THE Revenue Commissioners is preparing to step up its efforts to identify individuals and businesses evading tax. Under a new three year strategy it aims to reduce tax arrears by £1 billion and take a much tougher line against so called "phoenix directors."

The Revenue's latest annual report shows tax arrears of £1.6 billion on its books, although it has always said that this is an overestimate of what is actually available for collection. Under the new strategy it intends to cut £1 billion off this figure by 1999 through collecting taxes due and writing off much of the amount which it no longer regards as collectable.

The Revenue, which says it will collect some £40 billion in taxes over the three years 1997-1999 in total - is preparing to adopt a series of new measures to ensure greater compliance. It has said it will be keeping a closer watch for abuses under company law, monitoring the activities of companies - where a director abandons one company owing money to the Revenue and others and starts up another - and bringing legal action against directors found to be acting in breach of the law. In some cases it will demand an up front bond from such directors to secure VAT payments from the new company they set up.

It will also look at expanding its tax clearance system to other businesses while introducing automatic tax clearance for individuals whose affairs are in order from next year.

Among other measures planned are the establishment of a mobile customs tax unit to collect information to tackle the black economy, tougher action to guard against abuses of company tax law and the intensive investigation of individuals and groups evading tax.

Announcing the new strategy yesterday, the Minister for Finance, Mr Quinn, praised the Revenue for its "foresight and preparedness" in dealing with major issues for the economy. To date, Mr Quinn said, the Revenue has achieved excellent results, in, particular in tax collection, drugs control and other activities that have contributed to the economic and social well being of the community.

The Revenue Commissioners latest strategy focuses on improving the level of tax compliance and the enforcement of its powers. In terms of its contribution to Government policy and legislation, it will be working to ensure that legislation is drafted precisely and its implications clearly understood by the public, it said. The Revenue has also indicated that it will be seeking to extend the network of tax treaties.