In May 2022, the Revenue Commissioners (Revenue) published its annual report for 2021 (Report). The Report reviews how Revenue is performing against the backdrop of a changing trading environment between Ireland and the United Kingdom, and the continued economic and social disruptions caused by the Covid-19 pandemic. In this article, we examine some of the Report’s headline items.
- net exchequer receipts were €67.5bn, an increase of 20% or €11.3bn on 2020 (a record amount of tax and duty for the year, driven by increases in income tax, VAT and corporation tax receipts);
- employment wage subsidy scheme had €4.6bn in subsidies claimed by 47,600 employers in respect of 628,000 employees;
- €479m in supports claimed by 21,400 businesses in respect of 24,650 business premises;
- TWSS Reconciliation – €308m in aggregate liability with 99.6% of employers having completed the process;
- a total of €7.9m in BRSS payments was claimed by 1,988 businesses with 2,008 trades;
- by the end of 2021, €2.9bn of tax debt had been warehoused for 98,000 businesses;
- 10m electronic payments made to Revenue with a value of €90.65bn;
- 1.6 million electronic repayments made to taxpayers with a value of €9.8bn;
- €13.6m in yield, including interest and penalties, arising from 131 tax avoidance cases;
- nine criminal convictions for serious tax and duty evasion;
- the total yield from audit and compliance interventions in 2021 was €1,388m. Tax settlements amounting to over €30m were agreed with 86 taxpayers who were published as tax defaulters; and
- 172 Mutual Agreement Procedures (MAPs) completed following engagement with other jurisdictions to eliminate double taxation in relation to international tax disputes and bilateral Advance Pricing Agreements (APAs) concluded to prevent transfer pricing disputes.
Use of data intelligence and analytics
The Report confirms Revenue’s use of sophisticated data gathering and interrogating techniques. A wide range of third parties, such as Government bodies, financial institutions, and certain types of intermediaries, are obliged to provide information returns to Revenue. Data gathered in third-party returns is matched to Revenue’s records and is used to cross-check taxpayer declarations, highlight discrepancies and identify non-filers who may be carrying on trading activity.
DAC6 Reporting commenced in 2021, with Ireland making quarterly exchanges during the year. Ireland exchanged a total of 1,735 returns for the year, 1,605 of which were exchanged in quarter one. Most of the returns exchanged in quarter one were regarding the look-back period between 25 June 2018 and 30 June 2020.
Country-by-Country (CbC) Reporting: large multinational enterprise (MNE) groups are required to file a CbC report that provides a breakdown of revenue, profits, taxes and other indicators of economic activities, for each tax jurisdiction in which the MNE group does business. Revenue uses this information to inform high-level transfer pricing risk assessments and evaluate other BEPS related risks.
Not surprisingly, the COVID-19 pandemic has continued to impact Revenue’s compliance activity. It was interesting to note from Revenue’s 2020 Annual Report that Revenue audits undertaken in 2020 decreased by more than 50% relative to 2019. In 2021, Revenue audits decreased by more than 20% relative to 2020. Despite the decrease in audit activity, there was significant growth in the tax yield, with receipts of €388m in 2021, compared to €128m in 2020.
In the period 2015 to the end of 2021, Revenue initiated 42 transfer pricing compliance interventions. 19 of these have been finalised, resulting in a yield of €435.3m and a restriction in trading losses of €196m (tax effect: €24.5m). Additionally, amended corporation tax assessments have been made because of transfer pricing compliance interventions, with a total underpaid corporation tax of approximately €74m identified. Most of the amended assessments are currently under appeal.
Under section 1086 of the Taxes Consolidation Act 1997 Revenue publishes Lists of Tax Defaulters in Iris Oifigiúil within three months of the end of each quarter in which agreed settlements are reached or Penalty Determinations are made by the Courts. In 2021, tax settlements amounting to €30.29m were agreed with 86 taxpayers.
In July 2021, Revenue introduced significant changes to the collection of VAT on cross-border eCommerce transactions. The existing VAT Mini One Stop Shop (MOSS) was extended to a broader One Stop Shop (OSS). This allows for the simplified collection of VAT on all cross-border services supplied on a business to customer (B2C) basis within the EU and the collection of VAT on intra-Community distance sales of goods. The changes will allow traders to register in one Member State and complete all their EU-related VAT returns and payments there, reducing the administrative burden on cross border trade.
Double taxation treaties
The Report notes the signing of five international tax agreements: new Double Taxation Agreement (DTA) with Kosovo and with Kenya, a Protocol to each of the limited scope Treaties with the Isle of Man and with Guernsey, and a Protocol to update our existing DTA with Germany.
A review of Ireland’s tax treaty policy was announced, including a public consultation by the Department of Finance, which was held in 2021. The review is ongoing. It is intended to publish a treaty policy statement when completed.
A link to the Report is available here.
Contributed by Robert Kearns, Aoife Keenan