrange for a new tax credit certificate to issue. A number of PAYE taxpayers wait until after the end of the tax year to claim due allowances or credits, to return non-PAYE income or to make sure that there has been no underpayment or overpayment of PAYE tax. For the 2003 tax year, the latest year for which such figures are available, 287,258 PAYE taxpayers, representing 17% of the total PAYE taxpayer base of 1.6 million for that year, have so far made claims or requested reviews of their tax position, of which 8% indicated under payments, 17% resulted in no change and 75% resulted in repayments. A sum of €185 million has been repaid in respect of claims received and processed for 2003 and, on the basis of experience of late claims in previous years, this figure could be expected to eventually increase to an estimated €306 million when all future returns or claims for the 2003 tax year have been submitted. These figures should be seen in the context of the total PAYE revenue of €7.2 billion in 2003.
It is not possible or reasonable to extrapolate from the these figures estimates of overpayments or under payments for the full PAYE population. This is because claims or requests for review are, by definition, much more likely to come from those who know they have entitlements to reliefs for which they have not claimed in the first place, for example, medical expenses.
The tax code provides that no repayment can be made in the absence of a valid claim or return by the taxpayer. Without such a claim or return, Revenue may not have the full picture to determine entitlement to a rebate. For example, taxable payments from the Department of Social and Family Affairs or dividend income may not have been “coded-in” to the tax credit certificate or the taxpayer may have been self-employed for part of the year.
Revenue is engaged in a comprehensive modernisation of its PAYE computer system, which will include the ability to make amendments and claims over the Internet and much closer computer links with the Department of Social and Family Affairs. When the roll-out of the new system commences later on this year, it will provide a greatly improved level of service for PAYE taxpayers including, subject to defined parameters, a facility for automated reviews of liability where Revenue is satisfied that the figures are correct. The Finance Bill, which will be published next Thursday, will include provisions to underpin this new service.
Mr. Boyle: The figure of €186 million quoted by the Minister, while small in the context of overall PAYE tax collected, is significant. We must make a case for equity between how those who are overcharged within the system are treated as opposed to those who evade tax. The Revenue Commissioners have performed excellently over recent years and have collected hundreds of millions of euro, a sum to which they have added by the imposition of penalties and significant interest rates. Does the Minister not feel that the same principle should apply to overcharged tax, if only to help efficiency within the Revenue Commissioners? There should be a significant interest rate placed on overcharged tax and penalties should be imposed on the Revenue Commissioners to ensure the quickest possible payment and the least possible occurrence of tax overpayment within the system.
Mr. Cowen: The PAYE system has worked. I have given a detailed reply explaining how it works and that it is a cumulative deductive system. The equity of the position is safeguarded by the fact that claims are speedily dealt with. It is impossible to devise a system where there is an exact balance for every taxpayer, of whom there are 1.6 million, depending on their circumstances, for example subsequent claims for medical expenses or being partly self-employed during the course of the tax year.
There are particular circumstances which can arise and for which a taxpayer can claim at the end of the tax year when he or she receives his or her balancing statement. From the total of €7.2 billion collected under the PAYE system for the year 2003, the amount of overpayment was €185 million in respect of those claims already received and processed. That sum may rise to a figure of over €300 million. In the context of the total amount collected, it is probably approximately 3% or 4%. We are introducing further software into the system to enable taxpayers to interact and interface with the Revenue Commissioners on these issues in a way which will ensure the speedy resolution of any issues that might arise, depending on the individual circumstances of any taxpayer.
Mr. P. McGrath: Of the persons who make claims for a review of their tax affairs for the previous tax year and who look for a balancing statement, 75% of the claims are positive and the person gets a refund. How many of those successful claims were spotted by Revenue or are any spotted by it? Were any refunds made on Revenue’s initiative? Why is it that the computer system does not display such overpayments?
Why was a change made in the system which means a taxpayer cannot claim for overpayment for in excess of four years? The reclaim period has been cut to a four-year period. However, Revenue can pursue a taxpayer for as far back as it wants. Why has the Minister cut off the making of retrospective claims in excess of four years?
The Minister may have inadvertently misled the House when he said that Revenue turned around claims for balancing statements very quickly. There is a delay of at least ten weeks in one of the offices I know. Perhaps the Minister does not consider ten weeks to be a long delay but I do. The Minister should correct the record at some stage.
In many cases, overpayments relate to the fact that people do not claim for allowances to which they are entitled. Would the Minister not target some of those people? For example, 105,000 people make claims relating to medical expenses, which represents only 7% of households. Surely there are more people than that who could claim. This area could be targeted.
Some 90,000 people make claims for rent relief. I accept the Minister changed the allowance this year but if he made it more attractive to claim against private rented accommodation surely the scheme would be self-financing and there would be a gain in terms of bringing more people into the tax net.
A total of 75,000 customers have claimed relief on bin charges, which is only 5% of the total population. What is the other 95% doing with their rubbish? Surely people should be almost automatically entitled to claim for something like that because virtually every household has some kind of refuse collection. Does the Minister agree that he should target these kinds of areas? He should be proactive in ensuring taxpayers are not overpaying.
Mr. Cowen: These are matters to be taken up with the Revenue Commissioners. People have to be informed of their entitlements. I understand that when the Revenue Commissioners make contact with taxpayers they give out information with the forms to let people know what they are entitled to claim and so on. At the end of the day the Revenue Commissioners are there to collect revenue based on the submissions and assessments that people make to them. Unless people are evading their taxes they will not hear from the Revenue again. They just pay the balance and that is the end of it. In effect, the Deputy is suggesting that the Revenue Commissioners should change their role to become accountants as well as everything else for each individual taxpayer. The fact is that we have a tax system and as citizens we have to inform ourselves as to our entitlements and claim them where necessary if they are appropriate or relevant to our particular circumstances.
The Revenue Commissioners are providing a transparent system. In order to help taxpayers they are introducing a new system where people will have access to revenue records, allowances, credits and details of paying tax over the Internet at any time. They intend allowing people to amend their tax credit certificate on the web, either to claim an allowance or credit not on the certificate or to change the amount involved. They will enable people to request an on-line review of one’s balancing statement based on Revenue’s records and confirmation that details are correct and complete. They will also enable people to receive automatic repayment in certain cases where Revenue is fully satisfied from its records or from recent contact that a repayment is due. Revenue are not interested in taking more tax from people than what they are duly entitled to pay.
It is a matter for individual citizens to ensure they make a full claim to whatever credits are available to them under the law, based on their own prudence. These are individual matters between citizens and the Revenue Commissioners.
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