THE AMOUNT of tax lost to the State as a result of businesses going to the wall has more than trebled since 2007, according to the Revenue Commissioners.
Revenue chairwoman Josephine Feehily told the Dáil Public Accounts Committee yesterday that the commissioners have written off €151 million in tax so far this year, compared with €128 million for all of 2008.
Of this, €131 million is attributable to businesses which have gone into liquidation or receivership.
The remaining €20 million has been classed as uncollectable for a number of reasons.
According to a spokesman for the Revenue Commissioners, the amount written off last year as a direct result of liquidations and receiverships was €77.4 million. In 2007, it was €41.4 million, less than one-third of the €131 million reached so far this year.
While the recession began last year, 2007 is recognised as the point at which the boom ran out of momentum, largely as a result of the credit crunch which hit in the final months of that year.
Ms Feehily told the Public Accounts Committee yesterday that more businesses were failing and going into liquidation as a result.
She said most of the write-offs were due to “honest” business failure, with no wrongdoing on the part of those involved.
However, about €1.5 million to €2 million of the amount written off last year was due to “phoenix” companies. These are businesses that have been restarted in a new guise by individuals who had previously wound up companies to avoid tax and other liabilities.
Where companies are put into liquidation, the Revenue Commissioners – and other creditors – can ask the High Court to ban their directors from acting in that role in other companies, or to restrict them from doing so, if they believe the individuals have acted wrongly.
The Revenue is likely to seek to have the directors of one company, whose failure resulted in a €9.9 million write-off last year, disqualified.
The commissioners can bring individuals suspected of tax offences to court, or refer the cases to the Director of Public Prosecutions.
While the commissioners write off taxes that insolvent companies cannot pay, a spokesman explained yesterday that this does not necessarily mean that the money will never be collected.
He pointed out that, if circumstances change, the debt can be “reinstated” and the Revenue can demand the money be paid. However, he said that this was unusual.
The Revenue chairwoman emphasised several times during yesterday’s hearing that the commissioners are prepared to accommodate businesses that have problems meeting their tax liabilities as a result of trading difficulties.
Ms Feehily added that the commissioners will give companies longer periods to pay, or come to some other arrangement with them. She added that currently about 700 businesses have made special arrangements with the tax authorities.
“We don’t want to put otherwise viable companies out of business,” she said.
