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Dáil Éireann debate -
Tuesday, 15 Dec 1998

Vol. 498 No. 4

Supplementary Estimates, 1998. - Comptroller and Auditor General and Committees of the Houses of the Oireachtas (Special Provisions) Bill, 1998: Second Stage.

I move:

"That the Bill be now read a Second Time."

The circumstances surrounding this Bill are well known to all Members. They were brought to light in the October 1998 issue of Magill magazine which made certain allegations regarding the collection of deposit interest retention tax. That article and other revelations in the media raised questions about the actions of a major financial institution and, by implication, other banks here. The allegations raised the issue of the efficiency and effectiveness of the systems operated by the Revenue Commissioners.

The public quite rightly demanded action. A rapid response came, I am proud to say, from Members. The Committee of Public Accounts focused its examination of the Appropriation Accounts of the Office of the Revenue Commissioners on the core issues exposed in the media. The proceedings of the committee brought to the surface, in the first instance, a fundamental conflict about the administration of deposit interest retention tax between the Revenue Commissioners and AIB.

Having been made aware of the key issues, the House passed a resolution on 21 October which asked that the Committee of Public Accounts examine and report to Dáil Éireann, inter alia, on “any purported settlement between the financial institutions and the Revenue Commissioners in respect of undeclared DIRT” and information known to the financial institutions and regulatory authorities concerning the use of bogus non-resident accounts. By means of that resolution Dáil Éireann also pledged to facilitate the committee in its investigations.

Having considered the matter, the committee realised that its existing powers would not be sufficient to further its investigations into this matter. Accordingly, it made a series of recommendations about how best to proceed. The key point was that the Comptroller and Auditor General should be requested by Dáil Éireann to prepare a report and be empowered to conduct a thorough investigation. On receipt of his report, the Committee of Public Accounts would then continue its examination of the key issues, using enhanced powers under the compellability Act, and make recommendations on further action. These are, in essence, the arrangements made by the Bill. Before discussing its provisions, I want to emphasise two important features of these legislative proposals.

First, the arrangements of the Bill have been tailored to a specific situation, namely, to carry out one inquiry into how the Revenue Commissioners and financial institutions — and perhaps others — comported themselves in the matter of collecting DIRT. We are not putting in place elaborate or bureaucratic procedures; these arrangements will, in effect, cease when that inquiry is completed. Second, the basic proposal originated with a cross-party group of Members at the Committee of Public Accounts — this is a common effort crossing conventional boundaries.

In the past there was, perhaps, a belief among some Members that entrusting to themselves the kind of investigations which had traditionally been undertaken by tribunals would lead to inquiries being conducted more speedily, more effectively and with a greater awareness of public concern. Deputy Quinn, when he occupied my post, went some way towards this by bring forward the compellability Act in 1997. In doing so, he had to disabuse many of our colleagues of the idea that procedures, generous time limits for responding to directions and safeguards on individual rights, could be modified.

The issue we are faced with is one of great complexity. Members realised that investigating it fully would take more time than parliamentarians could give without neglecting their wider legislative duties and the care of their constituents. What they decided upon was a two tier arrangement in which the Comptroller and Auditor General would present the relevant facts and identify areas of dispute. The committee would then draw on his report to reach conclusions, determine findings and make recommendations. This division of labour is the lynch-pin of the Bill.

As already stated, the Bill is based on the recommendations contained in the First Interim Report of the Committee of Public Accounts. The fact that this is not a party political matter strengthens the basis for the investigation. On both sides of the House we agree there are serious matters to be investigated; we agree on the essential arrangements for the investigation; we agree that the Dáil should request the Comptroller and Auditor General to prepare a report; we agree that to carry out his investigation he must have new powers to compel the giving of evidence and confer privilege; we agree that the Committee of Public Accounts should examine his report and, if necessary, hear further evidence; we agree that the committee should have enhanced powers under the compellability Act in furthering its inquiry; and we agree that the committee must draw conclusions, reach findings and make recommendations on further action.

The matters on which we agree constitute the core of the investigation. They are all provided for in this Bill. Moreover, focusing the statutory basis for the inquiry on the administration of DIRT will allow the investigation to concentrate squarely on the central issues. Was there an agreement between the Revenue Commissioners and a financial institution, in particular AIB, in respect of undeducted deposit interest retention tax during the early 1990s? If so, what was the basis and nature of that arrangement? Were the systems, practices and procedures of the Revenue Commissioners adequate in relation to the administration of the deposit interest retention tax? Were those systems properly implemented during the relevant period? Did the financial institutions exercise their statutory duty of care in satisfying themselves that relevant accounts were genuinely non-resident? Were the financial institutions aware of the existence and extent of bogus non-resident accounts? If they knew, what did they do about these bogus accounts? If not, why not?

In dealing with this matter, I have been concerned that a good idea which came from the Committee of Public Accounts should not run into difficulties from a legal or constitutional viewpoint. This has not been an easy task. A considerable amount of time was spent with the Office of the Attorney General and the legal advisers of the committee and the Comptroller and Auditor General to ensure that we had solutions on issues which could put the Comptroller and Auditor General or the committee on the hazard. The Comptroller and Auditor General has a clear-cut function under the Constitution and in moving him somewhat away from that base — as we have done in the Bill — we had to copper-fasten an area where he might have been challenged for moving into policing the private sector. The arrangement that he can get access to private information in financial institutions only through an independent auditor has been devised as a defence.

In co-operating with the Comptroller and Auditor General in this investigation, I want to assure those who have evidence to give that they are not at risk of criminal prosecution on foot of what they say or give in evidence. At the same time, should the Comptroller and Auditor General come across prima facie evidence of non-payment or underpayment of tax, he can draw that information to the attention of the Revenue Commissioners. However, he cannot publish names or any other means of identifying individual account holders in his report to the Dáil. This investigation should concentrate on the core issues I have outlined. That is what is needed and what the members of the Committee of Public Accounts requested. I am certain that the Comptroller and Auditor General will not be deflected from these core issues.

The House can be satisfied that all those concerned with the preparation of this Bill have moved quickly to respond to the recommendations of the Committee of Public Accounts. Barely 55 days have elapsed since Dáil Éireann passed the resolution seeking powers to continue the inquiry into this matter. The legislative package we have drafted is necessarily complex in its construction but it is simple and straightforward in its objective: to get at the truth, fairly and quickly.

By convention my Second Stage speech should address substantive provisions of the Bill but I am constrained more than usual by time. I propose, therefore, to give a brief summary of some of the specific provisions.

With the exception of a limited number of matters, the special provisions of the Bill are temporary. This is provided for in section 1 by attaching the special provisions to the Committee of Public Accounts as defined for the purposes of the investigation. When the committee completes its report to Dáil Éireann the special provisions lapse unless the precise terms provided for are replicated.

Section 2 is the core of the Bill. It provides for the examinations and investigations which the Comptroller and Auditor General will carry out, defines the relevant areas of tax law, the Revenue procedures to be investigated and specifies the purposes of the investigation. It provides that the Comptroller and Auditor General may appoint independent auditors to examine the accounts of private individuals held by financial institutions, if necessary. The section makes provision for the preparation of interim reports where self-contained elements of the investigation have been completed and finalised.

The arrangements for the presentation of the Comptroller and Auditor General's report to the Clerk of Dáil Éireann are analogous to the arrangements for the reports of tribunals. They permit the Comptroller and Auditor General, at his discretion, to make a copy available to the Committee of Public Accounts. The chairman of the committee is most anxious to be supplied as early as possible with a copy of the Comptroller and Auditor General's report.

Provisions empowering the Comptroller and Auditor General to gather evidence are modelled variously on the compellability Act and, where appropriate, are analogous to the powers of an inspector appointed under the Companies Act. They are set out in sections 3 to 10 of the Bill.

Using these powers the Comptroller and Auditor General may request witnesses to present evidence or give documents in the knowledge that the privileges and immunities of a High Court witness will apply to them. If a witness refuses to co-operate, the Comptroller and Auditor General has powers to compel them to give evidence, administering an oath, if necessary.

We are all aware that investigations and inquiries do not come free. The Bill has specific provisions for the payment of reasonable expenses from public money of certain persons giving evidence. By way of balance, however, section 18 allows the Minister for Finance to seek recovery of costs from a financial institution in the courts.

I wish to draw attention to section 11. This is a permanent provision which provides for absolute privilege for the chairman and members of the committee for the purpose of the performance of their functions. Such protection was specifically requested in the interim report of the committee. This privilege does not cover interviews or comments made by them on television or radio or in the print media. Section 12 is also a permanent provision which gives absolute privilege for the performance of functions by the Comptroller and Auditor General and his officers.

Section 13 removes restrictions on the disclosure of information imposed by law or contracts. For example, this section will lift obligations of confidentiality on former employees of companies for the purposes of this investigation. This removal of confidentiality will not apply to obligations imposed by EU directives and double taxation agreements with other states. If the Comptroller and Auditor General is exempted from confidentiality provisions in EU directives, this remains subject to any conditions set, for example, professional secrecy.

The House will note that section 14 allows the Comptroller and Auditor General seek directions from the High Court to obtain clarification as to how he should exercise his powers and to resolve quickly potential constitutional conflict. In carrying out its examination the committee will be able to appoint experts to give advice, guidance or other assistance during its proceedings and its discussions at private meetings may not be disclosed without the consent of the chairman. There are other permanent amendments to the compellability Act to clarify the granting of a block consent to the use of compellability powers for a full investigation. Crucially, section 20 temporarily removes the restriction on investigations in relation to tax liability contained in the compellability Act.

The House will read this Bill as a controlled and measured response to the recommendations of the Committee of Public Accounts. In the arrangements made, the rights of Members to seek the truth are carefully balanced with the natural and constitutional rights of citizens to fair procedure and due process. I can understand the enthusiasm of some Members to go even further. The responsibility to deliver a workable mechanism rests with the Government. We have done this well in the short time available and I commend the Bill to the House.

I wish to share time with Deputy Jim Mitchell.

It is a pity this legislation is being rushed. It is unfair to the Minister that he has only 15 minutes in which to present his case and to the Opposition that all Stages have to be taken today. I understand the Government is anxious that the legislation is passed before the House goes into recess so that work can commence from 1 January but the Bill could have been presented last week. We only received today the draft of the resolution which I understand is to be taken without debate on Thursday.

The Minister outlined the background to events. It was reported in Magill that bogus non-resident accounts were used to evade the payment of DIRT. There were allegations that a settlement was reached between AIB and the Revenue Commissioners in respect of the amounts of DIRT due. It transpired in evidence at the Committee of Public Accounts that AIB saw this as a forward looking arrangement. There was a difference of interpretation of what happened in the discussions between the Revenue Commissioners and AIB. There were further allegations that the practice was widespread in the banking industry. There appeared to be a prima facie case that the payment of DIRT on non-resident accounts between 1986 and 1991 was honoured more in the breach than in the observance and that there might be an outstanding tax liability which should be made good if that is the finding of the committee.

I compliment the committee and its chairman on its excellent work. It brought the case as far as it could under its existing powers. We are seeking to ensure its powers, and those of the Comptroller and Auditor General, are adequate to carry the investigation further.

The mechanism proposed appears cumbersome. The purpose is to grant extra powers to the Comptroller and Auditor General. It appears, however, that they will allow him to deal with this event alone. If that is the case, I cannot understand why the legal advisers believed it was necessary to proceed by way of resolution and this Bill.

Section 2 is the core of the Bill. It allows Dáil Éireann to request the Comptroller and Auditor General to investigate where it has been apprised of prima facie evidence of substantial risk to the revenues of the State. It appears, therefore, that this is an enabling Bill to allow Dáil Éireann to request the Comptroller and Auditor General to investigate where there is a loss of revenue to the Exchequer but the section goes on to state that the Comptroller and Auditor General is being empowered to investigate the position in relation to DIRT only. The resolution deals with this matter in greater detail.

If the purpose of the Bill is to deal with the allegations made in Magill with which we are all familiar, why is it necessary to adopt this cumbersome approach of activating the Bill by way of resolution? Why was the resolution not put into the text of section 2. If, on the other hand, the Bill was intended as legislation which would permanently enhance the powers of the Comptroller and Auditor General and under which he would be invited to carry out investigations on behalf of the Dáil when the Exchequer was in serious loss, I would support the way things are being done. It looks as if a policy decision was taken to give extra powers to the Comptroller and Auditor General which would be invoked by way of Dáil Resolution but at some stage there were second thoughts about the advisability of that course. It looks as if the Resolution process was then proceeded with but the terms of the Bill confined to this event alone. The Bill dies as soon as this investigation is completed. I do not understand the cumbersome manner in which it was approached.

Section 2 also allows the Comptroller and Auditor General to employ an auditor to carry out research for him. I would have thought the staff of the Comptroller's office were skilled at auditing. That is their bread and butter. They examine Government Departments, assess whether money voted by the Houses of the Oireachtas has been spent appropriately and report back. Their skills are those of auditors and accountants.

I do not understand the legal nicety referred to by the Minister when he said that if the Comptroller and Auditor General carried out such examinations himself that would constitute an extension of his powers beyond his traditional role but if he appointed an auditor to do work on his behalf it would not. It must be a principle of law that an agent carrying out the functions of a principal acts at all times on behalf of the principal and whatever legal risks exist would be incurred by the agent as much as by the principal if he did the work directly.

Will the Minister address the following two questions in his reply? Why is the approach under section 2 so cumbersome and why is this once-off legislation, when it is couched in the terms of a special provisions Bill whereby the Dáil can invoke these powers in circumstances other than those we refer to this evening? Can the Minister give the House a more lengthy explanation of why it is deemed necessary that an auditor exercise skills which the Comptroller and Auditor General and his staff quite clearly have? It is difficult to understand the way this measure is constructed.

The Minister referred to section 11 and spoke of the privilege of members of committees. I am glad the Minister has taken this opportunity to ensure that the work carried out by members of committees is privileged and that utterances by members of committees for the purpose of the performance of their functions is absolutely privileged. I understand the chairperson of one of our committees is being sued in a private capacity. As yet, the Government has not decided if they will indemnify him. It is important that such utterances be privileged.

The Minister was ambiguous in his speech. He said this will be a permanent provision and will provide absolute privilege for the chairmen and members of committees for the purpose of the performance of their functions. However, this privilege does not cover interviews or comments made by them on TV, radio or in the print media. What then does it cover? Discussions with professional advisers, perhaps? If privilege does not cover interviews or statements made or carried on TV, radio or in the print media then what privilege is being given? Does it simply cover the writing of official letters by the chairman of a committee or discussions with a legal adviser or accountant? I am sure members of committees are hoping that privilege will cover interviews or comments made by them when carrying out their functions if they place a comment in the print media or on radio or television. I would like the Minister to return to this matter. He did not have sufficent time to explain it. The time is inadequate and I would like my colleague, the Chairman of the Committee of Public Accounts to contribute to the debate.

I thank Deputy Noonan for sharing his time with me. I welcome the Bill and thank the Minister, his Department, the Government and Members on all sides of the House for their support of almost everything in the first interim report of the Committee of Public Accounts. This was followed by a Private Members' motion in the name of the Labour Party which was passed on 21 October.

This is a complex issue and the Committee of Public Accounts has no doubt that it is breaking new ground for parliamentary committees. My colleagues have acted with full commitment and discretion. We are conscious of the need to continue to do so throughout this process. The Bill, in general, deals with the issues raised by the committee but I wish to raise one or two problems.

First, contrary to what the Minister said in his speech, there is no provision for an early report to be given to the chairman or clerk of the committee. A High Court inspector, an authorised officer of a Minister or a tribunal of inquiry all would furnish a report in advance to those seeking it to allow for proper planning of the next step before the matter becomes public. I regret that this has not been provided for in the Bill and I hope it will be provided for in the Resolutions.

Second, the Bill does not provide for the committee to have the same rights as the Comptroller and Auditor General to go to the courts for direction in advance where that is deemed necessary. This might be a necessary power in order to avoid avoidable delay. The Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunity of Witnesses) Act, 1997, contains several provisions allowing for 21 and 31 days notice. The public are anxious that accountability be applied as speedily as possible. Speed cannot compromise natural justice but a provision allowing for a shorter time span while allowing a committee the discretion to allow a longer time where feasible, would expedite the completion of inquiries.

A third area of concern has been brought to my attention today and delayed my coming to the house. One interpretation of section 2(1) (c) is that it imposes a very acute limitation on the Comptroller and Auditor General, much more acute than I was given to understand. The argument for the employment of a private auditor was that the auditor would do the job of the Comptroller and Auditor General in relation to private bank accounts to as to ensure the privacy of those bank accounts. This is something with which the committee completely concurs. It appears, however, that this power will prevent the Comptroller and Auditor General getting any documents, including internal audit reports, bank minutes, correspondence and so on from a bank for fear they might mention an individual account holder in passing.

I would like an amendment to be tabled later this evening to put it beyond doubt that nothing in that subsection prohibits the Comptroller and Auditor General from accessing general documents of banks, even if they refer to an individual bank account holder. I am sure it is not beyond the wisdom of the parliamentary draftsman to provide that where such references are made they could be substituted by references X, Y or Z in copies provided to the Comptroller and Auditor General. If the Comptroller and Auditor General is to be effectively stopped from directly seeing copies of bank account holders' statements, that could scupper the inquiry and might compromise the committee's effectiveness thereafter.

Debate adjourned.