IRELAND 21 June 2018
Value for Money Examination 26; Use of Sheriffs and Solicitors in the Collection of Taxes
The systems employed to follow-up the collection of overdue taxes within the Office of the Revenue Commissioners (Revenue) and through referral to Sheriffs and Solicitors have changed significantly in the past five years. The new systems seek to improve the efficiency in the use of resources available to Revenue for tax collection. The overall effectiveness of the systems is dependent on a balance being achieved between the efficiency gained from early intervention by Revenue staff and the impact of delays in referral for enforcement. The purpose of the examination was to review the efficiency of the procedures for referral of outstanding taxes to Sheriffs and Solicitors and the efforts of these Agencies to recover the amounts due. The examination was concerned with value added tax (VAT), employers PAYE/PRSI liability (PREM) and the Assessing and Collection tax system (ASC).
Referral to Enforcement Agents
The new approach, referred to as Active Intervention Management (AIM), uses information systems to consolidate outstanding taxes across tax heads and for multiple tax periods. This facilitates an earlier intervention by Revenue, through caseworking, to pursue tax debt. The enhanced analytical capability is intended to improve the accuracy and appropriateness of cases referred and to reduce the time required to assemble information for referrals.
Although the AiM system was first introduced in 1995, a considerable amount of outstanding taxes remained subject to the older process driven systems at the end of 1997. The reporting facilities of the AIM system are still under development and it is not currently possible to compare the results of caseworking with the results of enforcement or to review the relationship between the timing of referral to enforcement agents and the subsequent outcome of enforcement actions on a case by case basis. Such comparisons should form part of a performance measurement system within Revenue.
The overall level of tax debt has been falling in recent years and at the end of 1997 was ?1,587 million. The level of debt which is less than one year old has remained in excess of ?500 million for each of the past five years. Some 26% of the overall debt was subject to a stop marker which interrupts and delays the referral process. The amount of debt under stop has fallen in 1997 partly due to a special review by Revenue. In view of the potential delay which can be caused by the stop procedure, there should be a regular review of the continuing validity of the stop markers.
A review of the classification of outstanding tax cases by case size revealed that 34% of VAT cases and 46% of PREM cases have not been allocated a case size principally because Revenue have not received a payment within the past three years which would enable their classification. Although many of these cases may be dormant or have a nil liability there is a possibility that they may include some defaulting taxpayers and Revenue have indicated that they propose to review these cases as resources permit. Cases designated as no case size are not included in the scanning procedures for referral. This improves efficiency but there is a risk that some defaulting taxpayers may avoid timely detection.
In 1997, over 63,000 certificates were issued to sheriffs for enforcement and some ?58 million was collected directly by sheriffs. A further equivalent amount was settled directly with Revenue on foot of sheriff enforcement action. The volume of referrals to sheriffs has declined in recent years but the quality of cases referred has improved and this is reflected in a higher percentage of certificates returned paid.
Almost 50% of referred taxpayers accounting for 77% of the value of certificates referred to sheriffs in 1996 and 1997, had been referred on more than one occasion. Taxpayers accounting for 31% of the value of certificates had been referred on five or more occasions. This incidence of persistent non-compliance suggests that there is room for strengthening the deterrent effect of sheriff action. While the revised arrangements for sheriffs' remuneration, recently introduced, may help by making it significantly more expensive for the taxpayer to deal with the sheriff rather than with Revenue, it is clear that these cases need to be specifically targeted.
A large number of cases identified as suitable for referral to sheriffs are withdrawn as a result of screening procedures. There is incomplete information on the reasons why cases are withdrawn and this can hinder effective follow-up. The system for tracking certificates issued to sheriffs is unsatisfactory as the current status of individual certificates cannot be ascertained. This is being addressed as pan of the revised monitoring arrangements. The routine six-monthly exercise scheduled for September 1997 to review expired certificates was not carried out. The next review which took place in March 1998 resulted in 5,849 cases being reactivated, some of which related to certificates originally issued in late 1995.
The value of cases referred in 1997 to external solicitor firms was ?28.7 million and to the Revenue Solicitor was ?20.7 million. The yield from external solicitor firms and from the Revenue Solicitor up to March 1998, in respect of such cases, was million and ??*? million respectively. Many cases referred are settled directly with Revenue and these are not included in the yield statistics.
The information available within Revenue to manage and evaluate the results of solicitor enforcement is very limited and does not include a tracking system for cases. New systems are under development to improve the level of management information.
The trends in the value of cases referred and the subsequent yield obtained are affected by the impact of the 1993 amnesty on referrals and by the introduction of the AlM system. For 1996 and 1997, the level of referrals declined compared to earlier years due to the introduction of caseworking and to the diversion of staff in the Solicitor Liaison Unit to work on the arrears reduction programme.
Some ?61 million, in respect of cases referred between 1993 and 1997, remained uncleared at March 1998. A large proponion of these cases have not been acted on for some time panly due to a failure to process cases beyond the judgment stage.