The observations of the Comptroller and Auditor General as reported at the Public Accounts Committee in February that there is a risk that up to 30% of taxpayers underdeclare the tax they owe is open to misinterpretation, according to Brian Keegan, Director of Taxation at ICAI.

On Thursday, 19 February, the Institute issued a public statement on the matter:

“First of all, only about one in four of all taxpayers make returns and pay tax directly to Revenue – the majority of taxpayers pay tax by deduction under the PAYE system” according to ICAI Director of Taxation Brian Keegan. “Secondly, Mr Buckley seems to be drawing his conclusion from the outcome of Revenue's random audit programme, where taxpayers who make returns are selected without any particular reason for close examination. In two out of every three such cases, no tax shortfall is discovered. The average yield from the remainder is less than €2,000. In our experience, this means that less than €1,000 in tax may have been at issue - the balance being interest and penalties.”

No system is perfect, and self employed taxpayers and companies can and do make mistakes, not least because of the complexity of tax law. The amounts involved suggest mistakes, rather than widespread underdeclaration. An important indication of overall tax compliance in a country is the proportion of tax paid to Gross Domestic Product. Over the period from 2002 to 2006, tax in Ireland as a proportion of GDP increased, from 28.2% in 2002 to 31.9% in 2006. “This could not have occurred at a time of decreasing tax rates if tax was being widely underdeclared” said Keegan.

However, one of the consequences of our serious economic position is a likely decline in tax compliance levels, and there are indications that this may already be happening. “Businesses are finding it hard to raise funds for every purpose, tax payments included” said Keegan. In the UK, an initiative has been launched to permit businesses in difficulty make tax instalment arrangements with the Revenue Authorities there, which is being very successful. “We would like to see our Revenue engaging more in similar initiatives to sustain good compliance rates in this country.”