Dáil Éireann debate -
Thursday, 25 Jun 1998

Vol. 493 No. 2

Adjournment Debate. - Political Donations.

Mr. Gormley

I thank you, a Leas-Cheann Comhairle, for giving me the opportunity to raise an important issue which has been conveniently glossed over by the establishment parties of this House and, as a consequence, has been virtually ignored by the media. This typifies the way politics and the media interact. If the five establishment parties agree on or decide to play dumb on an issue, the media does not give it the attention it deserves.

The people who claim the "pick me up" system is not that serious are the same people who believe tax evasion is not that serious. This is a prevalent view given that for the first time in the history of our State an individual was recently convicted for tax evasion in Galway Circuit Court and got a suspended sentence. This individual had £500,000 in an Isle of Man account. This view can also be seen from the fact that people at the highest levels of our society have accounts in Ansbacher, NIB and AIB with the intention of evading tax. They were actively encouraged by bank officials in this regard. It has even been reported that an eminent judge had money invested in one of these schemes, which, perhaps, accounts for the judicial leniency in relation to tax evasion.

An Leas-Cheann Comhairle

I suggest that the Deputy does not cast reflection on the Judiciary. I ask him to withdraw that remark.

Mr. Gormley

I withdraw the remark. Following on from all these scandals, we have been told that political parties in their fund raising efforts encouraged tax evasion. Companies which wished to encourage the democratic process picked up the tab for printing or advertising work for parties. These invoices were sent to the companies by a printing or advertising company friendly with the party. This had a number of advantages for the company and the political party. It enabled them to keep the political donation a secret and it also meant they could write-off the amount against tax and save money on VAT. It is what is known as a win win situation.

Unfortunately, however, there are losers when it comes to tax evasion. The ordinary decent PAYE worker loses out because he or she must pick up the tab for the rest of society. In reality, tax evasion means fewer hospital beds, teachers for schools and bad public transport. That is the unspoken reality of tax evasion. For many years we were told that millions of pounds of unpaid taxes could not be accounted for, that there was some mysterious black hole. The tax amnesty and the latest revelations show the reason is much more simple. There was widespread tax evasion. The pick-me-up scheme first came to light when the famous Fitzwilton donation of £30,000, which was originally intended for Irish Printers for work for Fianna Fáil, was subsequently paid to Mr. Ray Burke. The Taoiseach has now said he intends to clean up the way in which parties are financed through the pick-me-up scheme.

Dr. McDaid

Is the Deputy aware that the church, charities, sporting organisations etc, not just political parties, use it.

Mr. Gormley

That is not good.

An Leas-Cheann Comhairle

Deputy Gormley to continue without interruption.

Dr. McDaid

The Deputy was pointing at the political parties.

Mr. Gormley

Would there have been an attempt to clean this up if the Government had not been caught? The core of this issue is that some reputable Irish firms — which are known by name, and others whose names have yet to emerge — got themselves involved in schemes dreamt up and operated by leading political parties, the same political parties who have had responsibility for running the State. If such firms had the nod from the representatives of a high office holder in respect of this tax scam, what signal was that business picking up in relation to other aspects of statutory compliance and, for instance, in its approach to the business of tendering for public sector contracts?

It has been pointed out and substantially accepted that the tax savings to the companies which were implicated in the scam would not have been exceptionally large but the real and permanent harm which pick-me-up schemes have caused has been in creating a belief among some businesses, large and small, that they were not like their peers and had the inside track.

Minister of State at the Department of Enterprise, Trade and Employment (Mr. Treacy)

The Minister for Finance sincerely regrets he cannot be here to respond to Deputy Gormley's Adjournment matter.

The Deputy refers to the wide deployment of the "pick-me-up" system of party political funding and the allegation that the practice has facilitated tax evasion. I cannot speak for the other parties, but the Taoiseach has recently asked the Revenue Commissioners to examine payments made to Fianna Fáil in this way, with a view to identifying whether there has been an underpayment of tax in any case.

This matter came to light initially in Fianna Fáil headquarters in March during the process of a trawl for the purposes of furnishing an affidavit to the Flood Tribunal. Information also came to light in the context of Fianna Fáil preparing its returns for the Public Offices Commission. The accountant noticed that certain donations were accounted for differently to others.

Some donations were represented by an invoice rather than by a receipt, and this brought to light that the donation may have been made as a "pick-me-up". A party official brought the issue to the Taoiseach's attention on 31 March. The Taoiseach immediately ordered that the practice be stopped. He was also adamant that the matter be rectified. The Taoiseach also directed that those involved in fund raising indicate, as a matter of course, that political contributions are not tax deductible. Finally, he directed that past donations be examined to ensure that they did not involve an underpayment of tax.

In early June, the Taoiseach directed that the Revenue Commissioners be contacted at the highest level and requested to examine Fianna Fáil's funding practice. A meeting was arranged between the Fianna Fáil accountant and the chief inspector of taxes to initiate the examination.

Mr. Gormley

That was when the Government was caught.

Mr. Treacy

I did not interrupt the Deputy.

Mr. Gormley

You did.

Mr. Treacy

The Deputy comes from a party, some of whose supporters have tried to sabotage some of our national industries. It is a bit rich of the Deputy to interrupt while I make my contribution.

As regards taxation, the tax code does not allow relief in respect of financial support for politicians, political parties or any of their members. Political contributions are not allowable in the calculation of income tax or corporation tax liabilities and a VAT credit in respect of relevant expenditure is not allowable.

On the "pick-me-up" mechanism, Revenue has been conducting an inquiry into all taxation aspects of the matter. Revenue is in communication with the various persons concerned. It is precluded, in accordance with the ordinary confidentiality constraints, from commenting on the tax affairs of any person or body. The outcome of its inquiries cannot be anticipated, nor can tax evasion be presumed in any case, but it may be assumed that Revenue will take whatever action is necessary as regards compliance with taxation legislation.

The Ethics in Public Office Act and the Electoral Act have greatly increased the level of transparency in the funding of individual politicians and political parties. Proposals for the Standards in Public Office Bill are now before Government.

The Bill will provide for the Standards in Public Office Commission, which will have the authority and powers to investigate the conduct of public business.

The Deputy and the House can be assured the appropriate action has been taken in this case and I hope this meets the concerns of all.