Revenue warning as evidence of black economy emerges

Those earning additional income in Meath have been urged to be tax compliant as 33 people and businesses in the county received Revenue penalties in 2010. It is estimated that thousands of people throughout the country are engaging in work outside of their PAYE employment to earn extra income in these challenging times and many are choosing not to go 'through the books' at all as they struggle to make ends meet. However, tax specialists, www.taxback.com, have warned that people are leaving themselves wide open to Revenue investigations and other long-term repercussions of non-compliance as evidenced by the 33 convictions in Meath last year. Christine Keily of www.taxback.com commented: "The recession has seen the reemergence of the black economy and more and more people are working outside of their normal PAYE employment. However, Revenue is aware of this and is taking measures to ensure penalties are applied in cases where people fail to declare the entirety of their income. "In the last quarter of 2010 alone, seven individuals and businesses in Meath appeared on the Revenue's public defaulters' list. Revenue has the power to impose a broad range of penalties ranging from a surcharge for late submission of a return which may be five per cent or 10 per ent of an individual's tax liability, depending on how late the return is, to specific penalties for failure to file a return or provide information on request. Penalties for filing a return negligently or fraudulently can be severe as they are based upon the difference between the actual tax liability and the amount paid. Furthermore, interest on late payments of tax accrues on a daily basis and can result in huge tax bills." The tax specialists say the potential for publication of tax evaders in the national and local media is also a deterrent for people. In the most recent quarterly defaulters list published by the Revenue Commissioners for Q4 2010, fines and penalties of €873,060 were imposed by a court on 364 individuals. The offences varied from failing to file an income tax return to failing to file VAT returns to failure to pay VRT. Failing to file an income tax return was by far the most common offence committed and fines ranged from €750 right up to €14,000. Also published in the same report were details of cases where the Revenue accepted a settlement from individuals or companies. In total, 72 settlements were accepted by Revenue in the three-month period and those settlements amounted to a massive €13.2 million. In the majority of cases, the interest and penalties charged by Revenue exceeded the tax that was underpaid in the first place, and so often resulted in very high tax bills for those individuals that tried to avoid paying what was due. Ms Keily went on to say: "What is even more worrying, however, is that some people, particularly those who fail to make a tax return, may not be declaring any of their income. These people can be easily identified by the Revenue upon investigation. For one, Revenue can ask to see current account statements which will highlight any regular payments. If, however, someone gets paid in cash and fails to lodge all of their income in their current account, then the Revenue can compare the individual's bank statements with their lifestyle and investigate further and calculate an under-declaration, resulting in further tax and penalties." Another repercussion which many people don't consider is that unless they maintain records of regular income, then they will struggle in their endeavours to access credit such as a bank loan or mortgage in the long term, she added.