Unpaid taxes: Plenty of white-collar cash lurking in the shadow economy

Pubs, restaurants and the construction trade are the usual suspects when the Revenue goes searching for unpaid tax in the cash economy.

But audits show there is even more white-collar money sloshing around in the shadows of doctors’, solicitors’ and accountants’ offices.

These white-collar cash businesses were responsible for almost €30 million of unpaid tax last year.

While tax evasion in bars and nightclubs tends to involve sleight of hand and cash registers, unrecorded cash payments and double invoicing, the tactics among white-collar professionals are often more sophisticated.

In the case of doctors, for example, locums were often not on the PAYE register, property investment returns were not declared or pension and expenses were overclaimed. With dentists, many issues related to underdeclared income, non-payment of VAT and unpaid capital gains taxes linked to the sale of properties.

Overall, audits of the shadow economy show rental income accounted for the biggest individual yield last year. Officials uncovered €34 million owed to the exchequer by landlords based on an audit of more than 600 property owners. The average yield per case was in the region of € 40,000.

Audits revealed most liabilities in this area related to tax-incentive reliefs claimed as losses; false claims or non-allowable expenses; and stamp duty clawbacks.

Separately, other figures show more than €260 million in unpaid tax was written off by the Revenue on the basis that those liable were unable to pay their debts. The prospect of having your tax bill written off might seem appealing, but it typically applies only to individuals or businesses in the most desperate of circumstances.

There are a variety of reasons why the Revenue decides to forego tax revenue: liquidation, bankruptcy or receivership are just a few. In these cases, the decision to write-off tax is taken out of the Revenue’s hands. Where a person is declared bankrupt, for example, the liability is written off as soon as the process begins. But other cases require a judgment call by Revenue on whether it makes economic sense to pursue unpaid tax. In most cases, however, Revenue uses all the powers at its disposal to pursue any liabilities.