Irish exchequer revenue down 19% but audits, assurance checks, special investigations and seizures yield solid results

The Revenue Commissioners collected 19% less tax in 2009 than in 2008 but they were activity level in other areas was consistently frenetic – as one might expect of a public sector agency that is second-to-none when it comes to high standards of efficiency and effectiveness.

The impact of the downturn on taxes in 2009 varied by tax heading.

 

Category	€	% Change v 2008
Customs	208,598,000	-15.9%
Excise	4,702,552,000	-13.6%
Capital  Acquisition Tax	254,258,000	-23.2%
Capital Gains Tax	541,849,000	-62.1%
Stamps	929,510	-43.7%
Income Tax (+ levy)	11,835,235,000	-10.2%
Corporation Tax	3,900,306,000	-23.0%
VAT	10,669,652,000	-20.6%
Other levies	1,213,000
TOTAL	€33,043,173,000	-19.0%

 

Tax Audits and Compliance Checks

Some 12,404 taxpayer audits in 2009 yielded €598.6 million.  The comparable figures for 2008 were 13,406  taxpayer audits that yielded €570 million

There were 361,299 assurance checks, 15,877 more than in 2008, that yielded tax revenue of €68.5 million (+€5.5 million)

Special Revenue Investigations

The tax yield from special investigations, €114.35 million was 109% higher than in 2008.  Special investigations embrace the evasion of Deposit Interest Retention Tax, Bogus non-resident deposit accounts, offshore assets, certain life assurance products, offshore Ansbacher accounts, Tribunals, National Irish Bank, Interest Reporting and certain trust and offshore structures used to conceal tax obligations.

There were 1,490 Special Investigations in 2009.  The cash cow in 2009, from a Revenue Commissioner perspective, was Interest Reporting when 1,214 taxpayers paid €55.3 million to the Revenue Commissioners, a liability they presumably would have preferred not to have arisen.

The cumulative yield from Special Investigations is €2,603.5 million from a total of 34,335 cases, including €41 million derived as a consequence of tribunals from 23 individuals.

 

Convictions

There were 453 convictions arising from Revenue matters in 2008 but this figure rose to 2,144 convictions in 2009, mainly attributable to persons convicted for the non-filing of returns.  There were 20 convictions for serious tax evasion in Ireland in 2008 and 10 such convictions in 2009.

 

Revenue Seizures

The Revenue Commissioners have been particularly successful in the seizure of illicit drugs, tobacco and other products.

Drug Seizures

 

	2008	2009	% Change
Cannabis
Number of seizures	2,441	2,166	-11.3%
Volume seized, KG	3,655	3,443.1	-5.8%
Value seized	€27,900,000	€30,200,000	8.2%
Cocaine and heroin
Number of seizures	76	39	-48.7%
Volume seized, KG	1,615	33.1	-98.0%
Value seized	€517,200,000	€2,300,000	-99.6%
Amphetamines, Ecstasy and other
Number of seizures	4,118	5,983	45.3%
Volume seized, KG	115	405.8	252.9%
Value seized	€2,300,000	€6,300,000	173.9%

The 2008 figures include a €500 million cocaine seizure off the coast of West Cork.

Tobacco Seizures

Last year was hectic as far as tobacco seizures are concerned!

	2008	2009	% Change
Cigarettes
Number of seizures	10,143	10,600	4.5%
Volume seized	134,800,000	218,500,000	62.1%
Value seized	€54,300,000	€92,100,000	69.6%
Tobacco
Number of seizures	1,094	1,171	7.0%
Volume seized – KG	2,965.0	10,451.0	252.5%
Value seized	€1,000,000	€3,700,000	270.0%

 

The Revenue Commissioners also made 34 seizures in 2009 of suspected criminal cash amounting to €1.35 million.

14% of Irish population were at risk of poverty in 2008

An estimated 14% of Ireland’s population was at risk of poverty in 2008 – a mid ranking performance in EU terms.  Risk of poverty is defined as 60% of their income, after welfare transfers being below the poverty threshold.  The poverty threshold is set at 60% of the national median income per equivalent adult.  Comparison between countries is expressed in Purchasing Power Standards (PPS) – an artificial reference currency that eliminates price level differences between countries.

The highest risk of poverty in 2008 was found in Latvia (26%), Romania (23%), Bulgaria (21%), Greece, Spain and Lithuania (all 20%).  The lowest risk of poverty was in Czech Republic (9%), Holland and Slovakia (both 11%), Denmark, Hungary, Austria, Slovenia and Sweden (all 12%).

The following table highlights the percentage of the population who cannot afford particular items of relatively routine expenditure:

 

	IRELAND	EU 27 average	EU 27 Ranking
To pay for a 1-week annual holiday away from home	30%	37%	17th Poorer: Romania Hungary Malta Portugal Poland Lithuania Bulgaria Slovakia Latvia Greece Cyprus Estonia Italy Czech Rep Spain France
To keep their home adequately warm	15%	10%	9th Poorer: Portugal Bulgaria Cyprus Romania Lithuania Poland Latvia Greece
Afford a meal with meat, chicken, fish or vegetarian equivalent every second day	7%	9%	13th Poorer: Bulgaria Slovakia Latvia Poland Romania Lithuania Austria Czech Rep Slovenia Germany Hungary Malta Italy France Greece
A personal car	9%	9%	11th Poorer: Romania Bulgaria Latvia Slovakia Estonia Poland Lithuania Czech Rep Portugal Greece

 

The corresponding data for 2009 is likely to show a marked deterioration in Ireland’s performance.

2009 New-car sales collapse in Ireland; 2009 used-car sales boom

The Irish motor industry began the decade with record sales growth and volumes.  The decade ended with record sales contraction.

Registration of private cars in 2000 reached a record 225,259 new cars registered for the first time, a 32% increase over 1999. There were 24,003 used cars licensed that year ~ accounting for 9.6% of all private car registrations

The registration of new private cars in 2009 was only 54,432 units. But the number of used cars licensed for the first time was 49,564 ~ accounting for 48% of all private car registrations last year, 80% of which were worth €20,000, or less. 82% of the new cars registered had a price tag of €30,000, or less.

Behind the downturn there are changes in the fortunes of car manufacturers on the Irish market as illustrated by the list of top-10 manufacturers in 2000 compared to their 2009 ranking.

 

Top-10 Manufacturers in Ireland
2000 compared to 2009

Used car sales rankings – 2009

Used cars licensed 2000 2009 Change Volkswagen 1,007 7,942 689% Toyota 3,133 5,983 91% BMW 639 5,983 781% Audi 352 4,718 1,240% Ford 1,930 4,659 141% Honda 2,310 2,664 15% Vauxhall 2,035 2,493 23% Peugeot 1,094 2,417 121% Renault 742 1,556 111% Mercedes Benz 767 1,551 102% Top-10 Used=car sales (2009) 14,009 39,620 % Total Sales 58% 80%

When new car and used car registrations are amalgamated a comparison between 2000 and 2009 illustrates changes in overall market share and how the Irish population are currently responding to the offerings of the top-10 manufacturers in 2000.

 

Manufacturer	2000 Volume New +Used	2000 % Total Volume	2009 Volume New +Used	% Total Volume
Toyota	28,322	11.4%	13,729	13.2%
Ford	26,994	10.8%	12,397	11.9%
Nissan	26,320	10.6%	6.141	5.9%
Volkswagen	23,545	9.4%	14,069	13.5%
Opel + Vauxhall	23,240	9.3%	6,471	6.2%
Fiat	17,217	6.9%	1,198	1.2%
Renault	14,470	5.8%	3,957	3.8%
Peugeot	11,110	4.5%	4,269	4.1%
Daewoo	6,696	2.7%	37	0.0%
Seat	6,315	2.5%	1,119	1.1%

Toyota, Ford and Volkswagen gained traction while Fiat and Daewoo disappeared. Land Rover, (registered 127 new cars in 2009) and Citroen (826 new cars registered in 2009) have made alternative distribution arrangements in Ireland.

The falling out of public favour of Renault is interesting.  The most populous car in Northern Ireland is the Renault Cleo where over 30,700 of them cruise the highways and byways.

Is Ireland’s social welfare system not simply seamless but superb!

There were 2,166,700 persons in the labour force the first quarter of 2007 of whom 1,922,400 were Irish nationals. The total labour force in September 2009 was 1,922,400.

Live Register

Citizen of	Jan 2007	Sep 2009	% Change
IRELAND	139,610	346,076	148%
UK	7,545	18,062	139%
EU 15 other than UK and IE	1,517	4,073	168%
EU 15 > 27	4,198	42,675	917%
Other nationalities	5,882	12,709	116%
TOTAL	158,752	423,595	167%

 

Unemployment

Citizen of	Jan 2007	Sep 2009	% Change
IRELAND	76,900	225,200	193%
UK	2,300	9,500	313%
EU 15 other than UK and IE	1,700	2,400	41%
EU 15 > 27	6,100	29,600	385%
Other nationalities	4,800	13,200	175%

 

The number of persons aged 15, or more, who are not economically active, increased by 8,400 in the case of Irish nationals and 39,900 in the case of non-Irish nationals. The estimated population of persons aged 15, or more, declined by 29,200 in the case of Irish nationals but increased by 197,200 in the case of non-Irish nationals between the first quarter of 2007 and the third quarter of 2009. The total estimated population in this age cohort increased by 2.4% to 3,526,500. The consequence of the foregoing is that Irish nationals now account for 88% of the labour force having accounted for 91% before the onset of the recession.

The 2006 Census of Population indicated that there were 420,000 non-Irish nationals living in Ireland in April 2006 who were from 188 countries. The top-10 of these countries accounted for 82% of the total. 20% married persons from the category EU 15 > EU 27 were married but not living with a spouse at the time of the Census.

Profile of non-Irish nationals

· ⅔ of all Chinese were living in the Greater Dublin area compared to 20% of all Latvians, who favoured large and medium sized towns.

· ½ of the UK and ⅓ of all German resident nationals were living in rural locations.

· The number of single persons was highest among the Chinese and French (72% and 73% respectively) while ⅔ of Nigerians and Filipinos were married

· 13% of Latvian females were divorced and 8% of British males were remarried following divorce.

· Polish males had the highest percentage at work (91%) while 20% of Nigerians were unemployed.

· The Lithuanians had the highest percentage at work in the construction sector (32%) while the US had the greatest proportions in the higher socio-economic groups of professionals and managers.

Irish-national population declining

The population of adult non-Irish nationals living in Ireland is increasing. Despite the number of non-Irish nationals on the Live Register increasing from 19,142 in January 2007 to 77,519 in December 2009, the number of non-Irish nationals aged 15 years and over in Ireland increased from 319,800 in the first quarter of 2007 to 433,000 in the third quarter of 2009. The population of adult Irish nationals is decreasing. There was also a reduction of 29% Irish nationals in this age cohort during this period.

Citizen of	Q1 2007	Q3 2009	% Change
IRELAND Employed Unemployed Labour force Not economically active Total population aged 15+	1,845,000     76,900 1,922,400 1,200,300 3,122,700	1,659,000   225,200 1,884,800 1,208,700 3,093,500	-0.94%
UNITED KINGDOM Employment Unemployed Labour Force Not economically active Total population aged 15+	37,800     2,300   40,100   24,900   65,000	44,100   9,500 53,600 36,000 89,600	+37.8%
EU 15 other than UK and IE Employed Unemployed Labour Force Not economically active Total population aged 15+	24,000   1,700 25,700   6,100 31,800	28,200   2,400 30,600   9,200 39,800	+25.1%
EU 15>27 Employed Unemployed Labour Force Not economically active Total population aged 15+	106,300   6,100 112,400   11,700 124,100	122,100   29,600 151,700   30,300 182,000	+ 46.0%
Other nationalities Employed Unemployed Labour Force Not economically active Total population aged 15+	61,300    4,800   66,100   32,800   98,900	68,500   13,200   81,700   39,900 121,600	+22.9%
TOTAL PERSONS, aged 15+	3,442,500	3,526,200	83,700     +2.4%

Are the foregoing trends evidence that, from an international perspective, Ireland’s social welfare offering is especially generous? Has the time arrived for policy makers to adapt it to ensure that it has the capacity to foster self-reliance rather than dependency? Social welfare expenditure will cost €22 billion this year. The social insurance fund, having incurred a deficit of €244.7 million is now reportedly insolvent, possibly to the extent of several billion euro. What steps will be taken to match expenditure with available resources?

Gilmore seeks to respire Social Partnership

Eamon Gimore argued in The Irish Times (Opinion & Analysis) on Saturday, 9th January that a new national agreement would build on the nation’s strengths, foster solidarity and guarantee industrial peace.

Social partnership has been sustained when its participating pillars were able to deliver incremental financial and social benefits to those they represent.  The weaknesses, limitations and cost of social partnership have been laid bare, especially in the past year. It became paralysed and dysfunctional when there were no resources to deliver.  Participants became lobbyists’ seeking billions of euro exclusively for their own vested interests, but were apparently incapable, at times of economic adversity, of embracing a multilateral perspective, perhaps because their individual mandates are rather weak. Trade unions, for example, collectively represent no more than 25% of the declining national labour force and the collapse of the economy has also taken its toll on the strength of all pillars of the process.

The legacy of national agreements in the past decade is such that Ireland’s harmonised labour cost competitiveness ranked second lowest to Slovakia in the EU-27 and was 11.8% adrift of the EU average by June 2009, as measured by the harmonised competitiveness indicators published by the European Central Bank. If this country is serious and determined about an export-led recovery in knowledge-intensive sectors that will track that of trading partners there ought to be an acute national awareness of what it is that make us competitive.  Why has there been no debate, or analysis, about the prime reasons this country lost a substantial number of skilled, knowledge-intensive jobs in fields such as aircraft maintenance or crystal manufacture? That could have begun, but not ended, with some reflection of the implications of our minimum wage being the second highest in Europe and how a small open economy can foster a standard of living that is both acceptable, realistic and, most importantly, sustainable.

Ireland will only prosper to the extent that it can successfully trade internationally but the social partnership process had grown increasingly insular and delusional in its perspective. We are citizens of a world whose boundaries extend beyond our own definition of fairness, inclusivity and social advancement. The benefits sought through partnership need to be based on the nation’s capacity to compete and on the resources available to fund the benefits sought and legitimate aspirations. Our capacity to generate authentic national wealth is more limited than we might like to admit and the commercial output from it did not grow vigorously when the international economy was vibrant. What impact could the partnership process have in this context when none of the national agreements ever dealt definitively with the issue of national competitiveness and the strengthening of it?

Total social welfare expenditure increased by 238% in the past decade when the Consumer Price Index increased by slightly over 40%. The Social Insurance Fund, which recorded a deficit of €244.7 million in 2008, is now reported to be insolvent, perhaps by billions of euro, as social insurance expenditure exceeded €10 billion last year as a consequence of spiralling unemployment. The €21.3 billion social welfare bill in 2009 was equivalent to 87% of the increase in the national debt. The overall scale of this is a by-product of national agreements and we are now on the cusp of deluding ourselves that these standards can be maintained and that almost €22 billion can be spent on social welfare in 2010 and beyond through growing the national debt.

Mr Gilmore advocates a time-limited inquiry into what went wrong in the banking system. During the decade to 2009 the stock of new residential units in this country increased by 60% when the population increased by just 19%.  But the total amount of residential loans provided increased by almost 500% making Ireland’s residential mortgage bearers’ the second most indebted in the €urozone - next to those in Holland. Data produced last week by the Central Statistics Office indicates that the income per person in the State increased by under 55% from 2000 to 2007 so it doesn't take a wizard to discover the extent of imprudent lending that has taken place and the consequential negative equity that is now a reality. What more could an inquiry elicit except to advocate that financial regulation would be sufficiently robust to defend the integrity of the banking system; that the interests of vulnerable consumers would be robustly defended and that the criminal justice system would take its course effectively and efficiently, where appropriate?

The highest standard of national governance, rather than the most far reaching social partnership, will be the catalyst for economic recovery and vitality. The ability of political parties to persuade the electorate of their capacity to lead and govern will determine the outcome of the next general election.

Funding limits will define social welfare goals

THE Irish Government is discovering that social welfare and war have some features in common! It is easy to start a war but very difficult to end one! It is also easy to launch, or expand, welfare programmes but when welfare funding capacity tightens beneficiaries are likely to declare war on government if their entitlements are cut, which was the case in Dublin when pensioners revolted in October 2008.

The 2009 Exchequer Statement for Ireland reveals that the national debt had increased by €25 billion in a year to cover a deficit of €24.64 billion.

Irish social welfare spending in 2009 amounted to €21.26 billion, an increase of €3.5 billion (+19.8%) over 2008 and the 2010 Budget provides for the spending a further €660 million in 2010.  This trend is largely attributable to the number on the Live Register increasing from 227,070 to 413,505 and unemployment exceeding 12.5%. There are now approximately 1.8 million welfare beneficiaries in Ireland.

Some €10.7 billion of the welfare expenditure relates to social insurance which is funded by Pay Related Social Insurance (PRSI). The PRSI fund, which had a balance of €3.2 billion at the beginning of 2009 accumulated over the past decade is likely to be now in overall  deficit because of rising unemployment and increased claims for jobseekers allowance and benefit.  The social insurance fund recorded a deficit of €244,718,000 in 2008.  Any shortfall has to me met by the Exchequer through borrowing.

Irish welfare spending increased exponentially in the decade to 2009. The Irish population increased by 19% to 4.45 million but total social welfare spending increased by 183% compared to a rise in the Consumer Price Index of 42.4%.  Expressed as a percentage of gross current government expenditure, social welfare spending increased from 25.9% to 33.4% in 2008 and from 7.5% to 11.4% of GDP in 2008.

Short-term welfare rates of payment have increased  by between 112% and 122%.  Long-term rates have increased by over 100% in the period between 1999 and 2008 – more than double the Consumer Price Index.

Old Age Pensions

A decade ago 75% of all individuals aged over 65 received an old age pension – either contributory, or non-contributory. By 2009 91% of this age cohort qualified for a pension.  The number receiving the contributory State pension has increased from 76,241 persons  in 1999 to 250,117 person in 2008.

Child Benefit and Maternity Benefits

Child Benefit payments have grown four-fold in a decade and are now paid in respect of 1.14 million children.  Maternity Benefit payments have grown 6-fold.

Carers’ and Disability Sufferers’ 

Much of the additional spending went to carers’ or recipients with disabilities. A total of 11,416 individuals received a Carer’s Allowance in 1998 at a cost of €72.89 million. A Carer’s Benefit was introduced in October 2000 for individuals who gave up work to look after an ailing relative. Some 50 individuals received this in 2000 at a total cost of €36,000 By 2008 some 45,818 qualified for the Carer’s Allowance or Carer’s Benefit at to total cost of €483.97 million – an increase in cost of the two programmes in a decade of 563%.

Another are which experienced huge increases related to disability and invalidity. There were 147,158 qualifying individuals for a range of benefits in 1998 but this number increased to 237,651 individuals in 2008.

There is a medical assessment process in place. 43% of applicants were called for assessment in 1998 but in 2008 only 18% of a larger number of applicants were called. Approximately 53% of those assessed are typically deemed incapable of working while the percentage deemed capable of working was of the order of 16-18%. This would imply that if a larger percentage of applicants were medically assessed fewer might qualify for allowances or benefits.

Impact on the Exchequer

Between 1997 and 2007 the cost of social welfare was the equivalent of 26-31% of government revenue.  But in 2008 social welfare spending increased to 43%  and in 2009 to 63% of government revenue.  How can this be sustainable?  Where are the savings to be achieved?  Will political mayhem ensue?

The Minister for Social and Family Affairs refers to welfare funding as ‘an investment to reflect real social progress’  Current spending is not actually investment; it is simply spending.  Ireland’s wage competitiveness is the second lowest in the EU (ahead of Slovakia), according to data provided by the European Central Bank.  The objectives of ‘real social progress’ and ‘inclusiveness’ can only be sustained if the economy manages to sustain an appropriate level of vitality and the capacity to generate output that has value.  The objectives spoken of are not otherwise really achievable.  Where exactly is the country heading if social welfare spending exceeds the Consumer Price Index by a factor of 4?

Ireland’s soaring social welfare bill

The 2009 Exchequer Statement for the Irish Government was issued this afternoon indicating the following:

	2008 €000	2009 €000	Change %
Government Revenue	41,624,097	33,879,322	-18.6%
Welfare Spending	17,815,282	21,260,000	+19.3%
Government Deficit	12,713,821	24,640,971	+93.8%
National Debt	50,400,000	75,152,000	+49.1%

 

Tax revenue for 2009 was €1.357 billion less than forecast last April.  There was some silver lining – corporation tax was €160 million higher than anticipated and this is attributable to foreign direct investors.

Welfare Trends 1989 – 2008

The 20 years between 1989 and 2008 have seen Ireland’s welfare bill grow from €3.38 billion to €17.81 billion.  Expressed as a percentage of gross government expenditure, welfare has grown from 27.3% in 1989 to 33.4% in 2008.

During the decade from 1989 to 1998 the Index of Welfare Expenditure increased by 78.9 percentile points – compared to an increase in the Consumer Price Index of 23.6%

The comparable figures for the decade from 1999 to 2008 saw the Index of Welfare Expenditure increase by 183.5 percentile points in a period when the Consumer Price Index increased by 42.4 percentile points.

 

Welfare Trends 1999 – 2008

The Irish population increased from 3.7 million in 1999 to 4.4 million in 2008, an increase of 19.4%.  This compares to an increase in total welfare spending from €6.28 billion to €17.81 billion.

The pattern of welfare spending has evolved:

 

	1998	2008
Older People	23.6%	24.1%
Widows, Widowers and 1-parent families	18.0%	14.0%
Child Related Payments	9.7%	15.7%
Illness, disability and caring	14.1%	18.5%
Employment support	3.3%	2.3%
Miscellaneous	8.7%	22.1%
Administration	4.9%	3.3%

 

Maternity Benefit changes

Increases in the maximum duration and maximum payment of Maternity Benefit have resulted in significant increases in this category of expenditure.  In March 2006 the maximum duration of Maternity Benefit, Adoptive Benefit and Health and Safety Benefit  claims was increased from 18 to 22 weeks, with a subsequent extension of Maternity Benefit in March 2007 to 26 weeks.

The cost impact of changes in these three categories of benefit is reflected in an increase from €48.79 million in 1998 to €318.09 million in 2008 (+551%).  The number of beneficiaries during this decade has increased from 5,483 to 23,558.

1-Parent Families

The number of beneficiaries of this benefit has shown a significant increase – from 170,927 who received €307 million in 1998 to 233,620 who received €1,067 million in 2008.

Free Schemes

The cost of ‘free schemes’ have also increased significantly

	1998 €000	2008 €’000
FREE ~ fuel, electricity, bottled gas, natural gas, television licence, telephone rental	153,358	584,674

 

 

Funding Welfare

	1998	2008
Exchequer	56%	52.9%
Social Insurance Fund	44%	47.1%
Components of Social Insurance Fund
Employer PRSI contributions	71%	73%
Employee PRSI contributions	23%	20.1%
Self-employed	6%	5.0%
Investment income		2.0%
Population of Ireland	3,703,100	4,420,000
Number of welfare recipients	854,000	1,208,800
Number of beneficiaries	1,414,119	1,799,875
Percentage of population receiving welfare	38.1%	40.7%