Wednesday, 22 November 2006
Dáil Eireann Debate
56. Mr. P. McGrath asked the Minister for Finance if he will direct the Revenue Commissioners to prepare, in co-operation with the Central Statistics Office, an accurate assessment of underclaimed tax reliefs by ordinary families in order that an informed policy can be framed to refund tax rightly due. [39576/06]
Mr. Cowen: I refer the Deputy to the statements made by the chairman of the Revenue Commissioners, Mr. Frank Daly, to the Committee of Public Accounts when he appeared before it on 9 November 2006. In response to questions from the Chairman of the Committee of Public Accounts on the amount of money that may be owed to taxpayers and a suggestion that, in the case of PAYE taxpayers, large amounts are not owed in individual cases, Mr. Daly said Revenue had made a total of 485,000 repayments up to the end of October 2006, involving an amount of €353 million. He said this was the factual situation in respect of what was claimed and repaid and that it was difficult to speculate about what more might be reclaimable. Mr. Daly said he was reluctant to put a figure on what had not been claimed but repeated the figure of €353 million claimed to the end of October 2006 and gave the comparable figures for 2004 and 2003, which were €325 million and €295 million respectively. Mr. Daly suggested that to say almost the same amount remained unclaimed as had been repaid would be an overstatement but perhaps there is a further €100 million unclaimed.
The figures quoted by the chairman of the Revenue Commissioners clearly show that taxpayers are becoming more aware of their entitlements and, as a consequence, the number of repayment claims and the amounts being repaid are increasing year on year. During August, September and October this year Revenue ran an intense high-profile campaign to encourage taxpayers to claim the reliefs to which they are entitled. This campaign involved advertisements on radio, bus shelters, the DART and the Luas. There is also a continuing campaign involving the placement of leaflets and claim forms in clinics, doctors’ surgeries and pharmacies to encourage take-up of the relief available for medical expenses. There has been a positive outcome to this campaign which is shown in a significant increase in the number of people contacting Revenue and claiming entitlements particularly relating to trade union subscriptions, bin charges and age, rent, home carers and dependent relative credits.
There are preliminary indications that claims for some of these reliefs have more than doubled following the Revenue campaign. It is expected that the campaign will also lead to an increase in the number of claims relating to health expenses at the end of this year and early in the new year when the majority of such claims are normally made.
The Revenue Commissioners can only allow tax credits or reliefs on the basis of information that is known to them and, consequently, there is no way for Revenue, with or without the involvement of the CSO, to accurately assess underclaimed entitlements where changes in individual circumstances have not been notified by the people concerned. Revenue’s attempts to bring the existence of various reliefs to the attention of those that might benefit from them is a far better use of resources than a statistical exercise, which of its nature could not achieve that result.
I am satisfied that Revenue takes a very proactive approach to ensuring that individuals are made aware of and are granted their entitlements and that further initiatives in this regard will be forthcoming in the future.
Mr. P. McGrath: I thank the Minister for his response. Does he not find it significant that in approximately 75% of cases where balancing statements were sought a refund was made? The average refund in such cases was €800 per person, which is very significant. Does he not think that, based on that fact and the chairman’s report to the effect that there may be a further €100 million to be repaid, efforts must be redoubled to make the repayments to the taxpayers concerned?
How many of the 2.1 million or 2.2 million people who work make annual tax returns? I suspect the number is quite low. The process of making repayments might be easier with a better system for making tax returns.
Does the Minister not find the moratorium restricting backdated claims to three or four years, introduced by his Government, grossly unfair? Is it not very restrictive? If I were a taxpayer who owed the Revenue money for five, six or seven years but had a credit from four years ago I could not put that credit against moneys owing from the earlier period. The Minister’s predecessor brought in the restriction but it is grossly unfair that I cannot set my credits against other liabilities. The Revenue may go back as many years as it deems necessary but I, as a taxpayer, cannot do so to claim credits.
Are health-related expenses, such as those on nursing homes, prescriptions and doctor’s expenses, the largest area in which tax reliefs are not claimed? Can the Minister launch a campaign to make people more aware of their rights in regard to those? Does the Minister not agree that the minimum qualifying expenditure of €125 per annum constitutes a disincentive to claiming and clogs up the system? For what it is worth to the Government surely it would be better to wipe out that threshold altogether.
Mr. Cowen: I will consider some of the suggestions the Deputy has made. I indicated in my reply that, as a result of much discussion in this House and committees of the Houses, in consultation with the chairman of the Revenue Commissioners, efforts have been made to improve the ability to claim back ordinary credits to which taxpayers are entitled. The chairman has said in recent years that increasing amounts have been claimed. As a guesstimate, a further 20% or 25% may remain to be claimed. If that is the case and, according to the chairman, whose judgment and knowledge is better than most, the Revenue Commissioners are doing all they can by taking practical initiatives, particularly in medical relief which involves placing forms where people access medical services, then that is as good as they can do. In addition they run many publicity campaigns, provide information on their website and produce information leaflets etc.
The new computer system will not change the fact that the ultimate responsibility is on PAYE taxpayers to ensure their tax credit certificate is correct or to request an end of year review if they feel they have overpaid. However, the system allows PAYE taxpayers to access their records in a way that was not possible before, and to view their allowances, credits and details of pay and tax at any time. They can amend their tax credit certificate on the web, either to claim an allowance or credit not on a certificate or to change the amount involved. Taxpayers can request an on-line review or balancing statement based on Revenue records and confirmation that details are correct and complete. They can also receive an automatic repayment in certain cases where Revenue is fully satisfied from their records or recent contacts that a repayment is due.
The new computer system will also provide for details of taxable payments from the Department of Social and Family Affairs to be provided to Revenue on an updated and regular basis. Part of the new PAYE computer system will involve details of pay and tax from employers’ P35 returns being made available much more quickly than before.
The combination of on-line access and amendment, together with the availability of quicker and more reliable information about pay and tax and payments from the Department of Social and Family Affairs, should help to increase the reliability and accuracy of the PAYE system and reduce the number of PAYE overpayments that remain unclaimed, which is one of the issues often discussed in this House.
The vast majority of taxpayers are conscious of the reliefs to which they are entitled. When claims are necessary they take the required action. That said, in reality some taxpayers do not claim all the reliefs to which they are entitled each year and may not have kept a record of expenditure on doctors’ bills and prescription drugs so it requires an ongoing effort.
The Minister said people could download details of their credits from a computer but that only applies to a limited number of people. The people at the margins who pay tax but cannot afford to pay accountants are losing out. Those who employ accountants will do very well and receive all their tax credits. Some become so expert in tax credits they pay no tax at all, even if they have income of more than €1 million per annum. The Minister must reach the ordinary middle class people so that they can receive their just entitlements and not overpay tax.
Mr. Cowen: Over the past few years many of the more significant reliefs have been made virtually automatic either through the introduction of tax relief at source, TRS, or through the automatic carry forward of the reliefs. Mortgage interest and medical insurance reliefs, for example, are provided at source through the taxpayer obtaining a reduction in repayments or premia equivalent to the tax relief. Recurring reliefs, such as those for trade union subscriptions, once claimed are allowed on an ongoing basis and reappear each year in the taxpayer’s certificate of tax credits. With refuse charges, the Revenue Commissioners use whatever information is available from local authorities via tape exchange to ensure as many people as possible get their relief automatically without claiming it.
The other main reliefs relate to medical expenses, certain dental expenses, age credits for people over 65 years, third level tuition fees and rent relief. In the case of these reliefs and the first claims for trade union subscriptions, it is generally up to the individual taxpayer to claim his or her entitlements as the Revenue Commissioners have no other way of ascertaining what these involve. In so far as they can and do ascertain what people are entitled to, they allow it to remain on the certificates in future years. They also have increased the number who can get tax relief at source.
There are improvements. A proactive effort is being made at every level in terms of information for the taxpayer and improving the computer systems to ensure that taxpayers get as fair a deal as possible. However, the primary responsibility is on the taxpayer to ensure their tax credits are in order.
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