In collecting €45bn as noted in their Annual Report for 2006, Revenue can be commended for doing exactly what it says on the tin, but the reporting on Sectoral Audits demands closer scrutiny. The systematic examination of a particular industry sector has its attractions, not least in terms of newsworthiness, but an overemphasis on sectoral reviews to ensure tax compliance generally has several drawbacks.

The first is bang for buck, or the lack of it. Revenue have pointed out that a quarter of their auditing capacity was devoted to the Construction Industry sector during 2006. This was in response to a highlighting of the sector in an earlier report by the Comptroller and Auditor General. Despite this significant commitment of resources, average audit yields were less than 60% of the averages from the targeted audit programme; that is, from cases where Revenue had evidence of irregularities on a case by case basis. This is not to say that the sectoral approach doesn't work, but on the basis of Revenue's own figures it is not as successful as the case by case selection of audits.

Revenue argue that Sectoral Audits help to tidy up tax compliance in a particular area of business. The ongoing possibility of a Sectoral Audit being applied helps focus the compliance mindset. However, “Wolf” can be cried too often, and there is already evidence that sectoral notifications are being regarded merely as a trawling exercise on Revenue's part. Several business sectors in different parts of the country have already been subjected to scrutiny – the motor trade, the licensed trade, the fishing industry, cafes, fast food outlets to name a few. More of the same is now promised.

The real difficulty with the sectoral approach is that it puts unnecessary pressure on compliant taxpayers and their accountants. A notification of a sectoral review is not a trivial matter, and dealing with it requires time and costs on the part of the compliant taxpayer, to little or no business benefit. Revenue have both the information and the tools – their REAP system – to target instances of non compliance and evasion. An overuse of the sectoral approach diminishes the credibility of this targeting system among taxpayers, but also must surely lessen the incentive for Revenue to keep it populated with up to date, detailed data. If sectoral audits are to happen anyway, why maintain sophisticated targeting mechanisms? Why oblige compliant taxpayers to complete increasingly lengthy and detailed returns of income, requesting details which have no bearing on the computation of their tax liability, but which offer no shelter from Revenue intervention?

Of course Revenue must police self assessment through an audit programme – the main beneficiary of this activity is the compliant taxpayer. But it is unfair in a self assessment tax regime to put taxpayers under scrutiny because of what they do, rather than because of how they conduct themselves. CCAB-I is making representations to Revenue through TALC Audit to have the Sectoral Audit programme limited.