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R0872 PAC33 Your Ref: S0541 PAC33 Ref: 100612-21 5 November 2021 Committee of Public Accounts, Leinster House, Dublin 2.

D02 XR20 PAC@oireachtas.ie Dear Ms. Cremin, I refer to your letter dated 22 October 2021 regarding the Committee’s consideration of the Minute of the Minister for Public Expenditure and Reform dated 29 July 2021 on the examination of the 2019 Appropriation Account for Vote 9 - Office of the Revenue Commissioners.
The information requested regarding; ➢ what Revenue can investigate in respect of the financial and sectoral implications of a voluntary PAYE system agreed by Revenue and courier firms in March 1997 and ➢ a copy of the 2019 EU Commission inspection report on the control strategy for customs values and repayments when it is completed is included in the attached appendices.
If you have any further enquires please contact Angela O’Gorman at angela.ogorman@revenue.ie Yours sincerely, ___________________ , / Niall Cody, Chairman.

Appendix 1 Information note in relation to what Revenue can investigate in respect of the financial and sectoral implications of a voluntary PAYE system agreed by Revenue and courier firms in March 1997 By way of background, it is important to note that PAYE is not a tax, but a collection mechanism for Income Tax.
The operation of PAYE does not, of itself, confer any rights in terms of employment rights or welfare entitlements.

The operation of PAYE on bona fide self-employed couriers involved the application of a withholding tax on an administrative basis, which facilitated collection of tax on account from a cohort of self- employed individuals and made it easier for these individuals to meet their payment compliance obligations.
A review of the 1997 letters from Revenue bears out the fact that the individuals in question were required to be self-employed and that the conditions to participate in the “voluntary PAYE scheme” were that the individuals were in fact bona fide self-employed.
It was necessary for the couriers to display the characteristics of a self-employed person, being that the vehicle was owned by the courier, all the outgoings in relation to the vehicle were paid by the courier, that the courier was engaged under a standard self-employed contract and a basic wage was not paid in addition to a "mileage" rate.

All these factors ensured that those eligible for the voluntary scheme were self-employed.
It should also be noted that the determinations made back in 1997 that the individuals concerned were genuinely self-employed are still valid today and meet the necessary criteria in the updated Code of Practice governing such matters that was published in July this year by the Minister for Social Protection and can be found at: www.gov.ie/pdf/?file=https://assets.gov.ie/34185/fcfac49276914907b939f64fad110ae8.pdf#page= null.
Bearing in mind the significant lapse of time, the information available to Revenue in relation to matters which occurred over 20 years ago is severely limited, particularly in light of Revenue only having access to information returned in statutory reporting.

However, with the introduction of PAYE Modernisation in 2019, Revenue has access to more detailed real time data in relation to PAYE returns.

Revenue can conclude from that data that there is limited use of the voluntary PAYE system in recent years.
• • In 2020, 3 courier companies were using the system with voluntary PAYE applied to 117 individual couriers and a total gross ‘pay’ figure for those individuals of c.€268,000.

In 2021 (up to end of July), just 2 courier companies were using the system with voluntary PAYE applied to 10 individual couriers and a total gross ‘pay’ figure for those individuals of c.€ 67,000.
It should be noted that the tax and PRSI remitted in respect of ‘voluntary PAYE’ deductions represent approximately 2.5% of the overall tax and PRSI remitted in 2020, and 1.5% of tax and PRSI remitted in 2021, by the employers operating the arrangement.
In relation to the financial and sectoral implications of the voluntary PAYE system agreed by Revenue and courier firms in March 1997, Revenue’s position remains, as previously detailed, that there was no cost involved as the couriers were correctly classified as self-employed.

The application of the voluntary PAYE system ensured that those self-employed individuals were facilitated in such a way that the users of the services of the couriers withheld some income tax through the voluntary PAYE system.
This led to the courier having income tax withheld on payments received which could be offset when filing their Income Tax return.

The Department of Social Protection (DSP) had decided that class S was the appropriate rate of PRSI.

DSP is responsible for determining PRSI classes and any impact on the Social Insurance Fund is a matter for that Department.
Regarding policing the nature of relationships between employers and its workers, Revenue has a strong track record in tackling instances of misclassification of employees as self-employed persons.

A recent example is the success Revenue had in an appeal to the High Court by a fast-food provider on the status of its delivery drivers.
There have also been a number of appeals to the Tax Appeals Commission against Revenue assessments that re-characterised payments to workers as ‘emoluments’ and, therefore subject to PAYE, rather than payments made to persons providing services through self-employment.

In addition, Revenue’s compliance programmes over the years have included a focus on ensuring that employers were treating workers as employed or self-employed in accordance with tax legislation and the published Code of Practice.
These interventions have been conducted by Revenue acting alone or in collaboration with Department of Social Protection officers, who examine the PRSI status of individuals as part of such interventions as well as with officers from the Workplace Relations Commission, who are responsible for examining employee rights including sick leave and other entitlements.

Appendix 2 A copy of the 2019 EU Commission inspection report on the control strategy for customs values and repayments when it is completed.
As previously advised the correspondence referred to is part of an on-going audit engagement between Revenue and the European Commission in relation to inspections carried out, in 2017 and 2019, under Council Regulation No 608/2014 of 26 May 2014 laying down implementing measures for the system of own resources of the European Union.

The audit engagement has not yet concluded.


Revenue will share a summary of the audit report and the subsequent correspondence when completed, taking account of taxpayer confidentiality in sharing this information with the Committee.