Tax officials are targeting millions of euro in rental income as part of a crackdown on the “shadow economy”.
Audits and investigations into the rental sector since 2013 have yielded more than €55 million in unpaid taxes and penalties.
The availability of new sources of data, such as the property tax register and the home renovation incentive scheme, is helping Revenue to target those most likely to have tax liabilities.
In the first four months of this year, for example, audits and other investigations have yielded some €10 million for the exchequer. This is more than any other individual sector of the so-called shadow economy, or areas associated with cash transactions, including the construction industry.
Officials have found most liabilities in this area related to undeclared income; tax incentive reliefs claimed as losses; false claims or non-allowable expenses. About 70 per cent of Revenue audits are resulting in yields to the exchequer, with average settlements running at between €50,000 and €55,000.
It is also using information from other State agencies, such as rent supplement payment details and returns to the Private Residential Tenancies Board, to identify landlords who may have failed to declare their income.
There are also improved arrangements for detecting foreign properties owned by Irish residents.
Foreign accounts
In many cases, officials found that owners of properties abroad retain a foreign bank account for rental lodgements.
There is now a formal data exchange agreement between EU member states in relation to properties between foreign tax administrations. Previously, this information had been received on an ad-hoc basis.
The details of Revenue's activities are contained in internal records prepared earlier this year and released to The Irish Times.
Overall, the yield from Revenue’s audits and other compliance measures across the wider economy rose by 11 per cent to €610 million last year.
Almost €200 million alone came from sectors associated with cash transactions. These include “white collar” professions, such as doctors, solicitors and accountants.
In the first four months of this year the rental sector (€10 million) was responsible for the biggest source of unpaid tax, followed by construction (€7.5 million), wholesalers (€5 million), doctors (€4.7 million) and retail (€4 million).
Revenue’s enhanced access to information from debit and credit card sales – provided via banks and other financial institutions – has played a key role in focusing its investigations on businesses.
Techniques used to evade tax typically involved suppressing sales and purchases, under-declaring income and keeping cash payments “off the book”.
Records also show that tax authorities are developing a “conspicuous consumption model” to identify individuals who may be evading tax.
This approach involves analysing bank data to identify cases where there is a high probability that a person is under-declaring their income, because their reported income does not match their lifestyle expenses.
