Net tax revenues jumped 11 per cent to €35.8 billion last year, €2.2 billion ahead of Budget projections.

Income tax, VAT, excise, capital taxes and customs and stamp duties all came in ahead of Budget but there was a slight shortfall in the Exchequer take on corporation tax, according to the Revenue's annual report, published yesterday.

Significant growth in income tax was boosted by one-off contributions of €697.8 million from special investigations, well ahead of expectations.

The Revenue has also set up a dedicated prosecutions division as part of a continued clampdown on tax evasion. Revenue Commission chairman Frank Daly expects the tax authorities to pursue a record number of cases through the courts this year.

The number of Revenue audits carried out last year rose slightly to 16,321. These yielded tax of almost €550 million, 28 per cent ahead of the previous year.

On the customs side, there was a sharp increase in the number of drug seizures in 2004 although the volume of illegal drugs taken off the streets fell. A total of 1,463 seizures were made compared to 803 in 2003.

Mr Daly noted that use of the Revenue On-Line Service had increased dramatically. Fifty-four per cent of all income tax self-assessment returns were filed online last year, up from 40 per cent a year earlier.

The Revenue has also become more efficient at tax collection, according to the annual report. Arrears have dropped to a historic low of 2.5 per cent of gross receipts from 3.1 per cent in 2003. Mr Daly noted that, as recently as 1998, arrears accounted for 37 per cent of gross receipts.

It has also reduced the cost of collection and processing. Performance indicators in the report show the Revenue spends 85 cent collecting every €100 of tax and spends an average of 79 cent processing each payment.

Mr Daly said yesterday that Revenue would continue to "foster a culture of voluntary compliance".

"We aim to make voluntary compliance the easy and attractive option and to make sure that non-compliance doesn't pay."