Irish registered non-resident companies are companies which, although formed and registered in Ireland, are tax resident outside Ireland. The decision as to whether a company is treated as tax resident is one taken by the Irish Revenue authorities and is decided mainly by reference to where the central management and control of the company abides.
Irish Registered Non-Resident Companies: Statements.
On a point of information, is it intended to circulate a copy of the Minister of State's contribution?
I presume the normal procedures will apply. I am not in charge of that function.
Acting Chairman
That is not a matter for the Chair.
It is.
It would be helpful to have the text.
The Deputy will get a copy in due course.
Company Law provides for the incorporation and registration of companies. The main statutory provisions are contained in the Companies Act, 1963. The Act has been amended on a number of occasions, most recently by the Companies Act, 1990.
In addition, regulations made under the European Communities Act, 1972, as amended, have implemented various European Union company law directives and regulations designed to harmonise company law within the EU. Approximately 156,000 companies are registered in the Companies Registration Office. We have no definite information as to how many of these companies are treated for tax purposes as non-resident and, thereby, fall into the category of IRNR. Various estimates have been given, including the 40,000 used by the Deputy in her question. Every company registered in the Companies Registration Office has to submit an annual return to the office. Appended to this return is a copy of the company's accounts, but in the case of companies which meet the criteria of small and medium sized, the accounts are less detailed than for larger companies.
It is important to place on the record that the company law regime in operation has been harmonised to the level provided for in EU directives, and in some instances goes beyond basic EU requirements. Information available to the Department is that an ever increasing number of IRNRs are being set up, but are not active in Ireland. Accordingly, these companies do not pay Irish tax. It is understood some companies have been found to engage in undesirable activities worldwide, such as fraud, money laundering and other illegal activities. It will be appreciated, therefore, that these companies, because they are Irish registered, reflect badly on the reputation of Ireland. More particularly, they are perceived as being regulated in the same manner as companies operating from the IFSC but this is not, of course, the case. Nevertheless, the perception seriously damages the reputation of the IFSC as a centre where reputable companies are properly regulated.
Various attempts have been made to address the problems created by IRNRs. Section 58 of the Finance Act, 1995, amended section 141 of the Corporation Tax Act, 1976. The amendment was designed to enable the Revenue authorities to seek specific information from parties who were incorporating companies which were subsequently being operated as non-resident companies. It enabled them to seek the disclosure of certain information about the people who had control or ownership of the companies in question. For various reasons, the section has not been as effective as might have been hoped.
In June 1997 a renewed impetus was given to the search for a solution to address the problems created by IRNRs. A sub-committee of the IFSC Banking and Treasury Group, which is one of a number of groups under the aegis of the Department of the Taoiseach which exists to co-ordinate the policy and regulatory matters relating to the ongoing development of the IFSC, was set up to develop proposals that would address the problem. The sub-committee is still in existence and meeting on a regular basis seeking solutions.
Concurrent with the IFSC sub-committee an inter branch/agency committee was established within the Department of Enterprise, Trade and Employment in mid-December 1997, with a view to reaching consensus on the proposals under consideration in the tax and company law areas. Equally, that committee is still in existence and seeks to develop solutions to the problem.
Against the background outlined, it will be seen that the focus of Deputy McManus's question was whether the Tánaiste and Minister for Enterprise, Trade and Employment had any proposals for improvement to the procedures for registration and monitoring of companies and if she would make a statement on the matter. The reply, which I gave, is as follows:
The Government is acutely aware of the problems that some Irish registered non-resident companies are giving rise to and of the urgent need to put measures in place to address these problems. An IFSC working group made up of representatives of the Departments of the Taoiseach, Finance, my own Department, Revenue, Central Bank, the IDA and some private sector interests who are members of the IFSC Banking and Treasury Committee has been actively considering proposals over a wide area in an effort to come up with workable solutions to what is a difficult and complex issue.
Among the proposals being considered are some in the company law area put forward by my Department, which is being assisted in its deliberations by Forfás, IDA and Forbairt. While I am not in a position to give details of possible legislation at this stage the broad thrust of whatever action is taken in the company law area will be aimed at a tightening up of the registration process consistent with avoiding the imposition of undue cost and administrative burdens on business at large. A key challenge therefore will be the achievement of a proper balance in this area. The Government will respond swiftly to any reasonable proposals emerging.
In the meantime the Companies Registration Office which has been allocated additional resources in the past 12 months is now in a much better position to monitor compliance of companies with existing company law requirements as regards the making of annual returns and such like and to respond more effectively and speedily where non-compliance is occurring.
It will be seen, therefore, that the response acknowledged the Government is acutely aware of the problems created by some IRNR companies and that work is being done to see how they can be addressed. However, as indicated in the reply, the work has not reached the stage where it is possible to disclose what proposals will be brought forward, but it states the broad thrust of whatever action is taken in the company law area will be aimed at a tightening up of the registration process consistent with avoiding the imposition of undue cost and administrative burdens on business at large.
The issues raised by IRNR companies had been the subject of substantial public coverage in the media in the days prior to the answer of the question. In particular, I refer to articles in The Irish Times on 6 and 13 February 1998. A great deal of information about IRNRs is already in the public domain.
I came into office only in October 1997 and the matter came to my attention in November. An interdepartmental committee was established in December as a result of a decision I made. This shows the matter was dealt with immediately and we intend to take an effective decision on the matter to rectify the situation as quickly, responsibly and positively as possible.
On a point of order, I regard it as regrettable that the Minister of State did not take the opportunity to apologise to Deputy Rabbitte for his gross misrepresentation of the Deputy's position on television news last night, particularly as he admits the Government of which the Deputy was a member dealt with the matter in 1995.
Acting Chairman
That is not a point of order and the Deputy will have an opportunity to contribute later.
The Minister of State concluded his speech by referring to the fact that articles in The Irish Times on 6 and 13 February made certain information available. I interpret that to mean that if members of the Opposition put down questions, we will not get the information we want or expect to receive if it has already appeared in a newspaper.
I remind him this is a House of Parliament, we are duly elected by the people and we expect such information.
I never said any such thing.
However, the implication is that somehow or other we should get information from media reports and if it is in the media domain it is too much trouble for the Minister to attach such information to a reply to a parliamentary question.
He was advised by his Department not to tell the Dáil.
Acting Chairman
Deputy Owen, without interruption, please.
The issues involved in this emergency debate can be addressed in two ways. Why did the Tánaiste not give the information she had in the note in reply to the question? There was nothing in it that she could not have included in the reply. The question specifically referred to concerns about these companies using this country for tax evasion or to hide money derived from criminal activity. It is not as if the question did not refer to that matter. It is clear from the note, inadvertently issued with the reply, that the Tánaiste was privy to the information that there is grave concern about the use of these companies and that they are being confused with properly regulated and registered IFSC companies. A clear warning was given to her in that note that the actions of these companies was giving rise to concern. The note stated:
The fact that they are Irish registered reflects badly on the reputation of Ireland. More particularly, they are perceived as being regulated in the same way as companies operating from the IFSC which, of course, they are not, but this perception seriously damages the reputation of the IFSC as a centre where reputable companies are properly regulated.
Since the Progressive Democrats were formed, the Minister pilloried us, from the Opposition benches, for not giving full information to the House. I was at the receiving end of an attack from her when she was on the Opposition benches because less than 12 hours — certainly less than three to four working hours — after a major robbery had taken place she expected me to come into the House with the crime fully investigated and put the facts before the House. She wanted me to name the offenders, the sentences they received and so on. She gave no mercy if she felt Ministers gave the House less than the full information she thought they might have.
The shoe is on the other foot now and she must now face up to the reality. It is not good enough to give the House this type of answer to a question when she has other information available to her, as we know she had from the note. She owes the Dáil and Deputy McManus an apology. I hope when she speaks this afternoon she will not continue with her gung ho attack on the Opposition for daring to criticise her for not giving the information. Even a first year English student would be able to detect the difference between the reply and the note. She was less than open in her reply. It is not good enough for her to say she would have given the information on the note if she were asked supplementary questions. She should also know from experience that Question No. 101 was unlikely to be reached by way of oral question and that, therefore, she would not have been able to give the information on the note in answer to supplementaries. Her defence in that line is very weak.
The other issue we must tackle today is the substance of the note. There is no doubt serious concern exists in the Department of Enterprise, Trade and Employment and in the Department of Finance about the issue of non-resident registered companies. Obviously, this system has existed for many years and was used mainly by companies who operated here, contributed to the economy and used those accounts to carry on work elsewhere where tax was paid on the money involved. In recent years, however, there has been a move to set up companies that do not trade or have a tax liability here. Yet, the Minister gave a slightly laid back answer to a question about this matter as if it is a problem, but not an urgent one. People are concerned about this matter.
The Minister could be forgiven if she and the Minister for Finance had not recently gone to Brussels to sort out our rate of corporation tax with the Commission. When the programme for Government was prepared by Fianna Fáil and the Progressive Democrats they pilloried the last Government for talking about a 12.5 per cent rate and promised a 10 per cent rate. They said this was possible and that our Government was wrong. They went to Brussels where the debate centred around the fact that some of our EU partners were concerned that there were special regimes here that were giving rise to favouritism and causing inward investment that other countries could not attract. The Minister need not tell me that she or the Minister for Finance, who is in charge of the Revenue Commissioners, would not have been briefed by their respective Departments about the widespread concern about this matter, which was reflected in the note to the Minister. This is merely another instance of the Minister's actions. When the closure of Seagate was announced she expressed surprise even though she had known for three months that there were serious concerns about the company's future. She is again trying to imply that she did not know about the concerns being expressed at European level and by her Department, as evidenced in the note, about non-resident companies. I do not accept her contention this morning on the radio that she or the Minister of State were handling the matter and that it would be dealt with in the fullness of time. She did not give the House the full information that was available to her. I accept the attachment of the memo was an error by some staff member. Obviously, it should not have been attached to the reply.
It was not intended to attach it to the reply.
It was a mistake, but like it or not, the Minister is responsible for her Department. She must take responsibility for the fact that somebody in her Department attached the memo to the reply and it is now public knowledge. We are now able to judge the Minister on the way she handles matters in her Department and she must face up to that because of the way she judged us when we were in Government. She was quick enough to blame other Ministers when she was in Opposition if something happened in their Departments. I recall her stating from the bench where Deputy McDowell is now sitting that I was responsible for everything that happened in my Department. She is responsible for the mistake in making this document public, but that is not really the issue. She is responsible for clearing her parliamentary questions and making sure information available to her in note form is transmitted into replies.
In less than two months, on 21 April I think, the freedom of information legislation will become law. One would have imagined, therefore, that the Minister would be fully conscious of learning how to make information available, even if it is the tradition of Departments to give out information on a need-to-know basis. In less than two months, by law, her Department will have to give information and I trust it is already practising how to do that. If not, the fault lies with the Minister.
The Irish Financial Services Centre, founded ten years ago, has been a great boost to the country. It has created in excess of 3,500 jobs and is fully regulated under EU regulations. When my colleague, Deputy Gay Mitchell, was Minister of State he published a report titled, A Report of the International Advisory Group on the International Financial Services Centre. It is obvious from that report that we can be proud of the centre. It is recognised as a regulated centre for financial services in the EU, subject to the agreed disciplines embodied in EU Directives. I want to get across the message that the Minister for Enterprise, Trade and Employment and the Minister for Finance have an obligation to ensure that nothing exists that will damage the reputation and the regulation of the IFSC. It is clear from the report that the existence of the IRNRs are causing some threat to that reputation. When she and the Minister for Finance, Deputy McCreevy went to Brussels I have no doubt the matter was discussed. The lack of frankness and openness in her reply is even more damaging to her. I await with interest to see how she will tackle the problem.
Long discussions have taken place in Brussels on the 12.5 per cent corporation tax. One of the key criticisms about Ireland from the EU and other members was they were under the mistaken impression that these non-resident companies were part of the IFSC. However, I am sure the two relevant Ministers made it clear to the EU Commission and their partners that the IRNRs were not part of the regulated IFSC.
The Minister and the Taoiseach today did not seem to know what was going on. For example, when Deputy John Bruton asked about the situation regarding the financial action task force on money laundering, a subcommittee of the OECD, of which Ireland is a member, it appeared there was no knowledge of it although we have been able to draw this down off the Internet since that debate. They did not appear to know Ireland was a member and there was a request as to what Deputy John Bruton was talking about.
Are the Departments of Enterprise, Trade and Employment and Finance aware of the role Ireland plays in various international bodies such as this? The financial action task force, FATF, produced a report on money laundering and under the Belgian Presidency its work was to continue. What has Ireland done about this since 1 July? There seems to be no knowledge in the Department about this work and what is expected. How many of the 40 recommendations have been implemented here?
It is clear the Minister has been caught offside on this issue. She owes it to this House and, more importantly, to the reputation of this country to rectify the misleading impression given and to get the report which was produced in June. We cannot wait another six months or a year for that report because our reputation is at stake. I hope the Minister will recognise, given the anger at the lack of frankness, that we need a proper reply. The reply of the Minister of State today did not explain why the Minister's reply was not frank and open. I notice the Minister is trying to put the blame on the Minister of State, Deputy Treacy, which is not fair as Deputy Harney is the senior Minister. When I was Minister in a Department I was briefed on all the parliamentary questions before coming into this House. If a Minister of State was taking questions he or she was also briefed. The Minister, Deputy Harney, is responsible for how she answers to the Dáil.
The Central Bank Act needs to be updated in regard to any trust set up here. We must know the proper regulations are in place to ensure it is not used to hide dirty money, drug money, Russian Mafia money or any other foreign money which may have been gained through criminal or tax evasion methods. The Government does not recognise that by one act we could lose our positive reputation for the Irish Financial Services Centre.
I am appalled at how unaware the Minister is of the danger about this information and that she was not upfront with it. I await her reply with interest. It is not the responsibility of the Minister of State, Deputy Treacy, to explain the reason the Minister misled the Dáil and was not frank and open, given that she, as a member of the Progressive Democrats, had lectured us year in year out. She must now be judged by the standards she set for everybody else.
There are two issues before the House: the question of Irish registered non-resident companies and the question of political accountability arising from the way this matter was dealt with by the Tánaiste and the Minister of State, Deputy Treacy. I shall deal with the second issue first. Deputy McManus asked a question comprising several parts. She asked if the Tánaiste was aware of the problem created by the use — or rather the abuse — of IRNRs and what proposals the Tánaiste had to deal with the difficulties arising out of that use or misuse. The response was succinct to the point of being meaningless. It acknowledged merely that the Government was "acutely aware" of the problems. The Minister was in possession of information which represents nothing less than a damning indictment of IRNRs and the way in which they were used.
The supplementary information in the Minister's possession dealt with allegations of criminal and illegal activity, money laundering — an activity damaging to Ireland's reputation abroad and damaging to the reputation of the IFSC.
I am at a loss to understand the reason the Tánaiste found it impossible to acknowledge the genuine nature of these concerns. Why did she not acknowledge the real nature of the problem? Did she consider that this House is not entitled to know that a particular company law structure is being used to help or assist in activities which are illegal and damaging to Ireland's reputation? Does she or the Minister of State, Deputy Treacy, believe it is sufficient to say they are "acutely aware" of the problem without giving any detail in relation to the nature of the problem?
The reason for the Tánaiste's reticence is clear. By providing an anodyne reply she presumably expected the question and the answer would go unnoticed by the press and the public and that she and her Department and other Departments of State would be allowed to deal with the matter secretly and quietly. Generally speaking this is typical of the way in which we do things — do not scare the horses, do not acknowledge the nature of the problem because the public do not need to know.
The culture of secrecy is deeply imbued in our public service system. Matters such as this are dealt with by interdepartmental committees, high level task forces and committees. Inasmuch as it can be done in private, that is the way to do it. This comes as no surprise to any of us, what is surprising is that the Tánaiste and her party should so meekly accept this culture of secrecy. For many years the Minister, Deputy Harney, and others trumpeted the need for transparency and accountability in the way we do the public's business. We are now being asked by the Tánaiste to accept that all the public is entitled to know about a serious problem is that the Government is "acutely aware" of it. This is not acceptable, the public is entitled to know and is entitled to expect we will do something about it.
The second part of Deputy McManus's question was about the proposals the Tánaiste may have to deal with IRNRs. On this question the Minister's response was even more mute. The official response it was intended to give to the Dáil merely confirms that her Department and others were looking at proposals. She specifically said she does not intend to give details of the proposals and the Minister of State, Deputy Treacy, repeated that.
The detailed response in the Minister's back-up information clearly indicates the nature of such proposals. When the Minister came into the House she knew proposals existed, and are being discussed, to deal with IRNRs. Yet he or she deliberately chose to hide the nature of these proposals from the House. These proposals were essentially threefold. We were informed the Department of Finance was considering a tax based solution, that the Department of Enterprise, Trade and Employment was considering a company law solution and that the Department of Justice, Equality and Law Reform was asked to look at an additional provision regarding money laundering.
Why was the Dáil not told about this? Why are we not upfront about these matters? I do not see what damage could have been done if the Minister had indicated the nature of the proposals being considered. What did he expect would happen? Did we expect these companies would vanish overnight? Perhaps some would have vanished and perhaps others involved in illegal activities might have departed these shores and taken their bank accounts elsewhere. If so good riddance to them. The likelihood is, without wishing to prejudice anything the Garda may do, that we will not be able to successfully mount a prosecution against these companies so why have them here in the first place?
I refer to IRNRs and the damage they are doing to our reputation and to the reputation of the IFSC. I do not believe there is a single convincing reason for offshore non-resident accounts and non-resident companies of this kind. Although these companies may not trade here, one can be sure they maintain bank accounts here. That is one of the primary reasons this company law structure exists.
This problem has not arisen today, last year or the year before last. As I understand it, this structure has been available for use since the mid-1970s. For most of that period it has had a benign presence. As we are all aware, the difficulty has arisen since 1989 when Britain closed off this loophole. Since then, particularly in Eastern Europe following the fall of communism and the demolition of the Berlin Wall, Ireland has been touted as a location where this type of company structure exists. This is not being done for reasons we should seek to uphold. It is clear from the Minister of State's response that it is being used, at least partly, for illegal and money laundering activities. We cannot stand over this.
There is no legitimate reason for the existence of these companies. No other country in the European Union currently has a company law structure of this kind. As I understand it, Britain was the last to close off what is seen, at best, as a loophole. It is an undesirable structure. We should move to ensure these companies fold.
The argument has been made in the past 24 hours that multinational corporations locating here use these companies for legitimate reasons. They may use them for reasons that are legal and, to that extent, proper but I remain to be convinced that we should facilitate them in using them in this way. This country offers decent tax concessions to multinational corporations. There are many reasons they should seek to locate here. We have a young, well trained, English speaking workforce which is of huge benefit to multinational corporations. It is of benefit to American based multinational corporations that they can gain a foothold in the EU market by locating here. I do not see why we should seek to facilitate them further by providing a company law structure which allows them to avoid or defer the payment of tax in their home country, in many cases, the United States of America. If the IDA believes this, it has a job to do to persuade me and my party that we should seek to facilitate them in that way. There is little or no benefit to the economy in having this company law structure available. As Deputy Owen said, there are huge drawbacks.
It would be wide of the mark to attribute responsibility for what is happening to the Government; the problem has been growing over the past seven or eight years and it is one we must tackle as it is inflicting serious damage on our reputation. As we are all aware, many of our European Union partners look upon Ireland as a second Cayman Islands. They are, to say the least, not impressed by our perfectly legal and proper efforts to attract foreign direct investment. They look askance at this company law structure. They are right to do so. We should move to clean up our act. We should do so by making this kind of company useless to the people who wish to use it for tax avoidance purposes or other illegal activities.
I await the Tánaiste's response on the issue of responsibility. She has serious questions to answer. The unfortunate civil servants who have contributed to this déba cle may, in a sense, have done us a favour. They have pointed yet again to the way in which our public service works and the way in which we grasp for secrecy as much as we can. They may have made it less likely that something like this will happen again.
The manner in which the Government has reacted to the disclosures I made yesterday about the extent of knowledge in the Department of Enterprise, Trade and Employment of the problems associated with the operation of Irish registered non-resident companies and the manner in which this information was withheld from the House have been characterised by a degree of indecision, obfuscation and buck passing that we have not witnessed for a long time. One would be tempted to use the term "rudderless ship" but that would convey a degree of stability and direction which is missing from the Fianna Fáil-Progressive Democrats Administration. We have witnessed the Tánaiste trying to blame the Minister of State; the Minister of State trying to blame everyone else; the Taoiseach clearly embarrassed by the incompetence of his Ministers; last minute changes to the Order of Business without the normal courtesy of informing the Opposition; an inability to decide how the problem of Irish registered non-resident companies should be dealt with, and an indisputable decision by the Minister to withhold relevant and substantive information in reply to the question tabled by my colleague, Deputy McManus.
There are two issues involved, the first of which is the phenomenon of Irish registered non-resident companies, the extent to which this is increasing in recent years, the damage it is inflicting on the reputation of Ireland and the IFSC in particular. I agree with my colleagues who have drawn attention to the success of the IFSC and the need to distinguish between multinational corporations, and branches thereof located here, engaged in legitimate international commerce and fly-by-night companies which seek an Irish domicile for the express purpose of evading tax in their country of origin.
The second question relates to the concealment of information in reply to the question tabled by Deputy McManus which was straightforward and specific. It asked the number of companies involved in criminality and so on. It was not addressed, not because the Department did not have certain information and the Minister was not briefed but because someone decided not to make the information available. This raises profound questions about the efficacy of the parliamentary question and the accountability of Ministers to Parliament.
The Minister of State informed us that he was the Minister responsible, that is, after the Tánaiste had told him that he was the Minister responsible.
She told him to take the flak.
The Minister of State had nothing to say for himself. He has not added one whit to our knowledge. I do not know whether he knows what is going on or whether he thinks stonewalling is the thing to do until the boss comes home and someone has time to write a script for her. Manifestly, he cannot deal with the issue and he did not have the guts to apologise for the charge he made on television last night that he had discovered a file on this issue that had lain unattended by me for three years. That is a falsehood. I challenged him this morning to deal with the matter and to apologise but he did neither. I am surprised that he does not, at least, have the guts to say that, when he could not think of anything else to say last night, he blurted this out. If one is going to tell a lie, one might as well tell a whopper in the hope one will get away with it. It is a lamentable performance——
It is the tradition in the House that Members do not accuse other Members of telling lies.
Is it all right to accuse Members outside the House?
On the telly.
I ask the Deputy to withdraw the word "lie".
The Minister of State is beyond your protection. It is a lamentable performance and he is not fit to hold the office.
I ask the Deputy to withdraw the comment that the Minister of State is beyond my protection.
I withdraw it. I would be obliged if you would permit me to use up the time available to me in my own way.
Will the Leas-Cheann Comhairle now ask the Minister of State to withdraw his lies?
Various Ministers and Government sources have attempted to divert attention from the manifest concealment of relevant substantive information in reply to a parliamentary question by making wide-ranging and unfounded allegations in respect of my tenure as Minister of State with responsibility for commerce. It is a falsehood for the Minister of State to allege that "there was a file on this issue left unattended for three years" when I was Minister of State. There were no proposals for action on IRNRs, legislative or otherwise, brought to me. There was no knowledge, and according to the Minister's briefing note last week, there is still no knowledge of the scale of this phenomenon. Prior to my leaving office I have a vague recollection of it being brought to my attention that Department of Finance proposals were being contemplated but that they could not and should not be supported by the Department of Enterprise and Employment. Last week's internal memorandum is consistent with that and indicates the working group being established "in the middle of last year" and the Department of Justice now indicating that they too "see problems with these proposals". That is in keeping with the script of the Minister of State. He spoke about a subcommittee of the Irish Financial Services Centre and the treasury group being set up in June 1997 under the aegis of the Department of the Taoiseach, which had nothing to do with me. That was a decision of the Taoiseach's Department.
The Taoiseach was also wrong in his statement this morning on the Order of Business that as commerce Minister I should have been aware of the Ryanair prospectus and should have asked questions about the sweetheart deal concluded by the company with the then Minister, Maire Geoghegan-Quinn. There was no question of a prospectus prepared for American investors for an Nasdaq flotation being brought to the attention of the Irish commerce Minister or his approval being sought. The Taoiseach's intervention to that effect is a further red herring to add to the shoal put about by the Minister, Deputy Harney, and the Minister of State, Deputy Treacy.
Regarding my legislative record over two and a half years as Minister of State with responsibility for Commerce, I put seven Bills through the Oireachtas, some of which were major legislation. They include the Credit Union Act, the Consumer Credit Act, the Trademarks Act, the Takeover Panel Stock Exchange Act, the Legal Metrology Act, the Casual Trading Act and the NSAI Act. That legislative record does not include different regulations and statutory instruments. It is a legislative record of which I am immensely proud and in respect of a body of legislative achievement is second only to the then Minister for Justice, Deputy Owen. I also had at an advanced stage of preparation a companies (amendment) Bill providing for changes in the law relating to examinership, small firm audit and tackling the so-called phoenix syndrome. No previous Minister of State with responsibility for Commerce has put so much legislation on the Statute Book.
In addition, and immediately pertinent to this controversy, I took the Companies Registration Office out of the doldrums and put through a major reform package that included an extensive new premises at Parnell House and sanction for 60 additional staff and for £1.1 million investment in information technology. I discovered the Companies Registration Office had been neglected for years, was under-resourced and was in entirely unsuitable accommodation.
When the Tánaiste, Deputy Harney, returns to us, I would like to remind her that her party, in the form of the then Deputy Michael McDowell, harried me in the House to privatise the Companies Registration Office because it was not functioning up to standard. However, that was no reflection on the staff. The office had been under-resourced for years. It was in a warren at the bottom of Dublin Castle that was utterly unsuitable for staff. It did not have the necessary technology and no Minister in the previous 15 years seemed to have taken an interest in it. The then Deputy McDowell wanted me to privatise it. I did not do that, but the memorandum I brought to Cabinet included a provision for the recruitment of an outside chief executive. To my amazement as a result of this controversy I find that the leader of all the privatisers, the Tánaiste, Deputy Harney, has changed that decision and a Civil Service appointment has been made. I would like to hear her address that matter.
On the question of the manner in which Ministers account to this House, I remind the Tánaiste that when her colleague, the Taoiseach, was dealing with this matter on 24 May 1995 he stated:
It is totally unsatisfactory for the Taoiseach to say on the national airwaves this morning that the reason he did not give us a full account here in the House yesterday was because he was not asked the right question. The implications of that are horrendous for any Taoiseach. The Taoiseach is implying that if we do not ask the right questions he will feel free to conceal any information he deems proper from this House. How on earth are we on the Opposition benches to know on a daily basis what the right question is to elicit information in the public interest.. This is a disgraceful way to treat the House.
Deputy McManus knew the right question. She asked the pertinent question, but the Minister in that full state of knowledge chose not to answer it.
Deputy Owen dealt with the business of the metamorphosis that has taken place in the Tánaiste since the winds of indignation were billowing her over here on these benches. She has a totally different approach to parliamentary life and accountability. Her performance on radio this morning had to be heard to be believed. Apart from presumably a phone call from the Taoiseach to try to give the Minister of State a pat on the head, which strikes me to be the kiss of death——
While the knife was being put in between his shoulders.
Apart from that, she claimed she could not see any difference between the backup documentation and the answer to the parliamentary question. That defies belief. It has been dealt with by independent commentators to some extent and I am sure it will be dealt with further by them. That reply to the question did not deal with what number of those companies are here, the fact that the Department is so concerned that some of them have a proven track record of involvement in illegal activity, fraud and money laundering, that they are making no contribution to this economy, paying no tax, damaging our international reputation, damaging the reputation of the IFSC and that it is a growing phenomenon in recent years. Yet the Minister, Deputy Harney, could tell the country this morning that she could see no discrepancy between the reply she gave in the House and the information circulated. She went on brazen-faced to read out the first of two sentences under paragraph 8 of the confidential memorandum entitled "Confidentiality Proposals". She read: "While references have been made in the recent media coverage to solutions being sought in the tax and company law area no specific details have emerged." However, she did not read the second sentence which states: "It is strongly recommended that this approach be maintained in so far as the reply to the PQ is concerned." That is the critical point. That shows there was intention to conceal. She sets up a man of straw by accusing me of accusing her of misleading the House. I never did that. I accused her of concealing information and I repeat that charge now.
In terms of all this hokey-pokey and concealment, the Tánaiste's attitude to dealing with scandals that have broken is in stark contrast to her approach when in Opposition. It seems extraordinary she has chosen not to put an inspector into the National Irish Bank. Today I got a list of the depositors which I have not had time to study, but it makes fascinating reading. It contains many well known names which one would recognise at a glance, even in this House. I regret I only have one minute remaining and I am sorry we gave five minutes to the Minister, Deputy McCreevy, because I would have liked to have dealt with this in more detail. The Minister, Deputy Harney, was for openness, transparency and accountability when on this side of the House, but now she is in Government nothing warrants investigation. She knows in this case the Revenue Commissioners will never tell us what they find or do not find. The attempt to withhold from this House information on a critical issue of public importance, such as the issue of Irish registered non-resident companies here, is a very serious matter and, like Deputy McDowell, I look forward to what the Minister, Deputy Harney, has to say for herself this evening.
The Government protests that the emergence of this issue is connected to the by-elections. However, I doubt electioneering is behind this because I can think of 101 other issues on the minds of the people of Dublin North, judging from my canvassing, and this matter is not at the top of the list. The postponement of local elections, waste management, transport and horticulture are much more on people's minds than this issue, although that might change.
What is worthy of note is the degree of ignorance surrounding the subject. Comments from the Minister, Deputy Harney, through her Department, and from the Government in general show that Irish company law can be, is being and will continue to be abused for tax evasion and possibly even for criminal purposes. This being so, the amount of complacency shown by the Minister seems to imply a tolerance of dubious business ethics. She has not shown the same tolerance and concern towards groups such as lone parents.
Outside of ethical concerns, the Government seems unwilling to take on board other issues, just as serious, arising from the behaviour of the Minister and her Department and the ability of the Department to effectively monitor commercial activity. On the question of informing the Dáil, the Minister has been well and truly exposed. The contrast between her behaviour in Opposition and in Government is all too obvious, as has been noted by previous speakers. The defence that she and the Minister of State have responded in the manner in which the previous Government treated such questions is no defence. She has resorted to defending a culture that continues to treat freedom of information with contempt.
Of equal concern is that the information which was made available reveals that the Department of Enterprise, Trade and Employment has little idea how many Irish registered non-resident companies there are. Why should this be? Are registration forms not filled? Is the information not being collated? This hardly inspires confidence in the ability of the Department to monitor business activity in the State if such information is not readily to hand.
The reaction of other State agencies to these revelations is worrying, to say the least. The IDA has urged caution and said we should not make too radical a series of changes to the system of registering non-resident companies. It fears that multinational companies who have come to Ireland may be less inclined to come for manufacturing purposes if they are not also allowed to establish shelf companies to limit their tax liabilities in other countries. There was a time when the IDA claimed multinational companies were attracted to this country because of access to the single European market, even if this country's geographic position was and continues to be peripheral to the main population centres in that market. The agency was in the habit of speaking about the "young Europeans", the youngest population in Europe which received one of the highest standards of education in the world. In the light of the questions raised by the leaks, these sales points seem to have been only gloss. The IDA's underlying message is that multinational investment is largely because of generous rates of corporation tax, with the added incentive of creating company structures which will help to avoid or even evade tax elsewhere. That is the implication of the fudge which the Minister and Minister of State have done nothing to clarify.
The policy implications need to be considered and acted on by the Government. Is it national policy to tolerate and condone the establishment of shelf companies to avoid the payment of tax, wherever it is due? Does the Government, by its failure to act, tolerate what the people are not prepared to tolerate when Irish owned companies and public figures, some associated with this House, seek recourse to tax havens in other countries?
The House has established tribunals of inquiry into the financial activities of Irish citizens making use of foreign company law and banking regulations in ways which, it now transpires, Irish legislation facilitates foreign nationals to do here. Further questions need to be asked about the extent to which Irish citizens have been involved with the establishment of these shelf companies. How many are directors? What roles do they play? These questions lead to further questions and, like peeling an onion, the Government may yet find it will all end in tears.
The solutions are obvious. Irish company law must be amended so that any company registered in Ireland must carry out all or part of its activities here. Failure to do so will show this Government's disgraceful tolerance of what is, in effect, white collar crime in many instances.
The Minister was at pains to point out the need for a balance between attracting inward investment and ensuring compliance with the law. That balance, however, must take into account that indigenous enterprise must also face the implications of the current policy. We should welcome genuine overseas investors who respect the law and are here to do a job from which we all benefit but we must also protect the interests of our people, environment, indigenous enterprise and tax code.
As TD for Dublin North, I know of indigenous enterprises which have applied for licences with the aid of IDA and Forbairt. In one instance, a clean indigenous industry, involved in washing and packing prawns, was subject to rumours and verbal opposition from foreign companies, and the authorities were dissuaded from granting the Irish company a licence. That imbalance will make Ireland more vulnerable to the winds of change blowing internationally in the economic and commercial world. We must redress that balance so that we do not penalise enterprising indigenous companies through our tolerance of questionable practices, which have been highlighted by the reply to Deputy McManus's parliamentary question.
It is ironic that in Opposition Deputy Harney was forthright in insisting freedom of information was the way of the future, but now she is a Minister such freedom is strictly curtailed and we do not get the information to which the House is entitled. That is a reflection on the people who vote for us — they are regarded as somehow not entitled to the information either. The Freedom of Information Act should be introduced quickly and in a form strong enough to stop the concealment which is leading to widespread cynicism — any Ministers who have been on the by-election trail will be familiar with that.
Despite all the fuss and recent commentaries, the problem of Irish registered non-resident companies — or IRNRs, as they are known — is not a new one. The issue has been around for a number of years and was considered by my predecessor, who consulted the then Minister of State responsible for commerce, Deputy Rabbitte, on what might be done. These discussions and consultations were ongoing at official level in a variety of working groups.
As my predecessor will recall, he included a section in the Finance Act, 1995 to try to deal with the issue by requiring IRNRs to provide certain information to the Revenue Commissioners. I quote from the explanatory memorandum to the Bill as passed by the Dáil:
Section 58 requires Irish registered companies which are not resident in the State for tax purposes to supply certain information to the Revenue Commissioners. The information required includes the name and registered office of the company, its place of business, the nature of the business, the identity of the territory in which it is managed and controlled. Companies which carry on a trade in the State are not required to give information under the provision as they are subject to other information requirements. The measure is being introduced because certain Irish incorporated non-resident companies have been used for undesirable activities and have brought Irish incorporated companies into disrepute.
There it is in black and white in the explanatory memorandum — the use of IRNRs posed a threat to the good name of genuine business activity because of certain undesirable activities. From reading some of the articles in the media last month one would imagine this issue had been created recently. A little more digging would have found that the 1995 explanatory memorandum to the Finance Bill acknowledged the concern. As the House knows, explanatory memoranda to Bills are public documents available to all concerned and are not secret or hidden.
One might ask what the outcome of section 58 was. The intention was to turn the spotlight on those using company formation for unacceptable purposes and in this way to encourage them to conduct their affairs elsewhere. Section 58, unfortunately, has not been as successful as was wished in deterring such companies from carrying on undesirable activities. The net point is that further solutions must be found.
I hope it is plain that this is a problem we inherited and one that the previous Government, for understandable reasons, found very difficult to solve. The aim is to get shut of the undesirables, protect the financial reputation of the State and allow those companies legitimately using company law structures for acceptable ends to continue to so do.
The information already in the public domain indicates that certain IRNRs are used in connection with job creating foreign direct investment, or FDI, in the State. Deputy Rabbitte's press statement acknowledges that. Unfortunately, one might get the impression that FDI companies are engaged in the undesirable activities referred to. That is not the case.
My predecessor, Deputy Quinn, was very aware of the foreign direct investment aspect and the need to take into account the ramifications in that area of any solution which might be essayed. I do not criticise him for the action taken in 1995, even if it was a less than effective solution. I listened to what the Labour Party spokesperson, Deputy McDowell, said about IRNRs, which was a total contradiction of what his party leader rightly had in mind when he was Minister for Finance. If the Deputy wishes me to give him some details on the matter I will do so.
Deputies Quinn and Rabbitte acknowledge this is a very complex area which is not easily solved. I did not hear Deputy Rabbitte put forward a solution as simplistic as that suggested by Deputy McDowell because he knows the issue has ramifications and is not easily solved. There is correspondence on this matter between the then Ministers, Deputies Quinn and Rabbitte, from 1995. It is difficult to find an equitable solution to this complex matter which will not damage the interests of the State.
We must be clear about the need to focus a solution on those fraudsters or moneylaunderers we wish to send on their way. My aim and that of my colleague, the Minister for Enterprise, Trade and Employment, is to do that without damaging legitimate and acceptable business practices. I deplore the message which is going out that this country is a Cayman Islands type tax haven. Those making such allegations for political capital should reflect on the repercussions of such assertions.
I say this in all sincerity and notwithstanding the two impending by-elections. I have held a well known view in both Government and Opposition that there should be a three month moratorium before elections during which anything said by politicians would be put into a machine and cleansed. Elections seem to send many people a little astray — I make that allegation about all Members.
People should reflect on the possible effect of what they recently said or implied about our financial system. It is all right for political purposes to shout and roar and make allegations from the back of a lorry or in a hall to try to win a few extra votes for one's side. However, some of these allegations are media commentaries which are being relayed around the world to our competitors.
Those who have been in Government, either in Cabinet or as Ministers of State, should know the effect this has on Ireland's reputation. This might not be recognised by politicians who have not held office, but those who have know it is extremely damaging and is used by our competitors. Last year international magazines were writing about the Celtic tiger. There are now items in such magazines about Irish scandals. Someone has now come up with the idea that Ireland is a Cayman Islands type tax haven.
I have often been guilty of engaging in soundbite politics and I readily recognise there were probably many soundbites over the years which I should not have given. However, I ask Members to be a little more responsible in this regard. I do not expect the media, whose job it is to sell newspapers, to be responsible in this regard because they have another agenda. However, I expect people who should know better to refrain from making outlandish allegations which are being relayed abroad and damaging the Irish cause. I said that when I was in Opposition and I am saying it again now that I am in Government. I ask Members to be a little more responsible.
I plan to address this issue in a measured and rational way, although I recognise that action needs to be taken as quickly as possible. My Department and the Department of Enterprise, Trade and Employment will be tasked to continue working towards a practical solution from a company law and tax perspective and to come up with a set of measures at an early date. I then plan to publish this and seek comments from all concerned, and it will then be for the Government to decide and announce the action it will take.
The Members opposite can hardly take issue with that. They dithered over the issue. I now have said how the Government plans to proceed through consultation. The Opposition has urged me to adopt such a process of reflection and consultation in regard to various items in the Finance Bill, ranging from betting hours to self-assessment filing dates. It can hardly object to me adopting in this case the modus operandi which it has urged on me in other matters.
I want to make clear there should be no place for these undesirables in the company register of this State. The last Government failed to solve the issue of how to weed them out in a way that left the healthy plants alone. Let us see if this Government can do better.
It took the Minister 15 hours to realise the credit union mistake.
I find the contribution of both Government speakers quite extraordinary. We had a non contribution from the Minister of State, Deputy Treacy, who failed to do the honourable thing and apologise for the lies he told on television last night.
I ask Deputy De Rossa to withdraw the word "lie".
I withdraw the word "lie" because I do not want to get involved in a row with you, Sir.
I would prefer if the Deputy did not.
The fact is the Minister of State has not withdrawn the statements he made on television last night, although he indirectly admits he was wrong. However, he has not the guts or the stature to admit plainly and upfront that he was wrong. He admits in his statement that the last Government did deal with the matter in the 1995 Finance Act. The current Minister for Finance confirms that. He says that it is a complex area and that the solution we came up with was not adequate. That is obvious, but we did attempt to deal with it.
It is typical of Fianna Fáil when they are in trouble that they reach for the "national interest". They say that we should not criticise what the Government is doing because the newspapers around the world will print it, that if things are wrong we should be quiet about it because it is not in the national interest to raise these matters. The Minister did not use the words "national interest" but that is what he is saying, that we must keep quiet on this side of the House in relation to serious matters because the international media will pick it up and run with it.
I did not say that. I said that people should reflect before making some of the more outlandish statements.
What are the outlandish statements — that Ireland is beginning to look like the Cayman Islands of the north Atlantic?
That is outlandish.
That is precisely what it is becoming. That is the perception.
If the Deputy had dealt with his colleagues in Europe on taxation issues, he would know that is an outlandish statement.
Instead of criticising Opposition parties for doing their job in this House, the Minister should admit that he and previous Governments have failed so far to come up with a solution, that it is a serious problem, and that it has to be dealt with. Otherwise our reputation will continue to be damaged by the existence of these companies which are here not only for the purpose of avoiding tax but for the purpose of laundering money. These are serious matters, and whether or not it is damaging to the image of the country they are matters that have to be dealt with. They would not be dealt with, we would not be having this debate, we would not be pressing the Government to deal with these things urgently but for the fact that a memorandum for the Minister for Enterprise, Trade and Employment was inadvertently attached to a bland reply to a parliamentary question.
I listened with astonishment to the Minister for Enterprise, Trade and Employment, Deputy Harney, on the radio this morning when she challenged the interviewer to identify what was in the memorandum that was not in the reply. The reply runs to one and a half pages, with plenty of space between paragraphs. The background memorandum runs to five pages containing eight paragraphs, yet the Minster is saying that the concrete information in that background note was included in the reply to the question. Clearly that is not the case. I have identified five specific issues that are not dealt with in the reply.
The background note states: "Essentially the IRNR structure is primarily a mechanism used by US companies to defer indefinitely the payment of US tax". That is not in the reply the Minister gave to this House. It also states: "Revenue are unlikely to have any interface with such companies because being non-resident Revenue would have no tax interest in income generated outside Ireland". That is not in the reply the Minister gave to the House. It also states: "Some of these companies have been found to engage in undesirable activities world-wide such as fraud, money laundering and other illegal activity". That is not in the reply the Minster gave to the House. It also states:
The fact that they are Irish registered reflects badly on the reputation of Ireland. More particularly, they are perceived as being regulated in the same way as companies operating from the IFSC which of course they are not, but this perception seriously damages the reputation of the IFSC as a centre where reputable companies are properly regulated. These problems have been highlighted in recent media reports — sample attached.
That was not in the reply the Minister gave to the House.
I could go on. In paragraph 5, on the Department's position, it is stated:
As regards a tax based solution the IDA continue to be opposed to the abolition of IRNRs because of their use by MMCs with operations here but this view continues to be based on the Big 6 accountancy firms' study who of course have a vested interest in retaining the status quo because of the business it provides for them.
That was not in the reply given by the Minister to this House.
That is deliberate concealment of information from this House. Deputy Rabbitte has already read out the comments the Minister made when she alleged that Deputy John Bruton, when he was Taoiseach, did not reveal information to this House on a particular occasion. She made the point that Deputies were expected to know the right questions to ask. She is applying exactly the same criteria she accused the then Taoiseach of applying. As it happens, Deputy Bruton was not guilty of doing that. However, the evidence is there now that the Minister, Deputy Harney, has herself been guilty of what she accused other people of, that is, deliberately withholding important information from the Deputies of this House, from the Parliament of this country. That is not acceptable.
It may, in the normal rough and tumble of politics, be acceptable for the Minister of State, Deputy Treacy, to refuse to apologise for his statements on television last night in regard to Deputy Rabbitte, although it would be better if he had the guts to do so. However, I am not even sure that an apology to this House from the Minister, Deputy Harney, would be sufficient in relation to deliberately keeping this information from the House on advice from her officials. I do not blame her officials for giving her that advice. As a Minister I got advice from officials many times which I chose to ignore in the interests of giving this House full information. The Minister accepted the advice and chose not to give this very serious and important information to this House when she was advised not to do so. I would expect her to come here today and explain why she took that decision, why she felt that the Members of this House, the Parliament of this country, were not to be trusted with the information she had to hand in replying to that question.
It also raises serious questions about the use of Question Time, particularly written questions. I do not know whether anybody has noticed, but I rarely put in a question for written reply in this House because I get nonsense replies. One never gets hard information from a Minister in answer to a question for written reply. As for oral Question Time, it has come to the point where five or six questions are dealt with in ordinary Question Time. I do not have access to Priority Questions. The possibility of Deputies in this House getting an oral reply and being able to put supplementary questions to winkle out the information they need is practically non-existent.
There is one chance in a million.
Question Time has become a joke. We know now the attitude of the Tánaiste is that unless Deputies know the right question to ask, they will not get an answer. Even when they do know the right question to ask and that question is put down for written reply, they still will not get the answer. They will get a nonsense reply.
I have a letter here from the General Office to Deputy Rabbitte.
An-Leas Cheann Comhairle
It is time to conclude.
The practice of transferring questions from one Minister to another is also important.
According to the order of the House the Deputy had ten minutes.
I appreciate that, and I appreciate the opportunity to speak on this because it strikes at the very basis of what we are about in this House.
As no other Member is offering, the sitting is suspended until 2.30 p.m.
On a point of order, can I have your absolute assurance that the debate, about which we had little notice, will be continued after Question Time?
The Order of the House is that following the announcement of the Adjournment Debate Matters under Standing Order 21, the Tánaiste and Minister for Enterprise, Trade and Employment shall make a statement not exceeding 15 minutes, following which she shall take questions for a period not exceeding 40 minutes, and the debate shall be concluded at 4.45 p.m.
Sitting suspended at 2.22 p.m. and resumed at 2.30 p.m.