Dáil Éireann debate -
Thursday, 6 May 1999

Vol. 504 No. 3

Adjournment Debate. - Finance Act, 1994.

Ms Shortall

I welcome the opportunity to raise this matter. Legitimate questions involving the circumstances surrounding the introduction of section 19 of the Finance Act, 1994, will not go away. Due to the persistent efforts of Deputies in this House and the Sunday Tribune, new information regarding this extraordinary decision continues to trickle into the public domain. The controversy has been an issue of public concern since the beginning of the year yet, incredibly, the Government will not provide full and frank answers.

In common with the Taoiseach's concealment of his role in the Sheedy affair, the obfuscation and evasion of the Government on this issue only serves to fuel suspicions that someone has something to hide regarding the unprecedented decision taken by the then Minister for Finance in his 1994 budget.

The facts are well known to Members of the House. However, last week the Sunday Tribune published information that has come to light as a result of questions put by Deputy Noonan. I appreciate that a number of Ministers and Deputies may have been more concerned at another headline screaming out at them from that issue of the newspaper.

I will outline the latest revelations. The fact that section 19 of the Finance Act benefited one person only who happened to be a donor to the Fianna Fáil Party is well established. The Taoiseach, in defence of his role in this affair, has attempted to douse the flames by claiming that Mr. Rohan's tax assessment had already been brought before the Appeal Commissioners and that they had found in his favour. The Taoiseach claims that Mr. Rohan's tax bill was nil at the time the legislation was introduced and, therefore, any claims of impropriety or worse were unfounded.

The Taoiseach failed, however, to place on the public record what was eventually wangled out of the Department of Finance after a series of Parliamentary Questions – the fact the Revenue Commissioners were intent on appealing the decision of the Appeal Commissioners to the High Court. According to newspaper reports, the tax due on behalf of Mr. Rohan was approximately £1.5 million. Their efforts to recover this money in the wake of the Appeal Commissioners' judgment were blocked by the introduction of section 19. This section of the Finance Act scuppered the intention of the Revenue Commissioners to mount a legal challenge.

There is now incontrovertible evidence that the introduction of section 19 of the Finance Act materially benefited Mr. Rohan. It prevented the Revenue Commissioners from pursuing a High Court case. Mr. Rohan could contentedly enjoy the lavish contents of his stately home in the certain knowledge that Bertie Ahern's allegedly innocuous section 19 had saved him the trouble to defending the tax implications of his opulent hobby before a court of law. Our hero was free with one bound.

I remind Deputies of the statement made in this House by the Minister for Finance on 16 December 1998 on the role of the Revenue Commissioners in bringing Appeal Commissioners' judgments before the courts. On that occasion, when the nation was outraged at the fact that Mr. C. J. Haughey's tax assessment was reduced to zero, the Minister for Finance attempted to reassure the nation with the following words:

I understand it is standard Revenue practice where considerable tax is at risk, or where points of tax principle are involved for Revenue to vigorously pursue such liabilities and matters through the courts. Where the issues are complex it is rare for the Appeals Commissioner's decision to be taken as final by either side. It can be taken that the Revenue Commissioners will appeal this case through the courts in keeping with their normal practice.

The Minister for Finance claimed it is normal practice for the Revenue Commissioners to vigorously appeal complex cases to courts. Could the Minister explain to the House why, if this is normal accepted practice, did the then Minister for Finance block this expected and usual course of action with section 19 of the Finance Act? This Government cannot have it both ways. When one Fianna Fáil leader plays ducks and drakes with the tax authorities in this State we are told to keep calm, the Revenue will take all possible steps to pursue the case through the courts. However, when a Fianna Fáil donor is about to receive the same vigorous attention from the Revenue Commissioners, the law is changed, preventing a legal challenge from the Revenue.

In view of the extraordinary circumstances surrounding this matter, I call on the Minister to give a full and frank explanation. In the absence of that, I call on the Taoiseach to come before the House, make a statement and answer questions on this extraordinary affair.

Minister for Finance (Mr. McCreevy)

I dealt with this issue previously in reply to Parliamentary Questions and during the passage of the Finance Bill, 1999. In answering this matter, I want to outline once more the background to the introduction of this relief in section 19 of the Finance Act, 1994.

The section introduced a relief which exempted specified benefits provided to any individual by his employers from the benefit-in-kind income tax charge under section 117 of the Income Tax Act, 1967, and a similar income tax charge under section 96 of the Corporation Tax Act, 1976. The exempted benefit consists of the loan to any individual of a work of art or a scientific collection owned by his or her employer and which is available for viewing by the public. The section has effect for the tax year 1993-4 and subsequent years but could also apply from the introduction of the relief for expenditure on significant buildings, that is, from the year of assessment 1982-3.

The original representations which gave rise to section 19 date from February 1993. On that occasion the Irish Georgian Society wrote to the Minister saying that the society had recently been approached by a number of members who were deeply concerned by what they believed was a new proposal by the Revenue Commissioners to tax art collections in certain circumstances. The society pointed out that many of its members allowed the public to visit their historic houses to view, study and enjoy the buildings and art collections. This access was recognised in the previous section 19 of the Finance Act, 1982.

The society proposed a tax relief for such collections on view to the public in such "section 19" houses, in order to retain important collections in the State for the enjoyment of the people and in the interest of preserving the national heritage.

By way of explanation, section 19 of the Finance Act, 1982, now section 482 of the Taxes Consolidation Act, 1997, provides tax relief on the repair, maintenance or restoration of a building which is intrinsically of significant scientific, historical, architectural or aesthetic interest. The building must be determined by the Minister for Arts, Heritage, Gaeltacht and the Islands to be intrinsically of significant scientific, historical, architectural or aesthetic interest. The Revenue Commissioners then determine that the building is one to which reasonable access is afforded to the public. This relief came into effect from the 1982-3 tax year.

Around the same time as the representation had been received from the Irish Georgian Society, the Department of Arts, Heritage, Gaeltacht and the Islands wrote supporting the proposal, referring in particular to the case of a tax assessment on a named individual. The individual concerned also wrote to the Minister in October 1993 seeking an amendment to the Finance Acts indicating that such a change would be doing a great service to Irish heritage and that there was a danger of people moving works of art out of the State for sale. As indicated in reply to a question on 27 April 1999, the tax case in question had been heard and was won on appeal to the Appeal Commissioners in May 1993 by the taxpayer but the Revenue authorities were continuing to pursue the case.

In January 1994, representations from Bord Fáilte were forwarded by the Department of the Taoiseach supporting the proposed change to the Finance Acts. Having examined the matter, the Minister replied to the individual concerned in January 1994 that a suitable provision would be included in the Finance Bill. The Department of the Taoiseach was also informed of the position.

As a result of this decision, the Department drew up parameters for the relief in consultation with the Revenue, as is normal in the case of Finance Bill provisions. These parameters included provision for the retrospective effect of the relief to the tax year 1982-3. The proposed scheme of relief was published in the Finance Bill, 1994, as initiated, as section 17.

This retrospection is consistent with the year in which the relief for expenditure on significant buildings was introduced. There is nothing unusual in reliefs being made retrospective in certain circumstances and this has been a feature of various Finance Acts passed over the years. The proposed relief was specifically mentioned by the Minister in his Second Stage contribution and was amended as it went through the House, having been discussed in some detail.

As will be clear, this legislation was enacted following representations from a number of reputable sources and was supported in the House when it was being passed. The legislation applied generally; it was not confined to a sole beneficiary, as has been claimed in the media. Others in similar circumstances to those described in the legislation could benefit as could those who might, but for the relief provided by section 19, have been liable to assessment of tax on the objects in question. During the passing of the Bill in 1994, the then Opposition spokesperson speculated on how the BIK assessment might affect particular individuals other than the person now being associated with section 19. Furthermore, that Deputy made it clear that assessing art as a benefit-in-kind in these circumstances had surprised even the tax experts at the time.

I have on each occasion on which this matter was raised provided what information I could to the House. I have no problem with this. There are limitations, however, as some of the questions may relate to an individual's actual tax liability and, in accordance with long-standing confidentiality arrangements, it is not the practice to give such details in the House. Nevertheless, I hope the considerable detail I have given on this and other occasions explains the position to the Deputy.

Ms Shortall

No, it does not.