Revenue - The first 100 years

Introduction

On 21 February 1923, the Free State Government, through an Order passed by the Oireachtas, established the Revenue Commissioners (Revenue). Setting up the Revenue Commissioners, Order 2/23 stated there would be a single Board consisting of three Commissioners, one of whom would be Chairman and Accounting Officer. The Order also stated that the Board would have its chief office in Dublin.

William O' Brien, a native of Cappamore, Co. Limerick, was appointed first Chairman. Charles Joseph Flynn and William Denis Carey were nominated as the two Commissioners. Both Commissioners were Corkmen. All three had backgrounds in either the UK Inland Revenue or the UK Customs & Excise services.

The transfer of administrative services from British to Free State control took place on 1 April 1922. However, it didn’t become fully effective for Revenue operations until April 1923. The work of Revenue, as the agency responsible for collection of taxes and duties, was critical for the survival of the new State and transitional arrangements with the British were put in place. The UK revenue authorities, on an agency basis, assessed and collected 1922/23 liabilities on behalf of the Irish Exchequer. All taxes and duties collected after the 1 April 1922, even if for pre-treaty liabilities, were passed to the Irish Exchequer.

The main areas of revenue collection in the fledgling State were:

• Customs duties on imported goods
• Excise duties on beer, spirits, tobacco, wine and hydrocarbon oils
• Licences for publicans, brewers and distillers
• Income Tax and Super Tax
• Estate Duties and Stamp Duties.

Since the establishment of the Revenue Commissioners in 1923, successive Governments and the Oireachtas have reaffirmed the principle of the independence of the Revenue Commissioners in their dealings with the tax affairs of any individuals, businesses or other entities under tax and customs legislation. This independence is seen as critical to maintaining the integrity of the taxation system and it forms a key pillar of Revenue’s Governance framework. Legal effect in this matter is provided under Section 101 of the Ministers and Secretaries (Amendment) Act, 2011. This provision ensures that neither article 9 of the Revenue Commissioners Order 1923 nor section 9(3) of the Ministers and Secretaries Act 1924, which relate to Ministerial responsibilities and controls, can apply to the Revenue Commissioners when performing their functions under tax and customs legislation. Revenue’s independence does not extend to the overall administration of taxation and customs systems or Civil Service regulations and in these respects, Revenue is accountable to the Minister for Finance.

The Early years

After it was established, Revenue had little over a month to organise its policing of the land frontier with Northern Ireland. The civil war had delayed setting up the Irish Boundary Commission, provided for in the Anglo-Irish Agreement. Réamonn (1981) states that there were instances where all that marked the border were “a few boards over a few barrels”. He stated that this indicated a general refusal to accept that the border was permanent. In time, customs and patrol huts, as well as examination halls would appear along the land frontier. In the 1930s, pressure on Customs staff increased considerably as the Economic War took hold. The UK Government imposed a tariff of 40% on Irish cattle, which previously had zero duties applied. A tariff of 30% was applied to other agricultural produce. Inevitably, this led to smuggling, and in an effort to curtail it, more members of Revenue staff were assigned to border duties.

The pre-1922 tax arrears also created severe difficulties and for many it was an emotive issue. According to Réamonn (1981), people had abstained from payment of income tax “for patriotic or other motives”. Despite an amnesty announced in August 1923, arrears problems persisted for years afterwards. Ongoing attempts by Revenue staff to recover arrears generated much resentment. A second amnesty was included in Finance Act, 1932, in a bid to resolve this issue.

There were also complex issues with double taxation relating to the taxation of income in both the Free State and the UK. In 1926, the Irish and British authorities negotiated an agreement to avoid double taxation, several years before the League of Nations published its first model treaty. Though subsequent changes were made to this agreement, its fundamentals remained intact for many years. A conjoint office was established in London to deal with issues affecting residents of both jurisdictions. It was staffed by officials from the UK and Irish Revenue authorities, and remained open until 1979.

During the Second World War, there were emergency transfers of Revenue staff to the newly created Department of Supplies. This Department controlled production, distribution and pricing of vital supplies, which included food-rationing.

Although many customs duties were suspended during the war, restrictions and prohibitions in imports and exports were substantially widened. These added substantially to the workload of customs officials. Under emergency powers of Government, the Revenue Commissioners could authorise members of the Defence Forces to act as customs officers.

The war also saw the passing of the Taxes and Duties (Special Circumstances) Act 1942. In anticipation of a possible military invasion, it provided that the Taoiseach alone had the authority to set income tax rates and customs duties in the event that the Oireachtas could not meet.

Significant Changes to Revenue Administration

Since the foundation of the State, tax collection had initially been subcontracted by Revenue to self-employed contractors. Tax arrears, particularly for employees, had seriously deteriorated, and in 1952 Revenue created a centralised tax collection unit in Dublin. There were widespread complaints about the fragmented Income Tax system which was difficult to understand. In 1957, the Minister for Finance established the Commission on Income Taxation led by Cearbhall ÓDálaigh, future President of Ireland. Most of the Commission’s recommendations informed tax policy for many years and heralded far-reaching changes in Revenue. Among its recommendations were a system of PAYE for wages and salaries and ‘one taxpayer, one charge’ for income tax.

The implementation of PAYE in 1960 significantly increased the workload on an already overburdened Revenue staff. In addition, there were chronic shortages of suitably trained officers. This prompted a recruitment drive for more staff to be assigned to Revenue. In 1961, a decision was made to acquire a ‘second generation’ computer to centralise tax collection and implement the ‘one taxpayer one charge’ recommendation. The intention was to present the taxpayer with an integrated assessment notice and a composite bill for each tax year.

Around that time, a key strategic decision was made by the Revenue Board. To ensure that access to confidential taxpayer data remained secure, it was decided that computer equipment would be housed within Revenue and would be operated and supported only by Revenue officials. There would be no third-party involvement in maintaining such equipment.

Revenue also appointed a Collector General from within its own ranks, and in 1964 the Office of the Collector General was established. This replaced an earlier outsourced system whereby Collectors of Taxes collected taxes owed to the State.

Revenue’s first computer, one of the first of its kind in Ireland, was delivered and switched on in 1963. Initially it was used to mechanise some of Revenue’s administrative processes, particularly around tax collection. Revenue very rapidly advanced its use of the computer for Income tax, turnover tax and employers PAYE/PRSI liabilities. In 1968, the computer system was upgraded to cater for a substantial volume of PAYE transactions. The referendum carried in 1972 paved the way for E.E.C. accession and gave the force of law to its legislation. Value Added Tax, an E.E.C. sales tax, was introduced in 1972. By 1973, 96% of the total yield of income tax, sur tax, corporation profits tax and sales taxes was computerised. In 1974, the Revenue Computer Centre was opened.

During the 1970s, farmers were brought into the income tax net and several more taxes were introduced. These included Corporation Tax, Capital Gains Tax, Capital Acquisitions Tax and Wealth Tax. During this time, Revenue was actively recruiting, and its staff numbers increased dramatically. By the early 1980s, staffing levels had reached an all-time high of over 7,500.

Serving the Customer and Tackling Non-Compliance

By 1980, PAYE employees’ share of the overall income tax burden was over 85%. This triggered large-scale public protests. In response, the Government established a Commission on Taxation which produced five wide-ranging reports between 1982 and 1985. The Commission recommended a system of self-assessment which was introduced in 1988. Self-Assessment precipitated a fundamental change in the relationship between Revenue and taxpayers. The taxpayer Charter of Rights, published by Revenue in January 1989, defined the new relationship. Taxpayers, other than PAYE employees, were now expected to file tax returns without being requested to do so. In general, they would be presumed to have dealt with their affairs honestly. Taxpayers would now be treated as customers, as Revenue committed itself to providing access to full, accurate and timely information.

Revenue re-oriented its staffing and technological resources around promoting voluntary compliance and tackling non-compliance. These key pillars have consistently underpinned Revenue’s administration as it transformed, over ensuing decades, into today’s modern administration.

Revenue provided retraining for staff to adapt to the new way of dealing with taxpayers. It published leaflets and guides for taxes and customs issues. It established a Press Office to actively engage with the media. Staff in offices around the country attended local events to promote voluntary compliance. It forged closer relationships with tax practitioners through the establishment of the Tax Administration Liaison Committee (TALC). Local Enquiry offices were opened, offering comprehensive services which centred on the taxpayer as a customer. In the early 1990s, Revenue initiated long terms projects to reposition its internal computer systems around the taxpayer as a customer.

Revenue took advantage of self-assessment to move staff from assessing to compliance, audit and enforcement work. The introduction of the EU single market in 1993 brought an end to internal frontiers. This facilitated the establishment of the Customs National Drugs Team. In conjunction with An Garda Síochána and the Naval Services, it would go on to achieve considerable success though many high-profile operations. Revenue began seconding staff to the Criminal Assets Bureau (CAB) when it was set up in 1996.

In 1997, Revenue launched its website which enhanced its customer service. Thus began its digitisation phase, as leaflets, guides, and tax returns were migrated from paper and hosted on the website. In the following year, it amalgamated tax legislation for just the second time since the foundation of the State. The digitisation of the Taxes Consolidation Act 1997 made it possible easily to integrate subsequent tax enactments into it.

The Customs’ Automated Entry Procedure (AEP) system, introduced in 1991, accepted returns from traders via a secure digital channel. This was Revenue’s first step in using digital channels to accept returns. The Revenue Online Service (ROS) was introduced on a phased basis in 2000. ROS quickly became Revenue’s flagship system for online processing of all tax returns and collections from personal and business customers.

Revenue enhanced its compliance operations when its digital rules-based system (Risk Evaluation and Analysis Programme – ‘REAP’) was launched. This system collated and risk-ranked taxpayer data to facilitate better-focused taxpayer enquiries and interventions.

In more recent years, digital transformation has become a feature of Revenue’s business solutions. An example is the redesigned PAYE system (PMOD) which, in 2019, facilitated real-time reporting of pay and tax details and eliminated many of the returns required under the system that it replaced.

Revenue Staff Representation

Irish civil servants have been represented by staff associations/unions since the foundation of the State. This was a tradition carried over from the British Civil Service. One of Revenue’s distinctive characteristics was the large number of staff in departmental grades that were exclusive to the organisation. Not surprisingly, their staff associations operated exclusively in Revenue as well. In the early years, as the State struggled economically, staff working conditions declined, and consultation with unions was limited. Aside from pay, substandard accommodation was seen as a big issue for staff, driven perhaps, in the early years, by the threat of tuberculosis. The Civil Service conciliation and arbitration (C&A) scheme was introduced in the 1950s was seen as a major step forward by unions. Since then, industrial relations processes that evolved under this C&A scheme have worked well for all sides.

Since the 1960s, Revenue staff have benefited from significant changes to workplace terms and conditions. Flexible working hours, job sharing, career breaks, improved schemes for both paid and unpaid leave were introduced.

There were family-friendly initiatives that followed the ending of mandatory resignation on marriage by women in 1973. By 2020, more than half of Revenue’s managers, at every level, up to and including Principal Officer were female. Thirty eight percent of Assistant Secretaries were female in 2020, and the female representation is now fifty per cent. In 1998, Josephine Feehily was the first female to be appointed as a Revenue Commissioner. Ten years later, she became the Chairman of the Revenue Commissioners, a position that she held until her retirement from Revenue in 2015.

Revenue reformed its grading structure for staff by integrating general service and departmental grades. By 2003, integration was fully completed for all Revenue staff when tax officers and higher tax officers were regraded as clerical and executive officers respectively. This was regarded by Revenue as a vital step in adapting to changing business needs and it facilitated the integrated management of customers’ affairs, the so-called ‘whole-case management’.

Partnership and Employee Engagement

The Government announced its Strategic Management Initiative in 1994 to modernise the Civil Service. In response, Revenue began to publish its corporate plans and customer service standards. The Management Advisory Committee (MAC), comprising the Board and all senior managers at Deputy/Assistant Secretary level, was established to drive Revenue’s change agenda.

Partnership structures, involving management, staff and unions were set up in 1998 in Revenue. These allowed collaboration on issues, outside the industrial relations framework, that impacted staff. The Performance Management and Development System (PMDS) was introduced in Revenue following this type of collaboration. Revenue’s major organisational restructuring plan announced in 1999 was another. “Working Together: Our Workplace Charter” was a key output of Revenue’s Partnership Process in 2002. To promote employee engagement, local partnerships exist within Revenue’s divisions to facilitate consultation on local issues.

Due to the technical nature of so much of Revenue’s core business, a learning culture is deeply embedded in the organisation. Previously, Customs Officers and Tax Officers, both clerical officer grades, had to pass separate in-house examinations to become eligible for promotion. Newly appointed Inspectors of Taxes, had to undertake in-house examinations over several years to become fully commissioned Inspectors. T.K. Whitaker stated, on his introduction to economics in 1937:

“I kind of came into economics sideways. I hadn’t heard of it much before I found it was a subject for the Assistant Inspectors of Taxes examination”.

Learning the theory was just one step. It was essential to stay abreast of changes of tax law, case law, and Revenue administrative precedents. This fostered a strong sense of collegiality among Revenue staff as they helped one another to stay up to date with rapid change.

As the integration of departmental grades was nearing completion, Revenue entered into an agreement with the University of Limerick in 2004. Its in-house technical tax training programmes were accredited by the university with a Diploma in Applied Taxation. In September 2006, this agreement was extended for the delivery of a fourth and final year of a BA (Hons.) course in Applied Taxation. In more recent years, Revenue extended its educational partnership for staff training and development to include professional tax qualifications from the Irish Tax Institute.

Other Revenue Functions

Revenue’s role extends beyond the core functions of the assessment and collection of taxes and duties. It has always carried out work on behalf of other Government Departments and agencies. Its imports and exports controls have included, for example, protection of industry and agriculture, and the safeguarding of public health. Until the Department of Social Welfare was established in 1947, Revenue assessed eligibility for social welfare payments including the old age pension (see separate article). Links between Revenue and the Department of Social Protection remain close. Since joining the E.E.C., Customs officers have acted as agents for the Department of Agriculture on Common Agricultural Policy (CAP) issues. Revenue has printed postage stamps, fiscal stamps, licences and forms for other departments and more recently printed millions of COVID digital certificates on behalf of the HSE.

Revenue works closely with the Department of Finance in contributing to the evaluation, development and implementation of national tax policy as well as contributing to the development of the overall international tax and duty policy framework of the EU and the Organisation for Economic Cooperation and Development (OECD). Through the International Organisation of Tax Administrations (IOTA) it collaborates on best practice for common administrative challenges. Ireland has double taxation agreements with over seventy countries and within this framework Revenue collaborates with other countries.

Conclusion

Through the efforts of thousands of Revenue employees, the organisation has transformed itself over its first century. In the early decades, Revenue staff helped the organisation and the country to stand on its own feet. Their dignified forbearance and resilience, often in adverse circumstances, set an example for those that followed them. Revenue’s independence in exercising control over the statutory obligations of taxpayers has provided a stable foundation for long term coherent planning. Technology was certainly a robust driver of change. So too were ground-breaking tax policies such as self-assessment and environmental changes such as the EU single market. Revenue’s ongoing commitment to employee engagement and training help staff to adapt to new organisational structures and systems. But more than that, staff at every level embrace a strong performance ethos geared to making those changes happen.

When the COVID lockdown was announced in March 2020, Revenue’s technology allowed working from home to happen almost seamlessly. Revenue is now an agile entity, capable of responding quickly and meaningfully to challenges, as the implementation of critical COVID supports showed.

The latest Commission on Taxation and Welfare report, which was published in 2022, offers some clues on the possible future direction of Revenue. It sees digital transformation as a way of ‘reimagining how things are done in the light of technological change’. It poses a question as to whether tax returns remain the best way of collecting tax data. What is certain is that none of this will happen without enabling legislation to build transformative business solutions. Any such measures will require a level of transparency that maintains public confidence in Revenue. For that to happen, the enabling legislation will need to set a pathway that respects the boundaries of data protection and taxpayer confidentiality.

Revenue staff of one hundred years ago could never have imagined the organisation as it exists today. The recent Commission on Taxation and Welfare report refers to certain fundamental canons of taxation. They bind past, present and future Revenue employees. Adam Smith, best known as the father of economics, was a Commissioner of Customs. In 1776, he emphasised the importance of certainty, the convenience of payment and the economy of collection as fundamental canons of taxation. Credit is due to all Revenue staff serving, retired and deceased as Revenue proudly moves into its second century.

Sources:

• Seán Réamonn, History of the Revenue Commissioners, 1981, Institute of Public Administration
• President is presented with the Inaugural TK Whitaker Award, 15 December 2016 
• Revenue over the Years, 75th Anniversary publication, 1998, Revenue Commissioners
• Annual Reports, Revenue Commissioners
• Commission on Taxation Reports, 1957-1962; 1980-1985 Commission on Taxation and Welfare, 2022