Re-Audits

“The risk analysis system [REAP] is at the heart of what we are doing with all of our compliance interventions. It has 28 data sources, the most recent of which relates to the deposit interest from the financial institutions. It has 197 rules and 806,000 cases. The rules are run across the data sources and cases three times per year to give us lists from which we pick the riskiest cases. Last year was our first opportunity to do so in a proper, sophisticated fashion.

As a backdrop, we commenced a statistically valid random audit programme a few years ago. As the Comptroller and Auditor stated, that programme has not only given taxpayers a sense that they might be audited, even if they are not rich, but it has also given us a control group against which to validate our risky cases.

Regarding re-audit, we have decided to identify a number of cases from 2008, tag them, track them electronically and at the end of 2010 we will analyse which cases have become riskier. We will then re-audit a proportion of them. We want to do this on a statistical basis and we will be happy to speak to the Comptroller and Auditor General about this. Cases that were taken through human selection do not have the same validity as doing this on proper statistical basis.”

Audit focus and Sectors

“I also mentioned that we were doing a lot of work in different sectors. We are focusing heavily on cash businesses which can range from tradespeople to barristers. Anywhere there is cash we perceive a risk. Projects have been put in place which cover a number of sectors. We also have a cash register project which began in the south-east region. We bought electronic cash registers and found an expert to show us how they worked and how information could be extracted from them using technology. The pilot project achieved substantial success in the south east and it is now to be adopted in other regions. If a pilot project proves fruitful in one region, it will be taken up the following year in other sectors. For example, by knowing how to interrogate one can discover underdeclarations. That seemed to cause shock and horror among businesses when they discovered we had that ability. We have trained people in how to use the system. We have another project that we call the whole-of-street or whole-of-town compliance programme which involves small towns or, in larger towns, a street. Our officers visit every business, ask questions about the books and records and the cash registers. We see if staff are registered for PAYE purposes and so on. We ask for specific print-outs…

The pilot project took place in the south east in 2007 and but this is now the practice everywhere. It is proving fruitful in two respects. First, it is giving us money, or a yield. It also gives us visibility and a presence on the ground, which is very important. The point has been made that business people should feel it is likely they will be visited and audited by Revenue. I refer to cash businesses in general, if I can anticipate the Deputy's question about focusing on particular sectors. In the future we intend to try to make the process a little more scientific by taking sectoral projects in a more structured way. This is something we learned from Revenue in Sweden. We invited a Swedish expert to talk to us last year. A Revenue region will be asked to undertake a small but intensive audit programme in a particular high risk sector. Cases will be chosen very carefully and there will be a control group of cases which will not be so carefully chosen. The audit results will be compared and we will learn from the process. Our risk analysis system will be improved and we will learn also about new avenues of inquiry and specific risks that may be common to taxpayers in that sector. We started this process some years ago. We encouraged Revenue regions to explore local risks and test sectors in an unscientific way and subsequently share the knowledge gained. We found this to be so fruitful that it merited being done in a more scientific way. That is what we are beginning to do this year. We will have a control group and a selected group in a sector and will extend the project if it works.”

A transcript of the full debate is available on the Oireachtas website.