In June 2020, I made my way to Dublin Castle to meet Niall Cody, the chairman of the Revenue Commissioners.

The world was in a state of flux. Covid had changed everything. The economy was shuttered, and no one, including Cody, knew when normality would return.

Cody was in an unusual position for a tax man. As opposed to collecting taxes, he was spending the bulk of his time organising the payment of money to businesses through the various wage supports. 

All enforcement activity had been halted, and following engagement with the government, Revenue also allowed struggling businesses the opportunity to defer tax payments.

“We knew if we could do something, we should do it. Before the crisis, I never anticipated that we would be paying out €1.8 billion,” Niall Cody told me. “I didn’t anticipate that we would be suspending enforcement activity, that we wouldn’t be charging interest, that we would have a debt warehousing system.”

Now, in August 2023, everything has changed. The tax authority is once again actively pursuing debts and chasing down payments. This was something I highlighted in my piece last week when I examined the Revenue’s enforcement activities over a five-year window. 

In 2021, the authority issued just 62 cases against individuals or companies who it believed had issues over unpaid taxes. Already this year, the number is more than 210.

And this is just the tip of the iceberg. The tax authority provided me details in relation to its enforcement activities for the first half of the year. As I outlined in the piece, it shows a trend of increasing activity.

The authority has referred 2,842 cases to solicitors acting o behalf of Revenue. The value of the debt being referred is €77.8 million. It has also referred a whopping 22,251 cases to sheriffs acting on behalf of the authority, pursuing more than €287 million.

It has secured 1,311 attachment orders with a value of €79.9 million. According to Revenue: “Attachment is an enforcement method where Revenue may attach a third party, or an employer, where there is a debt due to the taxpayer from the attachee, for tax outstanding to Revenue. The circumstances of each case and the likelihood of effectiveness in recovering an outstanding tax debt will determine the enforcement method deployed by Revenue.”

An analysis of the Revenue’s various enforcement metrics over a five-year period highlighted a significant rise in High Court action taken by the Collector General, as well as increases in the level of activity by Revenue-appointed sheriffs, solicitors, and in attachment orders.

And the trend is likely to accelerate.

This is clearly seen by the volume of businesses still warehousing tax debts. Some 61,278 businesses that availed of Revenue’s debt warehousing scheme during the pandemic still owed a combined total of €1.999 billion in taxes by the end of May 2023. The bulk of debt still owed through the scheme is warehoused by only 6,139 customers, all with outstanding balances greater than €50,000, totalling €1.6 billion.

This is the next brewing issue. The tax authority and the State have shown a significant amount of patience when it comes to repaying tax debts incurred during the pandemic years. But it is inconceivable that the money will be written off – it would undermine fairness for other businesses who opted to pay their taxes. 

This was something echoed by the Minister for Public Expenditure and Reform Paschal Donohoe when I spoke to him earlier this year. Donohoe was clear; there would be no write-downs for companies. Instead, if they work with Revenue, they will be able to avail of flexible repayment structures.

“I do feel of course that the normalising approach that [Minister for Finance Michael McGrath] has outlined in debt warehousing I think is appropriate. We brought in place those debt warehousing mechanisms to deal with a pandemic. Thank God the most searing effects of that pandemic have now lifted, and I think the strategy that Minister McGrath is outlining from a timing perspective I think is fair,” he told me.

As Revenue told me last week: “You will note that the enforcement figures in 2022 and period to June 2023 have increased compared to 2020 and 2021. As you may be aware, during the Covid-19 pandemic, Revenue supported businesses by suspending normal debt collection activities and introduced a number of flexibilities to support businesses e.g. flexible payment options and implementing the and the Debt Warehousing Scheme (DWS) – the Government legislated to allow for debt associated with the Covid-19 crisis to be deferred or ‘warehoused’. Revenue commenced a phased return to normal debt collection activities in August 2022, which is reflective of the increase in enforcement figures.”

The authority took a softly-softly approach during the pandemic. That approach has now ended. Businesses will have to deal with the consequences. 

*****

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