Revenue audits, tax collection and tax compliance are all things that can be a little scary to business owners. All these things could have you thinking: is Revenue watching me? I was on a tax course with Omnipro last week and Brendan from MK Brazil was the speaker. He was excellent as usual. One of the topics covered was the Annual Report for 2021 from Revenue. I know words like tax and report are not going to excite you but hang in here. There was a lot of very interesting stuff in it and i’m going to share some of these things with you in this article.
We will look at
- What are the big earners for Revenue?
- Main findings
- Audits – what sectors
- Where they get their information from
- Lessons to learn
Revenue – Main Earners
Income Tax, Vat, and Corporation Tax make up 85% of the total tax take of €67.5 billion. This was a 20% increase from 2020. An extra €11.3 billion
| Income Tax (incl USC) | 39% | €26.7 billion |
| Vat | 23% | €15.4 billion |
| Corporation Tax | 23% | €15.3 billion |
Revenue also collected €17.4 billion for other Departments. The largest was €12.6 billion in PRSI which would go to the Department of Social Protection.
The comment from Revenue was that “2021 was a truly exceptional year for Revenue”. And “not only did we collect a record amount of tax and duty….” When you think of the economy shut down for the first months of 2021 with Covid, and Brexit too, it is very impressive. My words and not theirs!
Main Findings
The large numbers in employment and profitable businesses drive the Income tax numbers. Unemployment is at 4% which in many eyes is full employment. Many businesses did well during Covid and helped by government support had a strong 2021
The Vat numbers would have got a huge boost from the lifting of covid restrictions. A lot of money that wasn’t spent during Covid could see the light of day. There wasn’t much foreign travel so people holidayed at home and were happy to be out and about.
We will all read about the large multinationals driving the corporation tax numbers. This is true. Top ICT companies like Facebook, Apple, Google, Microsoft, and LinkedIn are all here. Many service and construction companies are doing well and are driving the numbers.
Compliance levels are huge. For example, Revenue collect 99% of PAYE/PRSI in the month it is due. The figure is 97% for Vat and 98% for Income Tax and Corporation Tax.
The amount Revenue get from enquiries, Audits and investigations has never been higher. The average yield for a non-audit intervention was €2,161 for 2021. The average yield from a Revenue audit was a whopping €334,000.
Revenue Audits – What Sectors
“Over the past number of years, the construction sector has posed significant risks to the tax system”. Yet compliance activity in construction yielded €24 million. This was just 2% of the total yield from all interventions. The focus for Revenue in this sector was Vat, RCT and Employer PAYE risks. Revenue did note that there was clear evidence of employers who got the EWSS exiting the scheme. There is a hidden compliment in there!
E-Commerce providers got a mention too. “The Vat compliance of non-resident online traders who supply goods and digital services to Irish customers continues to be a particular area of ongoing interest”
| Sector | Yield Per Audit |
| Professions | €151,786 |
| Rental | €106,383 |
| Construction | €59,664 |
| Wholesalers | €53,465 |
| Retailers | €26,263 |
| Hospitality | €18,824 |
The number of Revenue Audits in 2008 was close to 14,000. That number has fallen to 1,160 audits in 2021. The average yield per audit in 2019 was €73.5k and €85.7k in 2020. It was €334,000 in 2021. While the 2021 number may be exceptional, you can see the underlying trend. Fewer audits but they will get more. So, if you get an audit letter, they expect to get money.
Where do they get their information from?
How long is a piece of string? A huge amount comes from third parties
- Credit card providers
- Government bodies
- Financial institutions
- Intermediaries (like auctioneers)
- Employers
These third-party returns confirm payments made to or assets held by Irish taxpayers. Per page 41 of the report, the data gathered in third-party returns
- is matched to our records and
- used to cross-check taxpayer declarations and
- highlight discrepancies and
- identify non-filers who may be carrying on trading activity and/or
- determine specific compliance projects.
Revenue use this third-party information to prepopulate tax returns. These would include
| 135,000 returns | Department of Agriculture Payments |
| 93,572 returns | Tenancies registered with the RTN |
| 20,874 returns | Housing Assistance Payments |
Revenue has international agreements in place to exchange financial account information. This includes bank account details and details of investments. They state that this information “is cross-referenced with tax returns, to ensure all offshore assets and income are properly declared”
They invest in data analytics and powerful IT systems to analyse information. Needless to say, they could know more about your finances than you do.
Lessons to Learn
Being compliant has never been so valuable. Not being compliant will cost you the original tax, plus interest and penalties. And possible publication too.
If you are serious about your business and your personal finances, you need to do things right. That doesn’t mean you are not tax efficient, or you don’t structure your business in a tax efficient way.
Not paying what you owe will cost you more in the long run. This will be more money but also time and the reputation of you and your business if published. There is no excuse for companies to be silly. After all the corporate tax rate is 12.5%.
Get the foundations right with a quality bookkeeping system in your business. This will give you the confidence to know your numbers and to keep Revenue onside too.
Are you interested in an exceptional year for you and your business and not Revenue? If so, Start here and talk to us about Revenue audits, tax collection and tax compliance concerns.
