The Revenue was forced to write off more than €260 million in unpaid taxes last year as a result of bankruptcies, inability to trace taxpayers or a lack of assets.
Internal documents show the challenging economic and financial environments are posing challenges for the recovery of tax debts.
But the Revenue says it is committed to taking all necessary action to recover tax debts due to the exchequer.
Most of the written-off tax involved VAT, followed by PAYE taxes, corporation tax and capital gains tax.
In all, some 150,000 cases involved a write-off of tax liability. Some of the biggest write-offs included 17 cases where individual debts were €1-€4 million. They included property developers, companies which have ceased trading and individuals with large liabilities for capital gains tax, VAT and income tax.
In these cases, Revenue documents suggest officials had been “proactively engaged” over a period of years. However, bankruptcy, liquidation or cessation in trading or a lack of assets by taxpayers meant Revenue was left with little choice but to write off debts.
In one case, relating to a property developer, the taxpayer agreed to work with the Revenue in 2009 to begin paying a capital gains tax liability of almost €600,000.
Hardship claims
Amended assessments and new information increased this liability to €2.1 million. However, in 2010 a claim of hardship was lodged. “It became evident that the level of debt was unsustainable. The taxpayer’s assets were taken over by Nama,” the documents state.
In another, an individual had capital gains tax liability of €1 million. The Revenue explored forced sale of the person’s properties, but due to a lack of equity and legal issues, they were not suitable.
“Due to the taxpayer’s age and his indebtedness to a financial institution – €250,000 – the debt was written out. The taxpayer is now employed under the PAYE system,” records state.
Most cases were closed last year on the basis the cost of pursuing the debt would have exceeded the outstanding tax. The bulk of these cases were for relatively small amounts.
When broken down by economic sector, construction was responsible for most write-offs (€68 million), followed by wholesale and retail trade (€54 million) and accommodation and food services (€35 million). The total written off last year was €263 million. On a positive note for the Revenue and the exchequer, the write-offs have been falling steadily since 2011 due to a decrease in debt associated with ceased trading.
The one category where debt write-offs have been on the rise is where taxpayers were unable to pay the debts. These cases resulted in a €28 million loss to the exchequer, a sum which has doubled over recent years.
A further €13 million was written off as a result of individuals who left the jurisdiction or could not be traced. In all, total debts for unpaid taxes over recent years have risen to more than €2 billion.
