Thursday 17 October 2019

Exclusive: Now the taxman is spying on your credit card spending

The data can be used to help determine if businesses trading online are avoiding tax
The data can be used to help determine if businesses trading online are avoiding tax
Declan Rigney
Shane Phelan

Shane Phelan

The Revenue Commissioners says it is now able to examine credit and debit card data to help determine if businesses are avoiding tax.

The data is among indicators used by the taxman to help determine whether businesses offering services online are tax compliant.

It is being supplied to Revenue by merchant acquirer firms - clearing houses for credit and debit card transactions - under legislation enacted two years ago. According to the Banking and Payments Federation, six such firms operate in Ireland, AIB Merchant Services, BOI Payment Acceptance, Barclaycard, Chase Paymentech, Elavon, HSBC and WorldPay.

The move is part of efforts by Revenue to significantly ramp up its focus on internet commerce amid concern about growing scope for tax evasion.

A senior Revenue Commissioners official revealed that over the past 18 months it had doubled the size of its team engaged in "advanced analytics", a process used to flag potential tax evaders using various databases and data sources.

This team has been examining several popular websites, including peer-to-peer businesses such as Airbnb, which acts as a middle-man to facilitate short-term rental of rooms in private homes.

Declan Rigney, assistant secretary in the Revenue's planning division, said such sites, which channel cash from the purchaser to the service provider, were obliged to disclose any transactions totalling more than €635 in a given year.

Airbnb said this week it had been asked by Revenue to provide information on transactions going back to May of last year. The disclosure caused consternation for many Airbnb hosts, who mistakenly believed they were exempt from tax under the rent-a-room scheme.

Mr Rigney said the focus on online peer-to-peer business was "only a small part" of a much wider effort to get to grips with potential tax evasion involving e-commerce.

"There are a huge number of businesses trading online. We need to make sure during the course of our audits that all income is returned," he said.

The Irish Independent understands that inquiries have been greatly helped by the legislation obliging merchant acquirers to hand over credit and debit card data.

"We are able to match information up with our records and see firstly, do we know about them, and secondly, have they registered with us and have they declared income and so on," said Mr Rigney.

"After that, we can examine if that cumulative figure for the year matches what they have told us in their income tax or corporation tax returns."

Analysts have been feeding various sources of data into sophisticated software on Revenue's Risk Evaluation Analysis and Profiling (REAP) system. Revenue says this can accurately predict whether or not someone is potentially evading tax.

The software can flag certain cases by comparing them to previous ones where tax evasion was found.

"It is really exciting stuff," said Mr Rigney. "It is very much of using mathematical probability theory to highlight potential cases with an error or where there is fraud."

The information provided by the merchant acquirers is one of around 50 different data sources being used as part of this analysis.

Other data sources include information from government departments and payments made by life assurance companies in respect of their investments.

Irish Independent

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