Parliamentary Inquiry into DIRT: Motion.

Mr. J. Mitchell

I move:

That Dáil Éireann takes note of the Report of the Committee of Public Accounts – Parliamentary Inquiry into DIRT, First Report – Examination of the Report of the Comptroller and Auditor General into the Administration of Deposit Interest Retention Tax and Related Matters during the period 1 January 1986 to 1 December 1998.

It is just over three months since the Committee of Public Accounts issued its first report arising from its parliamentary inquiry into DIRT. It is now time to check against the report to see what progress has been made on its recommendations. Before embarking on that process, I remind the House that the inquiry has not concluded and is merely suspended. Hearings will resume on Tuesday, 20 June 2000 to further review the progress made and to see what further steps, if any, require to be taken. As also indicated in the report of the inquiry, it will again resume in the first week of December 2000. Thus, clear deadlines have been set for the relevant Departments and agencies to report back to the committee. This follows the procedure followed by the Committee of Public Accounts since I first became its chairman in 1993. It has added greatly to the effectiveness of the committee as it ensures that its recommendations and decisions are not ignored, delayed or forgotten.

This parliamentary inquiry, the first of its kind, is a milestone in parliamentary procedure and work for a number of reasons and has inevitable consequences for the future of parliamentary organisation. The committee was seized of the issue for 14 months in total, which included ten months of preparation and two months writing the report, following 26 days of public hearings over six weeks. The background work and intense preparation for the inquiry allowed the efficient discharge of public business. Detailed procedural, logistical and legislative preparation was the key to permitting the inquiry to be completed speedily, economically and efficiently. However, I was also required to be a firm and totally focused chairman who would not take "no" for an answer or brook any avoidable delays from any quarter. I apologise if I offended anybody in the process but it was absolutely necessary in the public interest. Another important fact is that the committee received widespread co-operation from public agencies and the financial institutions, and most especially, from the staff of the Houses of the Oireachtas and the Department of Finance. I pay particular tribute, once again, to the clerk and staff of the Committee of Public Accounts whose diligent, tireless work over long hours and months were, in respect of each member of the staff, beyond the call of duty.

When the committee was first seized of the DIRT issue in October 1998, it became immediately apparent to it that its powers were insufficient to permit it to undertake a full investigation of the issues involved. Within one week of hearing the Revenue case and the AIB case, the committee adopted a memorandum I submitted to it and that day sent an interim report to the Dáil detailing the procedural and legislative changes which were necessary to permit it to undertake and successfully complete a parliamentary inquiry. This interim report proposed, inter alia, that a previously unused vehicle provided in section 7 of the Comptroller and Auditor General Act, 1923 be used whereby, by resolution of Dáil Éireann, the Comptroller and Auditor General could be requested to undertake specified work on behalf of the Dáil. The Comptroller and Auditor General and his office embraced this considerable burden willingly and undertook it with the effectiveness and diligence which have been a hallmark of the office for many years.

All the legislative changes were enacted within eight weeks in the Comptroller and Auditor General and Committees of the Houses of the Oireachtas (Special Provisions) Act, 1998 which was signed by the President during Christmas week and which permitted the Comptroller and Auditor General to commence his investigation immediately after Christmas.

The advantages of an initial investigation was that the Comptroller and Auditor General was asked, in effect, to compile a book of evidence by interviewing potential witnesses under oath in private. The wisdom of the committee's decision has been borne out by the speed with which this initial stage was concluded.

Central to the findings of the DIRT inquiry are that major and urgent changes are required in the Revenue Commissioners, the Central Bank, external auditors, the financial institutions and, in particular, the Oireachtas itself. Some structural management and information system reform is needed in the Department of Finance and this reform should be a model for other Government Departments.

In relation to the Revenue Commissioners, it should be acknowledged that significant administrative changes had already recently been introduced. However, more fundamental change is required and ideally this should be legislated for in a new consolidated Revenue Act. Among other things, such an Act could address the duty of the Revenue Commissioners to prosecute tax evaders and provide for stiffer penalties, including imprisonment, for such illegal activities; provide for the streamlining of the appeals procedure making it more transparent and accountable; and provide for a statutory Revenue board which ideally should include a number of carefully selected non-executive Revenue Commissioners from outside the Revenue itself.

The Central Bank has also been criticised in the report and rightly so. It has been subject to other criticisms, especially in the consumer protection area in the past year or two, to the extent that its future role is in question. As valid as the criticisms are, the Central Bank must have a continuing central role in governing the financial sector and this should include the consumer protection role as well. It appears to me that to have a financial regulator separate to the Central Bank would be to attempt to divide the indivisible. The continuing stability of the financial institutions is vital to the national interest but this does not excuse, or permit, that a blind eye be turned to illegality or poor customer service. Reforms of the Central Bank should be capable of addressing these issues. The practice whereby the Governor of the Central Bank is always a former secretary-general or second secretary-general of the Department of Finance has unwittingly blurred the independence of action and thinking which is such a vital part of the bank's role. This practice should be discontinued.

The role of the external auditors came under the spotlight in this inquiry and the revelations were not impressive. The committee welcomes the fact that a review group has been established to consider the issues raised by the committee and looks forward to receiving its recommendations in the near future. While the remit of the inquiry was to consider the DIRT issue and the financial institutions, it seems clear to me that the deficiencies disclosed regarding external auditors almost certainly can be extrapolated to embrace the role of external auditors across industry as a whole and this should be taken into account in the review group's recommendations.

I have noted the recent public comments which emerged from the International Financial Services Centre and the fact that the Revenue Commissioners have met representatives of the financial institutions operating there to discuss their concerns. Concerns have also been expressed by financial institutions operating outside the IFSC particularly in regard to the following: that the Revenue may take minor and irrelevant omissions in the documentation covering non-resident accounts as a breach of the law; and that the time lag in coming to an assessment of liability for unpaid taxes, penalties and interests is like a sword of Damocles hanging over those institutions with some attendant dangers. I am confi dent the Revenue Commissioners are undertaking the task sensibly and sensitively.

I am informed that Revenue recently finalised a protocol identifying those minor documentary errors or omissions which could not have led to tax foregone. I understand these will be excluded from any assessment of liability. I am also confident the Revenue Commissioners are working flat out, in what is a major undertaking, to finalise assessments as speedily as possible. The committee set clear deadlines for this so as to minimise uncertainty. Having discussed this matter with the Chairman of the Revenue Commissioners I have every confidence the deadlines will be met in most cases and, in some cases, earlier settlements may be possible. However, the speedy conclusion of this process also depends on the full blooded co-operation of the financial institutions and I am glad to note this has been generally the case so far. The Revenue Commissioners will, I have no doubt, act sensibly, and they can use their powers to reach settlements which appear to them to be reasonable. While the experience of the committee suggests that many will act reasonably, it is not clear to me that good sense prevails everywhere in the financial institutions.

The Government has apparently been advised that the suggested levy on the financial institutions could give rise to constitutional difficulties. Even so, an act of reparation on the part of the financial institutions would still be appropriate and would do much to restore public confidence in institutions in which confidence is such a vital necessity. There are many great causes in our society which could do with help, especially among the poor and the disabled. These groups are also least likely to be party to bogus non-resident accounts.

The financial institutions are perceived to have conspired with corrupt tax evasion and have been branded as corrupt. This is too simplistic. I have already indicated my belief that the deeds and omissions of the financial institutions, and the tens of thousands of citizens who, it must be recalled, established bogus non-resident accounts, were the product of laxity by the public authorities rather than endemic corruption. If this analysis is correct I see much better prospects for the future. However, the reality is that tens of thousands of citizens evaded taxes and getting to these sources will represent the greatest difficulty for the Revenue Commissioners. It remains to be seen how far the Revenue Commissioners can go in pursuing so many individual tax evaders especially with the elapse of time and considerations arising therefrom. The example in the Milltown Malbay case must be borne in mind, where a considerable sum of DIRT evaded was retrieved, but yet it only represented one tenth of total tax evaded and subsequently retrieved. It is the committee's hope that in the June review, the Revenue Commissioners will be in a position to clarify how it proposes to address this issue.

The only part of the report of the inquiry which has been subjected to significant criticism is the section relating to former Ministers for Finance. It should be absolutely clear that, in relation to the financial sector, the buck stops at the desk of the Minister for Finance. That fact is obvious and its declaration does not require the establishment of a parliamentary inquiry. The report makes several criticisms of Ministers. However, none of the media criticisms indicated evidence which the committee's findings either ignored or controverted. The criticisms seemed to suggest that the committee should have come to conclusions at variance with the evidence. Having a go at Ministers and politicians generally, regardless of the facts, may be acceptable to some journalists but a sworn inquiry of this nature had a duty to be fair and to have regard only to the facts. However, overwhelmingly the reportage and analysis of both the hearings and the report were comprehensive and fair. I thank the media for that and especially TG4 for covering the hearings live, which played a major part in the success of the inquiry. Media coverage is vitally important to the work of the Houses of the Oireachtas, its committees and future parliamentary inquiries.

The provisions contained in this year's Finance Act comprehensively cover the proposals made in the report regarding Revenue's duties and powers regarding a look-back audit since 1986 of all the financial institutions. I thank the Minister for his speedy and full response. The post of parliamentary legal adviser has already been advertised but at a salary level which does not approximate to the importance of the proposed post. A working group has been established in the Department of Finance to oversee the speedy implementation of the report's recommendations. The Department of Enterprise, Trade and Employment also acted quickly in establishing the review group on external auditors which was proposed in the report. The committee hopes that under each of the above headings significant progress will have been made by 20 June next when the sub-committee resumes and that complete progress will be reported when the sub-committee resumes again in early December 2000. I hope the Minister will indicate the Government's stance on each of the recommendations of the inquiry.

A fundamental and central part of the inquiry's recommendations is a comprehensive reform of the Oireachtas. This is based on the finding of the inquiry that weaknesses in accountability regarding Oireachtas resources, structures and procedures, were a common contributory factor to all recent scandals. The inquiry will be a failure if its recommendations on Oireachtas reform are not implemented. The Dáil is crying out for modernisation and reform. Yet, I am unaware of any progress on this matter. That fact in itself underlines the parliamentary inertia of which the report so rightly complains and blames.

Whether it will be feasible to establish many parliamentary inquiries in the future depends very much on Oireachtas reform. This includes ensuring the proposed office of parliamentary law adviser is appropriately resourced. It also depends on legislation creating the position of parliamentary inspector with appropriate powers and functions which the sub-committee suggests should approximate to those of a High Court inspector. The report points out that a parliamentary inquiry made up of politicians would never be an appropriate forum to inquire into matters that are essentially political. Therefore, parliamentary inquiries can never fully replace tribunals of inquiry. However, there is, rightly, considerable public disquiet at both the length and cost of some tribunals. Clearly, one possible factor is that counsel and other legal representatives are paid daily rates. This creates the perception that participants have a vested interest in prolonging the inquiry. This perception, together with the very high fixed daily rates, becomes as much a scandal as the original subject of the tribunal.

The DIRT report calls on the Attorney General to undertake a comparative study of parliamentary inquiries and tribunals to see if any lessons are to be learned. There is a strong case for abolishing daily rates for both tribunals and inquiries, instead providing, for example, a schedule of retainer fees which would be drawn up in a way that addresses this problem. Moreover, the question arises as to whether the practice of tribunals of taking one witness at a time is the most efficient way of conducting its business. Certainly, in the DIRT inquiry, building on the normal practice of the Committee of Public Accounts, the taking of groups of witnesses together greatly contributed to the speed of the inquiry. The atmosphere of a round table approach is intrinsically less adversarial than the witness box format which can be confused with a court dock. The avoidance of an adversarial format can contribute enormously to the speed of an inquiry.

The advance work done by the Comptroller and Auditor General on behalf of the Committee of Public Accounts suggests that a similar format may, in future, be considered for tribunals, with an inspector appointed to seek out the relevant information in private and to report to the tribunal before its public hearings begin. It is also worthy of consideration as to whether any future inquiry should be constituted by a sole member. A multi-member format could offer scope for a wider extra expertise other than just legal expertise to be brought to bear and provide an in-built corrective mechanism against delays or the adoption of the hours of sittings of courts rather than hours and days more appropriate to an inquiry.

In making these comments I make no judgment about the respective merits of tribunals or parliamentary inquiries. However, as Chairman of the Committee of Public Accounts I consider it my duty to raise concerns about costs that are not controllable by the Oireachtas but yet fall to be paid by the Exchequer. It is my hope that the Attorney General may be in a position to submit his comments to the sub-committee before its June review.

When the DIRT report was published I indicated that the cost to the sub-committee would be in the region of £800,000, including staff overtime but not including ordinary Oireachtas staff costs which would have been incurred in any event. I am now in a position to confirm a final figure of £823,393. Included in this figure is a provision of £239,388 for IT equipment and digital recording which will continue to be available to the Oireachtas henceforth and will be of enormous benefit. In reality, that cost should not be attributed fully to the inquiry. This equipment proved invaluable to the inquiry and was the subject of public comment and many inquiries from outside. Full credit is due to the clerk of the committee who designated the requirement and requisitioned it on behalf of the committee.

The total legal costs of the committee for three senior counsel and two junior counsel amounted to £208,685. The costs of the Comptroller and Auditor General's investigations on behalf of the Dáil are understood to be under £1 million. Therefore, the total cost of the inquiry remains at approximately £1.8 million.

On behalf of the committee, I thank the Ceann Comhairle for putting the entire resources of the Houses of the Oireachtas at the disposal of the committee and for making the arrangements he and the Clerk of the Dáil made. I cannot say too loudly how much I appreciate the enormous work done by the staff of the Houses of the Oireachtas at every level. It was edifying, they rose to the occasion brilliantly and they deserve the thanks of the public. This relates in particular to the clerk and staff of the committee, the Ceann Comhairle and the Clerk of the Dáil. I also thank the other staff, including the Editor of Debates for the speed with which the transcripts were provided within an hour or an hour and a half of the word being spoken.

There have been many innovations in the inquiry, including the full transcript of the inquiry and documents which are available on CD ROM. This is available for purchase in the Government Publications Sale Office. In addition, I thank the Minister for Finance for his wholehearted support, for the wholehearted support of his Department and for making the resources required available to the committee, including the appointment of personal assistants to each member of the sub-committee for the duration of the inquiry. That was money well spent and was invaluable. This will have to be replicated in future as an ongoing provision for some committees at least. I also thank our legal and financial advisers for their diligence and assistance.

I wish to say a few words of thanks to my colleagues on the sub-committee who were unstinting in their commitment and co-operation with me. This was an important aspect of the inquiry, without which it would not have been possible to conclude the inquiry as speedily or effectively.

The DIRT inquiry has been given widespread, even lavish, praise and approbation. While I am grateful for this, as are other members of the committee, it is premature for us to relax in a welter of favourable comment. Not until the recommendations are in force will the committee's work be completed in this matter. It is my hope that I will be able to return to the House in December and claim that a worthwhile public service has been completed.

Minister for Finance (Mr. McCreevy)

I welcome the opportunity to address the House on this issue. I have already outlined at some length the Government's response to the report of the Committee of Public Accounts when I introduced the recent Finance Bill. This debate allows me to recap and elaborate on the important public policy issues raised by the DIRT inquiry.

As the House is aware, on 15 December 1999 the Committee of Public Accounts published its first report of the inquiry into the operation of deposit interest retention tax. It seems clear that deposit takers facilitated the evasion of DIRT through the establishment of bogus non-resident accounts. However, these accounts were also used by investors, in some cases at least, to conceal otherwise taxable income from the Revenue Commissioners. The issue first surfaced in the printed media in 1998 whereupon the Committee of Public Accounts commenced an investigation of the matter. The investigation by the Committee of Public Accounts and the Comptroller and Auditor General was facilitated by resolution of Dáil Éireann. In addition, the legislative platform for the investigation includes the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act, 1997, and the Comptroller and Auditor General and Committees of the Houses of the Oireachtas (Special Provisions) Act, 1998. The report of the Comptroller and Auditor General was published in July 1999 and this was followed by the public hearings of the Committee of Public Accounts sub-committee which ran from August to November of last year.

Once again I wish to put on record my welcome for the report and my commendation of the sub-committee for conducting and concluding its deliberations in an efficient and expeditious manner. I am sure Deputies will agree that the cost effectiveness of the process is one of its more attractive features.

The report made a series of recommendations in relation to the following: the operation of the DIRT system by the Revenue Commissioners; a revenue Act to provide a modern framework for the Revenue Commissioners, to be preceded by a review of the Revenue; the powers available to Revenue in relation to audit; the publication by Revenue of details of certain tax cases; the role of external auditors; the operation of financial regulation and the role of the Central Bank; a possible contribution by, or levy on, the financial institutions concerned to fund socially desirable and community investment schemes; the appropriation and application of dormant bank accounts for such purposes; the operation of the Oireachtas and future parliamentary inquiries; the role of Oireachtas committees; the accountability of chief executive officers of State bodies to Oireachtas committees; and, finally, the issue of conflict of interest where former civil servants take up outside employment. The Committee of Public Accounts asked for progress reports on certain of these recommendations within six months.

In response to this report, I established a special group in my Department to examine the recommendations and findings. The work of the group is ongoing and a programme of action has been drawn up in relation to the recommendations of the report. The Attorney General has advised on the legality and constitutionality of some of the recommendations. The Finance Act, 2000, implements several of the recommendations of the report. I will outline these in more detail later in my statement. Work on the other recommendations is ongoing in my Department and other Departments and State agencies. The progress of these issues which may require action and-or input from my Department is being actively pursued by the specially established departmental group. I will deal with these issues first and outline their current position.

The sub-committee made a number of recommendations which are designed to promote the highest standards of corporate governance, probity and transparency in the financial services industry. Both I and the Central Bank have welcomed these proposals. It is my intention that future financial services legislation will incorporate appropriate provisions based upon these recommendations. This will provide a firmer legal basis for the regulatory authorities to obtain assurances that the highest standards prevail in financial institutions in the areas of ethics, corporate governance, compliance and auditing.

In the meantime, I advise the House that the Central Bank has requested all credit institutions to submit their internal codes of ethical practice so that an assessment can be made as to whether further action is required. At European level, the Central Bank has recently taken the initiative to arrange for surveys of current practices in the areas of ethics in corporate governance with a view to assessing where domestic standards can be improved. The Central Bank has also amended its licensing and supervision requirements and standards by requesting that a report be provided to the boards of credit institutions at least annually on compliance with national and EU laws and international regulations. This report will, inter alia, cover issues related to supervisory, tax, consumer, company law and other compliance matters.

The sub-committee further recommended that a scheme and procedure for bank officials to report suspected wrongdoing be introduced. I understand that the Tánaiste and Minister for Enterprise, Trade and Employment will be bringing forward proposals in this area in the near future. These are expected to take the form of amendments to the Whistleblowers Protection Bill, 1999, which was initiated in the Dáil last year as a Private Members' Bill.

The sub-committee also recommended that, as soon as is feasible, legislation be prepared so that the resources represented by funds in dormant accounts could be used for specified social and community purposes. Consideration of this issue is at an advanced stage. I hope to bring proposals to Cabinet shortly seeking approval in principle for a scheme requiring that the funds in dormant accounts in all financial institutions be transferred to the care of the State, subject to the right of the beneficial owner to seek a refund always being preserved. Subject to Cabinet approval, it is my intention to consult representatives of the financial services industry and the Central Bank and then to bring forward definitive legislative proposals.

The sub-committee recommended that a detailed examination be undertaken by a review group in the Department of Enterprise, Trade and Employment in regard to auditing. The establishment of a review group was announced by the Tánaiste on 29 December. The group is to report by 31 May 2000. The terms of reference of the group correspond closely to the Committee of Public Accounts recommendation.

My Department and the Revenue Commissioners have made separate submissions to the group and are also participating directly in the group. Both submissions seek consideration for the involvement of a State agency in a system to provide for the independent supervision of auditors. They also propose that auditors should be required to certify that a company has complied with statutory provisions in the tax area. Such a requirement would represent the formalisation of existing practice in the auditing area.

The centre for management and organisation development of my Department is currently carrying out the review of the Office of the Revenue Commissioners as recommended by the sub-committee. In particular the sub-committee suggested that the review should address the following issues: the independence and accountability of the office, including a review of its current legislative base; the office's organisation, structure and practices; and the desirability or otherwise of executive and non-executive commissioners on the board of Revenue.

It is hoped that the review will be completed within the timeframe set by the committee and work is being carried out on that basis. However, the scope of the review is broad and the six month timeframe may not be adequate to deal with all relevant issues in sufficient detail. In this event, it may be necessary to extend the review process beyond mid-year. I can assure the House that I am anxious that the review will be as thor ough as possible and that it deals with all the issues raised.

Without prejudice to the outcome of this review, I put on record again my acknowledgement of the progress made by Revenue for some years past, not only in streamlining processes but in modernising and opening up the organisation. This could have been recognised to a greater extent in the Committee of Public Accounts report. Nevertheless, it is timely to have a review as envisaged by the Committee of Public Accounts and I put on record that Revenue is co-operating fully with my officials in the work of this review. Revenue had undertaken a root and branch review of its organisation structure over the past few years, before the onset of the DIRT controversy. The extensive research undertaken by Revenue and the approach emerging from the deliberations of the Revenue board and management advisory committee has been made available to my Department and is a valuable input into the current review.

The findings of the sub-committee in relation to ACC Bank were a matter of grave concern to me and I wrote to the chairperson on 21 December 1999 requiring a full response from the board, including the steps the board considers should be taken concerning the sub-committee's findings. The board responded on 28 January 2000. I intend to revert to the board on this once the results of the Revenue Commissioners full look-back audit are available.

Pending this the reporting structures, which the sub-committee found had failed to keep the Minister for Finance informed of the deficiencies within ACC Bank, have been reviewed. Following this examination, new reporting arrangements have been established in the context of the concerns of the committee and of the need to address the future status of the ACC to ensure that both the Minister and the Department will be kept fully informed of all material matters within ACC. In addition to the reporting structures specified in the State bodies guidelines, I will meet the chairperson on at least a quarterly basis and there will also be quarterly briefings between the chief executive and officials of the Department. I will also meet the full board on an annual basis.

The ACC has also made operational changes to ensure respect for regulatory requirements. Many of these changes flow from the recommendations of the operational review of the bank carried out by KPMG in 1998. The changes include revised procedures in relation to the opening and operation of non-resident accounts and other exempt accounts and the appointment of a full-time compliance officer at a senior level in the bank. I am confident that the changes ACC has made, coupled with the new reporting structure, will ensure that this or any similar problem is addressed promptly in the future.

The sub-committee report contained a recommendation that where Ministers are not accountable for the operational decisions of State com panies, the chairman and chief executive of the company concerned should be amenable to the appropriate Oireachtas committee. The current accountability arrangements for State companies is based on a system of delegation to the board of general responsibility for operational matters and delegation by the board to executives of responsibility for detailed operational matters. In line with the sequence of delegation there is an appropriate sequence of accountability in the other direction, including to the relevant Minister who is accountable to the Oireachtas and, to the extent laid down by the Oireachtas, to other Oireachtas committees.

The sub-committee has requested my Department to report back to the Committee of Public Accounts within six months on proposals to avoid any conflict of interest where officials leave the Civil Service for employment in the private sector. My Department, in conjunction with the human resources working group, has been drafting a code of conduct which will apply to all civil servants. Part of the draft code includes provisions which are aimed at avoiding a conflict of interest where officials leave the Civil Service for employment in the private sector. The draft code of conduct has been under consideration by the SMI implementation group which consists of a number of secretaries general of Departments. When this consultative process has been completed, I will bring the code of conduct to Government. I have given a commitment that the code will be circulated to the Oireachtas Joint Committee on Finance and the Public Service for consideration. Detailed discussions on the code will take place with the Civil Service unions in advance of finalisation. The latest position on those proposals will be set out in the report back to the Committee of Public Accounts in June.

The sub-committee made a number of recommendations and findings relating to the role of the Committee of Public Accounts, the Oireachtas and its committee system generally. Examination of these matters is proceeding. Discussions are taking place with Oireachtas officials and also with the Attorney General's office. The preliminary legal view is that the recommendations in this regard can be implemented.

I wish to turn to the issue of the powers of the Revenue Commissioners. Following disclosures of tax evasion in recent years and the publication of the McCracken tribunal report in August 1997, I requested that my Department and the Revenue Commissioners review the adequacy of Revenue powers in the light of that report. While this review was wide-ranging, much of the focus was on powers of access to information held in financial institutions and measures relating to offshore transactions. Part of this process involved a detailed comparison of our powers in that regard with those in other jurisdictions. Arising from this process and well before the Committee of Public Accounts held its hearings and published its report on the DIRT issue, I had moved to strengthen substantially the powers of the Rev enue Commissioners in respect of investigation work on financial institutions.

As a result of provisions I included in the Finance Bill, 1999, which were then enacted into law, the Revenue Commissioners were provided with the following additional powers: an authorised officer of the Revenue Commissioners is now empowered to audit the DIRT returns of a relevant deposit taker, that is, banks etc. and the procedures applied by them in relation to non-resident declarations; the prohibition on an on-site audit of a financial institution was removed. Furthermore, an application can now be made to a judge of the District Court for the issue of a search warrant in relation to any premises; authorised officers have been given powers to issue a notice to a financial institution requiring it to make available for inspection books etc. or to furnish information relevant to a named person's tax liability. The new powers in this and other respects cover individuals and companies and extend to all relevant tax heads, not just income tax; an authorised officer is empowered to apply to the Appeal Commissioners for consent to issue a notice to a financial institution requiring it to make available for inspection books etc. or to furnish information relevant to a person's tax liability; an authorised officer can apply to a judge of the High Court for an order seeking from a financial institution access to books etc. or information relevant to a person's tax liability. Application can also be made by the authorised officer for an order of the court to freeze assets of a person in the custody of the financial institution; an authorised officer is empowered to apply to a judge of the Circuit Court or the District Court for an order authorising the officer to inspect and take copies of bank records for the purpose of investigating a Revenue offence.

A number of the new powers I have cited here are contingent on an authorised officer first securing the consent of a revenue commissioner. Certain of them are aimed at persons claiming exemption from DIRT on the basis of non-residence in the State.

Notwithstanding this and as a result of the Committee of Public Accounts report I included further provisions in the Finance Act, 2000. Section 68 of that Act empowers the Revenue Commissioners to appoint specially qualified persons to conduct or to assist with DIRT audits; to report to the Committee of Public Accounts before 1 November 2000 on the results of the DIRT "look-back" audit currently under way and to publish the results of this audit, including interim results, covering the years 1986-87 to 1998-99. The report to the Committee of Public Accounts is to set out the following in respect of each DIRT look-back audit: the name of the financial institution concerned; the amount of additional DIRT payable by that institution as a result of the audit; the amount of interest and penalties; whether an assessment has been raised and if that assessment has been appealed; whether the audit has been completed at the date of the report; the amount of any payment on account made; and such further particulars as Revenue thinks fit.

Apart from the report which must be made to the Committee of Public Accounts by 1 November 2000, the Revenue Commissioners have also been empowered to publish information at any time, either before or after that date. The section also augments the powers of the Revenue Commissioners to obtain information in the course of a DIRT audit.

Section 162 of the Act provides for certain changes to the legal requirements for the publication of certain details of tax defaulters. Since 1983 the Revenue Commissioners have been required to compile and publish a list of persons on whom either a fine or other penalty has been imposed by the courts or in whose case the commissioners have accepted a settlement offer in lieu of initiating legal proceedings. Publication is prohibited where the settlement is the result of a voluntary disclosure; where the 1993 tax amnesty applies; or where the settlement amount does not exceed £10,000.

The list of names of tax defaulters is published on a quarterly basis and gives details of the name, address and occupation of the person concerned and the fine or penalty imposed by the courts or the amount of the tax settlement involved. As a result of the recent Finance Act the published list will now give a description of the circumstances relating to the default of evasion, for example, whether a case may have arisen out of a specific inquiry or investigation. This will help identify settlements which have arisen from the work of the Committee of Public Accounts, tribunals or company law inquiries.

I made the point when publishing the Bill that there were constitutional limits on what could be done in respect of a limited number of the Committee of Public Accounts tax recommendations. Deputies will be aware that the report recommended that the Government consider the imposition of a levy on the financial institutions. It further recommended that the proceeds of the levy should go towards the funding of the Foundation for Investing in Communities including the National Endowment, the Children's Trust and Business in the Community.

I asked the Attorney General for advice on this recommendation. The advice I have received is that any involuntary levy of a restitutionary kind would be found to be a form of quasi-criminal import which would offend the Constitution. The Attorney General also advised that a levy cannot be introduced retrospectively. This advice is founded on Article 15.5 of the Constitution which states that "the Oireachtas shall not declare acts to be infringements of the law which were not so at the date of their commission". I am sure Deputies can appreciate the basic aim of the constitutional restriction on changing the law retrospectively which is to protect citizens from the unjust application of new laws. It is not a rule that can be set aside in any one set of circumstances regardless of what support such a move might attract.

The constitutional imperative does not affect the conduct of the look-back audit by Revenue. I am informed by the Revenue Commissioners that they are conducting audits back to 1986. Some 40 or so institutions which are "relevant deposit takers" under the DIRT legislation will be covered in the audit programme. To date, 28 audits have commenced and preparatory arrangements have been made for the balance. These audits are being carried out using the new powers given to Revenue in the Finance Act 1999. Before 25 March 1999 Revenue officers could not enter a bank premises, except in very limited circumstances and in the case of DIRT could not get behind non-resident declarations to examine, for example, the account transactions or the bank documentation which might indicate whether an account was bogus.

The focus of Revenue's DIRT look-back audits is on checking a sample of non-resident accounts, as provided for in the legislation, in each of the financial institutions concerned. I understand this sampling procedure is being carried out on a stratified basis; the sampling is weighted towards higher value accounts. The information gathered from checking the sample of non-resident accounts, together with the other information obtained by inspectors in the course of their audits, will lead to an estimation of the level of DIRT under-deducted by the financial institution. This work is well advanced. While a significant amount of work remains to be done, I understand the Revenue Commissioners hope to have completed the auditing work by the middle of this year.

When the Revenue Commissioners have completed the audit in each financial institution they will present the results to the management and seek to reach agreement on the amount of underpaid DIRT liabilities together with interest and penalties. If agreement is reached the case can be settled on that basis. On the other hand, if agreement is not forthcoming an assessment will be raised by Revenue which can be appealed to the Appeal Commissioners and the courts.

One of the issues that may arise in the course of these look-back audits is the question of documentary deficiencies in relation to non-resident declarations. This has already surfaced in the media recently in the specific context of IFSC banks. I understand representatives of the Financial Services Industry Association met Revenue on 25 February last and that there has also been an exchange of correspondence clarifying the continuation of certain procedures agreed with my Department and Revenue some years ago and which were referred to by the Comptroller and Auditor General in his report. These procedures, which sought to reduce the administrative burden in cases of certain non-resident situations, are of particular relevance to the IFSC institutions whose business is dealing with non-resident corporate investors.

I am assured by the Revenue Commissioners that a common-sense approach will be adopted in relation to latitude in the area of documentary deficiencies. For example, it has been suggested by commentators that an otherwise properly completed non-resident declaration would be unacceptable if a London address did not also have "England" on the form. This is certainly not the case. The Revenue Commissioners will not be unreasonable in their approach on such matters.

The Revenue Commissioners indicated to the FSIA that each institution will have an opportunity to discuss with them the findings of the audit in its case, including the implications of all documentary deficiencies, before any conclusions are reached and that the concerns of the institutions can be discussed further in that context.

While the Revenue Commissioners are required by law to report to the Committee of Public Accounts by November, it is Revenue's job to assess and collect unpaid DIRT, interest and penalties. The Committee of Public Accounts has no role in this. The Committee of Public Accounts will not decide how much the financial institutions will pay or how they should be penalised. This has been made clear on a number of occasions by the Chairman of the Committee of Public Accounts, Deputy Jim Mitchell, but it bears repetition as there may be some misunderstanding about this.

The question has also been raised as to how Revenue will approach the issue of the so-called "underlying tax", that is the tax liability of the individual holder of a bogus non-resident account. The source of the moneys on deposit in many bogus non-resident cases may be undeclared business income and the unpaid taxes on such undeclared income may be far more significant in amount and value than any unpaid DIRT.

This is an issue which will have to be considered by the Revenue Commissioners in due course when they finish with the DIRT audit of the financial institutions. I know from experience that it takes many staff hours for a Revenue inspector to finalise a back-duty case, so it will be time-consuming for Revenue to finalise back-duty settlements in many thousands of bogus non-resident cases dating back over 20 or 30 years. It is for the Revenue Commissioners to decide how they will go about this. It is possible that everybody who evaded tax using a bogus non-resident account will be investigated in due course. As I said during the Finance Bill debates, I believe we will be visiting this whole issue again but at present Revenue's focus is rightly on establishing and assessing the DIRT arrears of the financial institutions going back to 1986

I indicated recently in addressing the Institute of Taxation that the process of inquiring into past failures and defects was a healthy one and a sign of democratic maturity. The important message is that we should learn from past mistakes. I see no reason those charged with the exercise of public functions should be concerned over such examinations once they discharge their duties in a reasonable and responsible manner. It is possible, as in all things, to go to extremes but I would hope that such a reaction does not set in. We as public representatives and law makers should always seek to ensure the exercise of regulatory and supervisory powers does not amount merely to form filling and keeping the file straight but that such powers are applied by public officials with the judgment, seriousness and common sense that is the hallmark of an effective supervisory system.

Mr. Rabbitte

I had the privilege of serving as a member of the sub-committee that conducted the DIRT inquiry. I commend the work of each of my colleagues on the sub-committee. I commend the performance of the Clerk and staff of the Committee of Public Accounts and the staff of the Houses of the Oireachtas generally who rallied to the cause. I record my thanks to my adviser, Mr. Fergus O'Rahilly; Mr. Eugene McMahon and Mr. Mark Kennedy of Chapman Flood Mazars; Mr. Frank Clarke, senior counsel; Ms Mary Irvine, senior counsel; Mr. Paul Gilligan, senior counsel, and the two junior counsel who assisted. In particular I commend the leadership of the Chairman, Deputy Jim Mitchell. I commend the contribution of the Comptroller and Auditor General, Mr. John Purcell. I thank the Minister for Finance for his co-operation and assistance with various requirements of the inquiry as they arose.

The inquiry was a success because of a combination of factors. The collegiate effort and cohesion demonstrated by the sub-committee, the painstaking preparation dictated by the Chairman, his scrupulous insistence on fair procedures and attention to detail as well as his boundless energy and enthusiasm for the project were major factors. The dedication of the staff and their willingness to work above and beyond the call of duty were a demonstration of public service at its best. The DIRT inquiry must be a headline for how public servants, given a sense of mission and purpose, will respond to the challenge.

For the enterprise to be successful it was necessary that the members of the sub-committee not only did their homework but functioned in a politically non-partisan, co-ordinated and cohesive manner. We managed to do that, from which I draw two conclusions. In appropriate circumstances it can be done again and, depending on the nature of the issues being inquired into, it will not always be possible to achieve this impartial concerted effort. For example, if the nature of the subject matter being inquired into was party political, inquiry by parliamentary committee would not easily work.

The DIRT inquiry was a huge undertaking. Experienced Members of this House looking in from the outside will have drawn their own conclusions about the scale of the enterprise, the complexity of the task, the volume of documentation, the quality of the questioning and the soundness of the conclusions. I am certain I speak for all my colleagues when I say that any estimate of the work it entailed is likely to seriously understate what was actually involved. The purpose of this debate is to learn from the experience. For example, no other inquiry that I know of habitually met for a full day and on successive days for as long as was required. By comparison to other inquiries the DIRT inquiry was run on a shoestring budget. The chairman outlined the final figures.

One senior counsel described the inquiry as being equivalent to a largescale commercial litigation. He said that in such a case, for example, lawyers would have sought discovery of documents for at least six months in advance. Sometimes Deputies who served on the sub-committee received files for the first time at 8 p.m. the preceding night. This was not ideal and over a period of six weeks imposed its own strain. Deputies should not find themselves in a similar position again.

To some extent this touches on the question of parliamentary reform. A casual first glance at the Minister's script would suggest that the Government is taking the report generally and many of its recommendations seriously. It is too early to say, however, whether everything in his script and all the report's recommendations will be implemented. This will have to be monitored. I accept that in the Finance Act the Minister has recognised a number of important matters and seems committed to seeing others through. His script makes almost no reference, however, to the question of parliamentary reform. That is a major weakness and it probably points to the fact that this House will have to address the issue. It is naive to expect that this will come from the Civil Service and, the nature of government being what it is, it is not likely to come from Government.

The people most in favour of parliamentary reform are those who are out of government. In government other matters preoccupy them. Some of the conclusions drawn that the DIRT inquiry show the way for future inquiries and that it will automatically terminate the holding of tribunals of inquiry under the 1921 Act are facile and superficial and not based on fact given the major decisions that we have to make on parliamentary reform. The chairman of the committee in particular was very strong on this point and submitted a number of papers, edited versions of which appear in the report. It may fall to the office of the Ceann Comhairle to take some action to put a mechanism in place to allow us sift through the individual recommendations of the report.

In the calm of the House there is no appreciation of the workload involved or of the fact that virtually all the staff of the Houses of the Oireachtas had to be mustered to sustain the effort. No other parliamentary work was enabled to proceed while the inquiry was under way. Chairpersons of other committees had to abandon their work for the duration of the inquiry. Even then the stresses and strains imposed on the system threatened on occasion the conclusion of the inquiry. There is a world of difference between the shoestring budget on which the inquiry was run and the figures that one reads for tribunals of inquiry. It could not be done again without serious and substantial reform.

In assessing the inquiry it is necessary to acknowledge the vitally important contribution made by the live televising of the hearings by TG4. I am satisfied that the same work could have been undertaken but to much lesser effect without live television. The extent of democratic participation transformed the exercise. People watched and assessed the demeanour and conduct of the main actors. They weighed the evidence for themselves and measured the significance of what was happening before their eyes. The foresight and innovation of TG4 deserves to be acknowledged in this House. It was a considerable public service. I have no idea why RTE current affairs failed to recognise the significance of what was happening. The lid was being lifted on one aspect of social history over a quarter of a century, and the week before the hearings got under way RTE communicated to us that "Oireachtas Report" would not cover the proceedings because RTE news would report extensively on it. RTE news did a good job, but it is remarkable that RTE could not manage a brief nightly look-back programme. After all, if it was business as usual and there was a committee of the House sitting on pub licensing hours or the price of the pint, it would be faithfully reported by "Oireachtas Report". The success of TG4 and pressure from the sub-committee did eventually lead to an occasional nightly programme but overall RTE television seems to have misunderstood initially, at least, what was afoot.

Two radio shows, in particular, "The Last Word" and "Tonight with Vincent Browne", recognised the significance from the beginning and played a major part in informing, especially that section of the public who could not manage to view the TG4 reports. At a time when newspaper proprietors and other media decision makers seem to have decided that there is only a declining market for the daily proceedings in the Oireachtas, the feedback on the DIRT inquiry was refreshing.

Last night in a casual discussion on this, a younger colleague and first-time Member of the House told me that I should cop myself on because people are not interested, society has changed and current affairs and politics are not the staple diet of any significant sliver of the population, and media owners and newspaper proprietors respond to that. There is a great deal of objective evidence which suggests he is right and I am wrong. If one looks at the coverage of the proceedings of this House on any given day, it has diminished to a quarter of a page in the paper of record and frequently one cannot find it in the other newspapers. I am talking about coverage of the House as distinct from political stories, some of which are trivial. Only those stories which are controversial or negative are reported. Nowadays perhaps The Examiner probably makes a better stab at it than any of the others.

My younger colleague may be right, but that is bad for our democracy. It is an unwelcome development and it is extraordinary that the media proprietors, who criticise Members of this House so much about the manner in which they discharge their functions, have not made any effort to accommodate the fact that there is now a detailed committee structure in place in this House. On any given day there are three or four committees meeting simultaneously. The committee of which I am a member has had already 11 or 12 meetings on the Copyright and Related Rights Bill, 1999, for example, but not a single journalist has visited us yet and not a single line of coverage has appeared in the newspapers. That is not a matter of great import in one sense when one considers that no attention was given to the detailed scrutiny of Committee Stage of the Finance Bill, 2000, controversial and all as it was supposed to be. When the traffic is all one way in terms of criticism of Members of this House, it is fair to point out to those who own the newspapers and plan the coverage that there are some 21 committees of this House doing detailed work which normally would have had to have been accommodated in the Chamber and it goes unremarked and unassessed

There is genuine public interest in whether a inquiry by parliamentary committee can replace tribunals of inquiry. I would rather see the question expressed in terms of whether in certain circumstances matters might be referred to parliamentary inquiry rather than to tribunals as we have known them and whether there are aspects of the DIRT inquiry methodology which might be imported with profit into the tribunal of inquiry system. In assessing this, we should be careful not to make exaggerated claims for the DIRT inquiry. It is not to denigrate our work to note that perhaps it is somewhat unlikely that the same factors will all recur. For example, the financial institutions into which the sub-committee inquired more or less co-operated at all stages with the inquiry or at least they did not seek to obstruct the work of the inquiry in the manner which we observe at Dublin Castle. Accordingly the Comptroller and Auditor General was enabled to do the preliminary work in a reasonable period, thus, in effect, compiling the book of evidence for the public hearings.

The planning of the DIRT inquiry was meticulously carried out over a number of months so that important questions like the manner of interrogation, the order in which to take institutions and witnesses, etc., were dealt with in detail and adhered to. Because the inquiry was a parliamentary innovation and there was a consciousness that the reputation of the Dáil was to some extent riding on the outcome, there was single-minded mobilisation of Members and staff behind the effort.

There was manifest public support for the success of the enterprise, thanks in particular to TG4. Banks generally are not top of the pops and their customers approved of them being obliged to account for their actions in public.

The scope and tenor of media coverage generally assisted the effort. For the duration of the hearings and for many weeks besides, Deputies were rarely seen in their constituencies. The media swung from the customary hard-bitten cynicism to gradual serious analysis and extensive coverage, which greatly helped explain Deputies' unavailability for other business. I know that is something which might seem of little interest to people who do not have to offer themselves to the electorate for re-employment every three years, but it happens to be important. The serious manner in which there was a focus on the inquiry and the serious issues with which it was dealing made our job tolerable. I am not sure that a different six Deputies charged with a different inquiry into a different subject matter would get the same tolerance. Again that is an argument for the back-up and reform to which I referred earlier.

In that regard I want to refer briefly to the implications of the report for the great institutions of State, whether it is the Revenue Commissioners, the Central Bank, the Department of Finance or Ministers, the officeholders themselves. All demonstrated the absence of public accountability which, in turn, points to a failure of Parliament to discharge its responsibilities fully in this regard. I am intrigued by the attitude of the Department of Finance which seemed to have started out as hugely sceptical of the entire enterprise. It took a bit more than a week for the Department to change its view and take the inquiry seriously. There seemed to have been an attitude that the chairman and members of the sub-committee would stay with it because of tremendous publicity on days one and two, but that after that they would return to doing what Deputies do. Within a week it was clear that was not going to happen and we received a major submission from the Department of Finance which was of considerable assistance.

I think the Department was reflecting not just the scepticism but outright opposition which existed within the public service to the very concept of an inquiry of this kind. We heard evidence from former distinguished senior civil servants, for whom I have high regard, and it was clear from the tenor of their remarks that they were not just sceptical but enormously resented what was under way. From private discussions etc. one knows there are huge misgivings within the Civil Service about this kind of development and matters such as the Freedom of Information Act. There are dedicated, committed, honest and hard working civil servants who believe it will adversely change the nature of governance as we know it. I am fervently convinced this is not correct, but I acknowledge that such misgivings exist. I sincerely hope that the manner in which the Members of the Dáil applied themselves to the DIRT inquiry over a sustained and prolonged period, including the time it took to compile the report, which was by far the most difficult part of the process, will have provided reassurance among the senior echelons of the Civil Service about the seriousness with which the entire project was undertaken. Whereas I am sure some senior civil servants have serious reservations about some of our findings and conclusions, I do not think they can point to an absence of fair procedure or scrupulous attention to detail in terms of the way the inquiry was conducted.

I do not want to rehearse conclusions in the report in respect of the Revenue Commissioners, the Central Bank etc. – time does not allow for this. The analysis and conclusions of the report stand. It is not above criticism. However, it is noteworthy that it has attracted very little criticism from independent quarters. Claims that we were soft on Ministers for Finance because they are fellow politicians is the single substantial criticism I recall. This is interesting because if we drew conclusions or findings which were not supported by the evidence adduced by the inquiry the same commentators would be the first to criticise us. I am not disputing that the political culture in the years inquired into accurately reflected the attitude of some citizens to taxation. Quite frankly it was apparent that very many of our citizens were strangers to the concept of taxation, and the political culture in the House reflected this. Such an inquiry must draw conclusions based on the evidence adduced. There are some serious conclusions in the report concerning successive Ministers for Finance, but perhaps these are not the conclusions some people would have liked. This is because those conclusions could not have been reached from the evidence presented.

Similarly the lawyers and ourselves have been criticised for departing from the normal practice of members of the sub-committee carrying out the questioning. In this case we thought it was a good idea, for reasons which seemed obvious to us as politicians, that the questioning ought to be done by senior counsel as the danger existed that I may have used the opportunity, for example, to be very tough on one Minister for Finance and very lax when questioning another. Perhaps it is not understood that the lawyers were circumscribed in what they could do by the rules and regulations which guided us all. We were not permitted to inquire into matters of policy, which are not a matter for the Committee of Public Accounts. Therefore, I do not think this constitutes a major criticism.

Citizens were intrigued by the opportunity of lifting the veil on one the most respected and feared institutions of the State.

An Leas-Cheann Comhairle

The Deputy has two minutes remaining.

Mr. Rabbitte

I was just getting off the runway. Time flies when one is enjoying oneself.

I was going to refer to one of the most respected and feared institutions of State, namely, the Revenue Commissioners. Ordinary taxpayers, especially those who are compliant, were fascinated to be allowed look behind the curtains, and they did so with mixed emotions. On the one hand they saw some of the most highly motivated and dedicated public servants in the employment of the State while on the other hand they were amazed to find that the direction and management of Revenue was often on a more haphazard and less professional basis then they thought.

Because I have so little time, I wish to finish by saying there are a number of things in the conduct of the DIRT inquiry which might be imported with profit to the conduct of tribunals of inquiry, for example, the practice of an independent expert being required to do the preliminary stage and produce the book of evidence. There are still issues which will inevitably arise in public affairs where investigation and inquiry by a tribunal of inquiry will be the only way to proceed. We went outside the book of evidence, but nonetheless it greatly assisted the expeditious and efficient conduct of the inquiry, something which might be taken into account by tribunals of inquiry. I do not think we should confuse the cost of lawyers with the efficacy of tribunals of inquiry. Of course lawyers cost too much, there can be no argument about this. That can be the subject of another day's discussion, but if the matter is manifestly political a parliamentary committee would find great difficulty in terms of investigating it.

One of the things dictated by the chairman which worked very well was that a number of witnesses were present at the same time and questions could be addressed to more than one witness. This greatly expedited the work of the inquiry and did not lead to days on end being spent chasing red herrings. Rather, red herrings could be killed on the spot. The extent of amnesia we encountered was remarkable. It was remarkable that so many people had such a casual acquaintance with the full truth but the passage of time has that effect. We made conclusions which we honestly felt we were entitled to make on the basis of the evidence produced before us. We would like to have inquired into many other matters. The chairman of the committee pointed out that the inquiry is not finished but it has the most fundamental implications for the conduct of our public affairs, the manner in which we inquire into matters of public interest and, hopefully, the better governance of this democracy.

Mr. C. Lenihan

I welcome the publication of the report and, as a member of the Committee of Public Accounts, I pay tribute to the chairman who played a fantastic role in leading this ground-breaking investigation. I am glad my constituency colleague, Deputy Rabbitte, concentrated on the issue of Dáil reform, which was at the centre of this inquiry. People could be forgiven for thinking that it was a wonderful opportunity for the public to gain an insight into the arid worlds of the Department of Finance, the Revenue Commissioners and a series of large, successful banks and communications between them, including internal memoranda. However, that was not the purpose of the inquiry, although it is quite clear that many people felt a wonderful, malicious pleasure as they witnessed the discomfiture of the bankers, Revenue officials and others who were summoned to recount the culture of non-compliance which thrived in 1980s Ireland.

I was recently reminded of this culture as I read some old files. The Sunday Independent carried out a survey five or six years ago which highlighted that two thirds of people approved of tax cheating. We are still in transition from the culture of non-compliance which pertained during the period investigated by PAC. It is dramatically brought home to Members of the House as we must now register our interests, such as other sources of income, on an annual basis. It is good that we are moving towards a culture of compliance but it is a very painful journey for banks, politicians and all the other institutions which were put under the spotlight and found wanting in regard to the procedures they applied.

The issue of Dáil reform is central to the relevance of politicians. They are as essential to democracy as bankers are to the economy. No economy can operate without an efficient and competitive banking system and no democracy can work without efficient and professional politicians who provide valuable public service which is required as much in these prosperous times as it was in the 1980s when we did not live in a prosperous society.

I am reminded of John Kenneth Galbraith's book entitled The Culture of Contentment in which issues are raised that are clearly mirrored in our society, which is overseen by the Houses of the Oireachtas and the Department of Finance in particular. There are signs that Ireland is experiencing a culture of contentment where the haves enjoy the great benefits of a booming economy and the upswing in the economy but the have nots do not and are becoming marginalised. This is characterised by the increasingly middle class voting pattern at elections as disadvantaged people, who are unemployed and do not have educational opportunities, are not voting and fully participating in the economy and political structures. It is a formidable challenge for us, which we should be careful not to avoid. Reforming the operation of this House is central to that.

I am slightly saddened that Deputy Rabbitte feels that younger Members are not interested and he seemed to suggest that media owners are reducing the coverage of the House and politics generally. It is often forgotten that while there was a culture of non-compliance in the 1980s, there was also huge interest in politics. Media commentators regularly remarked on the large vote turn-out here relative to other European democracies at the time. Oddly, there has been a change from abnormally high turn-outs at elections to low turn-outs. I do not suggest complacency in this regard but voter participation is currently average in comparison to other countries which are as economically developed as Ireland. That does not mitigate against the ever present danger in our democracy that politicians could become irrelevant to the masses.

With regard to the relevance of our system I was shocked and appalled by the reaction to the remarks of the Taxing Master, James Flynn, last week. There was a great deal of sense in what he said regarding the tribunals, and perhaps it offended certain Members that he threw down the gauntlet to the Houses of the Oireachtas in regard to the tribunals at Dublin Castle. All Members feel that they should be wound up quickly because they are going on too long. However, the Houses established them and all of us should take responsibility for that. The Taxing Master's remarks challenge us to develop an investigative structure such as that established for the DIRT liability issue in order to instigate similar inquiries into issues of pressing public concern. A great deal can be learned from the Committee of Public Accounts inquiry. However, it is important that we do not overestimate the challenge of reforming the House by simply setting up similar inquiries into controversies as they arise.

I wish to refer to a worrying and much more dangerous trend in regard to the business of the House. A number of weeks ago Deputy Mitchell and I questioned Kieran Coughlan, Clerk of the Dáil, when he appeared before the Committee of Public Accounts. He informed us that this Parliament is the worst resourced in Europe in a plethora of areas, including the number of staff per Member. We are at the bottom of the European league. I hope the Minister for Finance will examine the resources issue as it is critical in terms of parliamentary reform.

The wider issue of Members' pay must be addressed. The average working day for a politician comprises 12 hours. It cannot be expected that highly talented people will be enticed into politics when pay is low relative to salaries in the private sector and elsewhere. The Minister displayed great courage in this area previously when he increased our expenses, but there must be an underlying shift in the way the House is resourced and Members are remunerated before we address the difficult and often vexed issues of electoral and parliamentary reform.

One must distinguish between the three distinct phases that occurred in the inquiry. The first was the voluntary phase, the second phase involved the Comptroller and Auditor General, as Deputy Rabbitte put it, garnering a book of evidence, and the third was the public hearings phase. I think it was Deputy Durkan and myself who took the view in the committee that it might have been better to push the voluntary phase to its ultimate conclusion where, in respect of banks that refused to appear, we would invoke our powers. That was an interesting discussion and the investigation was a good one but unfortunately people have failed to distinguish between those three distinct phases and the purpose of each phase as it occurred. The public hearings were, in a sense, only a development of the investigations already carried out by the Comptroller and Auditor General. They were to satisfy a public need that Parliament be seen to be in control and able to investigate pressing matters of concern.

As I stated earlier, when Deputy Jim Mitchell was not in the Chamber, and in paying tribute to him, I believe many people took a sneaking pleasure in the discomfort of bankers, Ministers for Finance and other worthies of our society who were found to be somewhat wanting when it came to the witness box. I am sure some politicians would have taken pleasure in this too because we are often treated with a certain degree of arrogance by those institutions, as if we do not understand matters, but some of our more notable bankers were singularly ill-equipped to deal with the public theatre in which we, as politicians, have to perform every day. The purpose of the inquiry was not to embarrass bankers but to hold them to account, and that was an important exercise.

One of the unfortunate consequences of the entire investigation has been a profound misunderstanding about the purpose of the inquiry. I made remarks recently at a dinner of the Irish Association of Corporate Treasurers that some people appear to have mistaken the intent of the report, for instance, in relation to the companies and financial institutions based in the Irish Financial Services Centre in the docklands, that in some way this report should be used as a justification for a full retrospective examination and full retrospective documentary compliance in relation to DIRT. That was not the purpose of the inquiry, although documentary compliance is obviously important. I note the Chairman's remarks that a protocol has been prepared and I note also that the Revenue Commissioners have met representatives of the Irish Financial Services Association who have expressed their concerns about the insistence on retrospective documentary compliance from companies that are not based in the domestic retail banking market but in the international financial markets and who essentially do not incur a DIRT liability.

I welcome the statement yesterday from the chairman of the Revenue Commissioners, Dermot Quigley, that there will be a common-sense approach taken, particularly towards those IFSC banks. That is important for a number of reasons. I have stated previously, and I do not mind repeating it again here, that when one examines the culture and the economy of the 1980s, the Irish Financial Services Centre was one of the flagship projects that pulled this country out of recession and made it a location worthy of investment. It acted as a beacon to the international investment community, that Ireland was getting its act together and that it was a good place in which to invest. It has also led, over the short period since its inception, to the creation of 8,500 jobs. I must declare an interest at this stage. As my wife works there I need the IFSC to continue to prosper if I am to live in the style to which I have become accustomed. I am sorry the Minister for Finance is not in the Chamber but as the House knows, it is virtually Fianna Fáil policy now that one has to force one's wife to work. If nothing else, I am a fully compliant member of Fianna Fáil. I insist that my wife works and shares in the household bills. We are all doing our bit for the Minister for Finance and his budget.

It appears that the Revenue Commissioners are taking a common-sense view on this retrospective documentary compliance issue in relation to the IFSC. There was a certain amount of hype about the issue in recent weeks and months and I am glad they are taking the responsible approach that is needed because the last thing this country needs is a run on the Irish Financial Services Centre. I urge the Minister for Finance and Government, as a unit, to re-examine the IFSC as a source of further financial innovation and development as a centre. With our current obsession with the benefits of the high tech economy there is a danger we will take our eye off the ball and forget about the financial services centre as a strong source of ongoing employment in Dublin and throughout the country. We need to examine how we can innovate even more in terms of the financial products that are produced there.

To return to the report, I was rather intrigued at Deputy Rabbitte's reference to lifting the veil, a very resonant phrase, on various institutions in our national life but we have reached the point where we have to think again about lifting veils. We have come through an intense period of subjecting ourselves to self-examination and self-criticism in relation to what happened in the 1980s and at other times. That covers the political, banking, religious and many other institutions who have taken the full heat of investigation and inquiry. I am the last person to advocate a cover-up or sweeping something under the carpet and trying to avoid important issues but it is important that we, as a Parliament, take the lead in this regard and focus on the future, on reform and on changing and putting in place procedures that will make us compliant. It is important that we should not move from a culture of non-com pliance to one of over-compliance. As a small country dependent on exports and on the world market, as we saw in recent months with the movement in oil prices, we see clearly the way the international economy can affect us and the way our economy is open to being disturbed. One of the great benefits of our recovery in the 1980s and of the prosperity we built in the 1960s and 1970s is that we were a small, open economy, in every sense of the word, our administrative burden was not too heavy and our regulatory environment did not discourage people from investing here. It is important that we do not move to a position of over-regulation. That would not suit Ireland.

I see in some of the measures being adopted by Government, which I have to support from time to time by way of Dáil vote, a tendency towards a regulatory environment or system that is not suited to a country of our size or to a country whose capital markets are not huge when compared to the capital markets of countries like Britain, France, Italy, Spain and even the United States. It appears that even within this House there is a tendency among some people to insist on a level of business regulation which is more suited to countries with large capital markets. Countries with large capital markets have a justifiable belief in strong regulation because of their size, power and influence and the ease with which they can get out of control and have an adverse impact on the under or over-arching economy within which they perform. We do not have the benefit of strong financial markets, both in terms of volume and the velocity of trades. We do not have the kind of liquidities in our market that we see in other financial markets and we should be careful about the whole issue of business regulation.

There is a tendency to over-regulate here as a somewhat shock response to the revelations we have seen. It is important that my intention in using the phrase "over regulation" is not misinterpreted by some. Dick Walsh, in The Irish Times, chose to deliberately misinterpret my remarks in that regard in a speech to the corporate treasurers in the past few weeks. It is not my intention to mollify the banks and suggest they should get off easily. The focus point of the DIRT inquiry was to ensure that those domestic banks which deliberately understated or failed to provide adequately for the level of DIRT tax liability due should have their liabilities fully investigated and fully recovered. That is the very minimum this House, the committee and, I hope, the Revenue Commissioners would expect as a result of this investigation.

I commend the report to the House. I also commend the chairman, who is now back in the Chamber, for his great work in the most difficult of personal circumstances, given his health problems. This report will stand as part of the record of this House and as a landmark in Irish public affairs in the 1980s and 1990s. It marks the turning of a corner for this House.

Mr. Durkan

I congratulate the Chairman of the Committee of Public Accounts, who also chaired the sub-committee, on the work, co-ordination and determination he put into carrying out this inquiry. The public and Members of this House who were not members of the sub-committee can have very little comprehension of the effort he had to put in. Although he would not like me to say this, it was above and beyond the call of duty for someone at the centre of such an inquiry to return to work only one week after undergoing surgery. That should not be forgotten in terms of the dedication shown by Members of Parliament to the tasks they are given. I do not think such an inquiry could take place without that level of commitment and determination, certainly not within that space of time.

One achievement of the inquiry, which possibly gave rise to a certain amount of resentment, is that it set a standard or precedent and reiterated the right of parliamentarians to do the job they were elected to do. That job might be unsavoury at times and might not always receive the full support of all the people. People might resent the questions they are asked and some might feel we are incompetent or incapable of asking the right questions. However, that is Parliament. It is elected by the people for the people, to work and act on their behalf until it is changed by the public.

I cannot understand how, in some quarters, the focus of attention seems to have shifted over past years from Parliament. As was mentioned in a recent radio programme, the movers and shakers are elsewhere. Perhaps, we are responsible for that ourselves. Governments of all political parties do not make major announcements in the House but hold press conferences or make announcements in centres which will attract attention for another reason. That seems to achieve the purpose of the exercise, which is to get the soundbite or kick-start required for the particular issue. However, there was always a very dangerous void in this or any other country when politics was set aside. There is a tendency in this country to disregard the parliamentary system and to assume that the power and authority comes from elsewhere. However, it does not, it still rests here. Some quarters might find that difficult to understand and accept. While that might not always be palatable, it is still here.

I compliment the chairman and my colleagues on the sub-committee. I also compliment the entire committee for the confidence it showed in us and the sub-committee on the manner in which it went about its business as a result of the directions it got. I was one of those who felt we should have gone ahead with the system we were accustomed to. However, I now recognise that this House does not have legal advice and counsel's opinion available to it on an ongoing basis. This is one of the few Parliaments that does not have that facility, and without such a facility, it would be very difficult to move within the law on a daily basis from one subject to the next in a way that ensured there could be no comeback or reference to the courts.

By the same token, I strongly believe that Parliament is supreme. It is not the business of Parliament to be subservient to anybody else. We might have our faults and failings and might not always do what we aspire to, nonetheless, this is still the Parliament, elected by the people for the people. We should not have to look over our shoulders when we go about our parliamentary business, wondering whether the courts will look upon us with a certain amount of disdain. This is still Parliament, the supreme authority.

It will remain to be seen whether the report produced by the sub-committee and committee is a success or failure. One cannot say at this stage that it was one or the other – that will be determined by the debate in the years to come. However, it is important to reiterate that Members of Parliament, sitting in a sub-committee or committee of that nature, should never be fearful of doing their job.

Mr. C. Lenihan

Hear, hear.

Mr. Durkan

Whatever one is charged with or is responsible for, whether one is a Member of the Dáil or Seanad, a Minister or a Minister of State, one's duty is to do it to the best of one's ability and let the consequences follow, no matter how unsavoury that might be at times.

The sub-committee was successful for one very important reason, to which Deputy Rabbitte referred. He correctly said it might not have been as successful if it had been a committee of political inquiry. The most obvious factor in the course of the sub-committee's hearings was that it never broke down on political lines. That amazing performance was due in no small measure to the fact that the chairman has repeated over the ten years I have been a member of the committee the need for it to be apolitical, which is what the sub-committee was.

When the pressure was put on – of which I am the living example – it would have been very easy for the committee to be hauled into a lay-by and break down on political lines. It would have been very easy for those who had a reason to bring the sub-committee's proceedings to a halt to take the measures necessary to bring that about. The sub-committee would then be seen to have failed. In those circumstances, the sub-committee proved it had the grit to take on an issue, follow it through, set politics to one side and con tinue. That was important. Other committees that wish to emulate that exercise will find, in the final analysis, that they will be successful only if they can achieve that.

The chairman and members of the sub-committee must also be complimented on another matter. I do not think even the members of the sub-committee fully appreciate the time, effort and energy put into it by the chairman and the members themselves. At the best of times, it is rather unusual to work the kind of hours the committee worked, but it had to work those hours to achieve the results within a specified period. To continue working those hours right through the weekends and late into the night, as happened in many cases, requires a great deal of determination as well as personal, social and family sacrifices. When an evaluation is done, as in time it will be, on the success or failure of this report, that is one of the issues that will come into focus.

Like other Members of the House, I have occasion to visit the courts from time to time on behalf of constituents and it is interesting to see how the court system works. The adversarial system of this House is somewhat different, however. For example, negotiations do not take place between counsel behind the scenes here. One just asks the question and the people opposite, whether they are in Government or Opposition, have two options: they can either answer the question or refuse to do so. It is interesting to see how both systems compare, but I will say no more than that.

The legal advice the sub-committee had during the course of its hearings was invaluable. We got very good guidance right from the beginning. With the benefit of hindsight and 20-20 vision, I accept that if we had not had that guidance we probably would not have been able to see the inquiry through to its conclusion.

Recently there has been some comment by those who seek to compare the parliamentary inquiry system with that of tribunals, but they are absolutely different. It would not be physically possible for a parliamentary committee to set up an inquiry of the nature referred to in recent public commentaries. The time commitment required would be so great as to make it impossible. Arising from our most recent experience in this regard, Members of the Dáil probably have the ability to carry out one such inquiry in the lifetime of a Parliament. More than that would require such sacrifice as to make it virtually impossible for them to operate as Members of the Oireachtas.

As regards the necessity for this inquiry, we must remember that it arose after prior examination by the Committee of Public Accounts on similar or associated issues. Despite that, we did not turn up many of the things that were turned up by the DIRT inquiry. Why? The whole attitude to asking questions and eliciting replies now come into focus in this House. It is far better to be straightforward and up-front in answering a question as it is posed. It is a defence and a protection to a Minister or a Department to operate that system. Anything other than that can ultimately lead to serious embarrassment, first, for the Minister concerned and, second, for the individuals in a Department who may well have responsibility in the matter at a later stage.

It would be a sad state of affairs if people became reluctant to ask questions and were fearful of doing so because pressure might be brought to bear on them. In such circumstances, the parliamentary system would begin to sag and would ultimately fail. When I was first elected to the House, I remember a senior Member, the late Oliver J. Flanagan, speaking at one of our parliamentary party meetings. He said:

I want to give you one piece of advice, you gang of 25 who have arrived here today: never give up your right to ask questions in Parliament. Any attempt to curtail your activity in that area will mean a diminution in your power as parliamentarians.

He was absolutely right.

Deputies Rabbitte and Jim Mitchell referred to coverage of the sub-committee's work. TG4 certainly took an initiative which hitherto had been unheard of and I was quite surprised by the impact its coverage had on the sub-committee's hearings. Members of the sub-committee, however, were not really conscious of how their work was perceived elsewhere because they had so many other things to deal with at the time. Some other national programmes took a constructive, balanced and even-handed interest in the sub-committee's work. Programmes such as "Tonight With Vincent Browne", together with George Lee and others in RTE, also took an ongoing and positive interest, not just a fleeting interest, in what happened.

At the very beginning, some comments were made as to whether the sub-committee and its members would be capable of dealing with the situation as it arose. I hope the public feels that members of the sub-committee discharged their duties in an honourable fashion. I think they did, but that is not a matter for us, it is a matter for the public.

In future we may well be faced with similar cases. The lesson to be learned is that Members can expect to have a great deal of pressure applied to them and they may as well face up to it before they start. They should, however, keep in mind that if they allow themselves to be deflected from their task they will not be able to do their job. Once a parliamentarian is detected as being in any way weak in that area, they are gone. It is as simple as that.

I do not wish to comment in any great detail on the rights and wrongs of the DIRT controversy. Rightly or wrongly, the concept of DIRT was introduced by Government in the Finance Act, 1986, which laid down certain conditions and criteria which it is the duty of everyone to follow. It makes no difference what the excuses are or who is offended. If the legislation is not in accordance with the common good, it should be repealed, but we cannot have it both ways. We cannot have a situation where people say: "Well, we have that legislation there; it is really something that we should not have but we are not going to repeal it; it will do a good job there anyway." That is not the way the system is supposed to work.

The fact that the legislation was seen to be ignored by a series of people who had knowledge and responsibility in the matter was a serious matter which set a dangerous precedent and one which could have totally undermined confidence in the institutions of the State. If there is repetition of the circumstances that led to the DIRT inquiry, let us learn from the exercise we undertook.

With regard to people who avoided payments of DIRT, some say that during the period in question, everybody was doing it and the taxation levels in the country were too high anyway. If one applies that principle then everybody ultimately would do the same. Ultimately, as happened during the period in question, the tax base becomes more restricted, fewer and fewer people are in the net and as a result the burden is increased on those who have no option except to be there. In those kinds of circumstances we have and should have learned a few lessons.

I thank my colleagues on the committee for their support and solidarity and other Members of the House who were extremely supportive and helpful to me during the course of the committee's inquiries. I also thank and extend my appreciation to the senior and top ranking journalists, both around this House and countrywide, who contacted me during that time and offered their support.

Mr. Dennehy

I welcome the opportunity to contribute to this debate. I had some involvement in the early days, as a Member of the Committee of Public Accounts. I was privy to some of the early evidence and the points raised. Following the work of the sub-committee, it soon became apparent to me that what it did could not be repeated. I will return to that later.

I compliment the Members involved. One could not continue working a seven day week at the level they worked and continue to work in the Parliament. I pay tribute particularly to the chairman of the committee, Deputy Jim Mitchell, for his tenacity and his doggedness throughout. His illness has been mentioned but the vast majority of people were not even aware of it because he did not let it impede him. The hours involved were cruel. It is very hard to imagine that they could keep going. The work was very intensive and Deputy Rabbitte pointed out some of the shortcomings with the supply of material and so on and how one was expected to cope with the late briefing. They coped and produced an excellent report.

There are questions to be raised, some of which are fairly obvious. What is the report worth, what is its benefit and what did it cost? Most importantly, to what use will it be put and what will happen with it? We need to examine what has happened to date. I am fairly happy with what has happened to date following the publication of the report. The onus for its implementation falls to a great extent on the Minister for Finance. I am pleased he has acted speedily to implement the parts of the report that could be implemented and to give a rational reason for the one or two recommendations he cannot implement while pointing out that he is willing to continue the work and will implement the remainder of the recommendations. It is important that people can clearly see what happened with every recommendation, how recommendations were implemented and eventually the net effect of the recommendation.

We must do this because of the importance of the financial services sector to our economy over the past 10 to 15 years. It has now become a central part of our commercial life, it has been the source of much employment and the source of confidence for people who set up in industry or do business in Ireland. It is imperative that the good name of our financial institutions is clear and unsullied but that we also have a base for picking out any problems or faults and dealing with them. This report will be the benchmark from which many happenings in the future will be measured. It will be referred to, as the previous speaker said, and in the years to come its effectiveness will be judged. It is already a winner and I am not merely saying that as a Member of the Committee of Public Accounts but as someone listening to the response of professionals and the general public, who have been following the workings and output of the committee and what has happened since.

Deputy Rabbitte referred to the lack of interest shown by the media in general. However, the people took it on themselves to watch and take note of what was happening and how people performed. Having seen how the committee worked and watched it in action, the difference between the kind of answer given in the early days and the answers given under examination was something of an eye-opener. Asking the right question at the right time was referred to here previously, but looking back on the record of people we had examined, they were being evasive in many cases. Maybe they were not up to speed with their information, deliberately or otherwise, but it put man ners on people to be brought before the sub-committee for examination. That is the way it should be – all questions asked should be answered clearly giving the full information available. It was probably obvious to most people in the early days that the practice of evasion was widespread. Perhaps the witnesses were afraid to commit their own institution or themselves but in the early days one or two people, more or less to protect themselves, pointed out that the practice was endemic in the financial services sector. That led into a wider inquiry.

It took the setting up of an inquiry and the activities of the Members to really dig out the important information. The eye-opener for me was that this practice was so widespread. I realised after a few early questions to some of the principal witnesses – those from the Central Bank and elsewhere – that much of its business was done on trust. The question of presuming that somebody might be capable of malpractice was not even taken into account. When we asked about the surveying and supervision of institutions, the prudential supervision was the only aspect about which anyone was concerned. If the bank or institution was not going to go belly-up then anything was permitted.

On a visit to the Bundesbank we found more or less the same approach from the principals who were not going to get involved in the day to day supervision of any bank or any institution. If that is the way things are, we need to establish some body who will become involved and who will supervise these financial institutions. If the Central Bank does not feel this is its role, then it is time to set up an independent, supervisory body, person or board.

As I said earlier, reports can be treated in many ways. They can be put on the shelf and allowed to gather dust and some recommendations can be acted on and some not. However, I am glad that so far the evidence suggests that there is great commitment to acting on this report and I do not think it will be shelved. It is imperative that all of the recommendations, where the Constitution allows, are dealt with speedily. The findings vindicate the approach of the Minister for Finance, who has repeatedly said that if taxes appear draconian people will go to any lengths to avoid paying them. They will pay for the best advice but will also avoid paying taxes in other ways. The Minister has taken a steady approach to ensure there is fairness in taxation so that people will respond and pay accordingly. This area must be monitored, but the principles are correct.

Deputies referred to the workings of committees and at an early stage it became apparent to us that the powers of the Committee of Public Accounts were inadequate to the task of addressing the issues raised. It became obvious that extra powers would be needed and I compliment all involved – the Minister for Finance and the Government Chief Whip in particular – on the speed with which these were granted as it reflected well on the Parliament that those powers could be put in place speedily to enable the work to continue. That should be noted. Compliments should be paid when due and they are due to those involved here.

It is now obvious that the powers given to the Committee of Public Accounts will have to be extended to other committees, though maybe not to the same extent. However, extra powers are required, for example, by the Oireachtas Joint Committee on Health and Children, which is trying to deal with the issue of smoking. That committee is taking on the tobacco industry, which can bring out big names to fight its case and at present the committee is fairly powerless when it comes to taking on that industry. Extra powers will be required immediately by that committee and the success of the DIRT inquiry will help it to get them. When we examine the committee system we will find plenty of committees which require extra powers and we should not be afraid to provide them with those powers. I am not sure what the constraints were in the past, but people now demand openness. Our job is not just to deal with legislation but with other issues which require attention.

Oireachtas reform has been referred to by Deputies Mitchell and Rabbitte and that will also have to be addressed. The major change involved setting up a committee to shadow each Department and a lack of facilities was immediately highlighted. Office space, broadcasting equipment and staff were in short supply and the committee secretariat was put to the pin of its collar to cope. There are also obvious shortcomings when Members are trying to attend three committee meetings a day, which is almost physically impossible. The workings of the committees need to be reviewed urgently. I appreciate that the new building will make extra space available and ease the problem somewhat, but we must examine how we are working and ensure that all our meetings have a positive outcome. Members now have the confidence to get stuck in more, which reflects the Committee of Public Accounts sub-committee's success.

The lack of legal advice was mentioned and that can be a handicap to ordinary committee members. Such advice is available to the Government, but ordinary backbenchers must be able to call on legal advice at times. One should not spend all day in a law agent's office, but Members need to be able to establish whether they are working within the Constitution and so on. That became apparent very quickly when the Committee of Public Accounts sub-committee was set up and it will have to be part of the planned examination of the committee system.

An obvious question that arises is that of tribunals versus parliamentary inquiries. It is not a black and white issue. There are benefits to both approaches and there may be room for combining them. The cost of tribunals, which are open-ended, is a major shortcoming. There is an old law that work expands so as to fill the time available and in the case of tribunals it is true that the longer they last the more money can be made. That is a weakness in the system. I do not want to criticise tribunals unfairly, but that is a fact.

The biggest weakness with inquiries is the sheer physical demands on Members. The DIRT inquiry involved six to eight weeks intensive work, with most people involved working seven days a week, and as Deputy Rabbitte said, all other work had to be set aside. We are elected to participate in forming legislation and to represent our constituents. We must continue with that work and it would be difficult to replicate the DIRT inquiry as a result. I would not expect too many inquiries that would demand the level of time and commitment required by the DIRT inquiry. The issues involved in that case went far back in time and involved numerous large organisations which could call on a lot of expertise, which meant it was a particularly difficult task.

The public is aware of the savings involved in dealing with such matters through a parliamentary inquiry. Deputy Mitchell gave the cost of the inquiry earlier and people will ask how such inquiries can be done for that price when tribunals cost so much more. Perhaps terms of reference need to be tightened or timeframes need to be imposed on tribunals, but the question of tribunals versus inquiries is not as black and white as some assume. There is room for both approaches.

I compliment the Members involved. They have shown us how we should do our business and the recommendations are being dealt with. I welcome the Minister's report. I do not want money flowing out of Ireland any more than any banker does. When DIRT was introduced in 1986, banks had to raise the rate of interest they paid by up to 3% to ensure there was not a total outflow of cash. I would not like to see our financial services foundation being damaged, but malpractice must be rooted out where it exists in order that people will have confidence in the sector. I agree with the Minister that the best way of ensuring tax compliance is a low tax regime and strict regulation of the system. This report should be welcome by Members of the Oireachtas and the financial services sector.

Mr. McCormack

I welcome the opportunity to participate in the debate on this report. I notice that thus far, with the exception of the Minister, only members of the Committee of Public Accounts have contributed to the debate. I hope other Deputies will avail of the opportunity to participate in the debate as its subject matter is not solely confined to members of the Committee of Public Accounts. It is a matter which concerns all Oireachtas Members.

As a member of the Committee of Public Accounts, I observed at first hand the tremendous work involved in this inquiry and in bringing this report to this point. I do not believe that all the committee's work was fully recognised. The task facing members of the sub-committee was a daunting one. When the sub-committee was being established, I selfishly passed the chalice on to my colleagues. I declined to serve on the sub-committee because I live far away from Dublin and could not provide the required commitment. The Fine Gael Party had two outstanding members on the sub-committee in the chairman, Deputy Mitchell, and Deputy Durkan. Everyone has acknowledged the manner in which Deputy Mitchell single-mindedly dedicated himself to this inquiry over a 14 month period. I compliment him on the manner in which he oversaw proceedings. He really believed in what he was doing and the end result will stand as a monument to him forever. I also compliment Deputy Durkan and the other members of the sub-committee who were involved in the production of this report.

Apart from the ten months' preparatory work and investigation and the work carried out by the Comptroller and Auditor General in interviewing people and producing evidence, an extraordinary level of commitment was required from the members of the sub-committee when it was established. The sub-committee commenced sitting at the end of August and sat throughout September when the Dáil was in recess and when some of us were trying to take a few days' holidays with our families or were catching up on constituency work. The members of the sub-committee devoted themselves to being in Dublin full time, often sitting for up to ten hours per day on consecutive days. That level of dedication was unique. When the sub-committee's hearings concluded in the first week of October, the sub-committee met on several successive occasions, including some weekend sittings, to prepare the report for publication.

Anyone who committed himself to serving on the sub-committee was committing himself to being present for the entirety of the hearings. Unlike the normal practice where members can exempt themselves from a committee for half an hour to do a radio interview or to attend to an urgent matter, the sub-committee members had to be in attendance at all times. The members could not even go to the bathroom while the sub-committee was in session. Given the nature of the evidence being presented to the sub-committee, all the members had to be present to hear all of it. That fact is not widely known by people outside the Oireachtas.

If Deputies are away from their offices for whatever reasons, work continues to build up – I know that from personal experience. I do not know how the members of the sub-committee managed to deal adequately with their Dáil and constituency business while sitting on the sub-committee for that two month period. I am glad I was relieved of that responsibility by Deputies Mitchell and Durkan. The Fine Gael Party required two members on the sub-committee to adequately represent it. I was happy to be able to pass the chalice in that regard as I would not have been in a position to devote the necessary time required for the sub-committee to produce the report.

I already referred to the dedication of the chairman, Deputy Mitchell, in bringing this first report before the Dáil. The report has not yet concluded and a great deal of work remains to be done. I thank the Comptroller and Auditor General for his commitment and I also thank the clerk and staff of the committee who rose to the occasion in supporting the sub-committee in its production of this report. Their dedication is an example of public servants working together as a team and rising to the challenge which was presented to them.

Ba mhaith liom focail buíochas a ghabháil do TG4 as ucht a chraolacháin beo. Some previous speakers criticised the media coverage of the inquiry and perhaps it did not receive the coverage it deserved. However, the live proceedings on TG4 became compulsory viewing for many people throughout the country. I know that some people even had the hearings recorded. TG4 provided a wonderful service by transmitting the hearings live, particularly when the Dáil was not sitting and there was no competing activity in the Oireachtas. It informed many people that the Oireachtas does not go to sleep until September because the Dáil is adjourned. This committee and others met during the recess. Members of the Oireachtas were in Dublin carrying out their constituency work. Apart from transmitting the hearings live, TG4 also did a great service in highlighting the work of this committee and others which sit during the recess.

The costs of these hearings may be questioned. The chairman confirmed a cost of £823,393, including a provision of £239,388 for IT equipment and digital recording which will continue to be available to the Oireachtas and will be of enormous benefit. This is the best value for money I have witnessed since I became a Member of this House 11 years ago. There is no reason for the public to be concerned about the cost of the DIRT inquiry although they are justified in questioning the cost of tribunals, particularly that of legal representation. However, the effect of tribunals and inquiries such as this on the mindset of the public will reap rewards. The mindset of people regarding tax liabilities has changed completely.

About ten years ago, it was fashionable to seek professional advice on how to avoid tax. Tax eva sion was widespread. However, now it is fashionable to pay one's tax on time. The attitude of the public, professional advisers and public representatives ten years ago was more lax and in some cases a blind eye was turned to tax evasion. However, people are now advised to ensure their tax affairs are in order. This change of mindset has only taken place in the past three years. In the 1980s and 1990s, tax evasion was encouraged by example and people bragged that they had undertaken various tax avoidance measures, including opening bogus offshore accounts. Public representatives and professional advisers now advise people to make sure their tax affairs are in order. This is one positive effect of this inquiry and of tribunals.

This inquiry was not a simple task. There were 26 days of public hearings, two months of meetings on the report and before that ten months of preparation. As the chairman said, if the Oireachtas is reformed, inquiries such as this and tribunals will be less necessary. This must be faced up to at Oireachtas and ministerial level. Successive Ministers have been guilty in this regard although I do not know with whom the fault lies. We should be able to get answers to the questions we put down in the Dáil, even if, as some Ministers say, we do not ask the right ones. Time should be allocated for questions on matters of urgency. Adjournment matters are a farce and are insufficient. A Deputy raising a serious matter on the Adjournment addresses the relevant Minister, often the junior Minister and in some cases a substitute for the junior Minister. He or she then reads a script prepared before the Deputy raises his or her problem in the House. This does not fool anyone, the Deputy or those asking for the matter to be raised. Even if a press release is issued, everyone knows the problem is not being addressed in the reply to the matter. A great deal of work needs to be done regarding Dáil reform. The chairman referred to this and I am sure he will follow up the matter. If the Dáil is reformed, we will not need tribunals and hearings such as this.

This investigation did not start when the sub-committee sat last August. Many people do not realise that the Comptroller and Auditor General had to produce a book of evidence by interviewing potential witnesses under oath in private. The wisdom of this decision was justified by the speed with which this initial stage was conducted. The required change in legislation then had to be made in the Dáil to allow this inquiry. Perhaps it would be more beneficial for everyone concerned if there was more openness in Dáil proceedings.

As a member of the Committee of Public Accounts, I thank all those who participated in the sub-committee and for producing this report. I hope the health of the chairman or any other member was not affected and that their constituency work, which is an important aspect of the work of a Member of the Oireachtas, was not gravely affected by the enormous amount of time and commitment given to the work of the sub-committee inquiry into DIRT.

Mr. Roche

I am pleased the chairman of the Committee of Public Accounts is present because the committee, its chairman and all its members, particularly those of the sub-committee, are to be commended by the House and by the country as a whole for the expeditious manner in which they handled the DIRT inquiry. Comparison between the expeditious and economical manner in which the Committee of Public Accounts conducted its business must be made with the languid, ruinously expensive and in many ways interminable operations of the tribunals appointed in recent years. I was amused by the recent public outcry at the statements of the Taxing Master, Mr. Flynn, in this regard because many of the views he expressed publicly have been expressed privately around the corridors of this House. However, I suppose he committed one of the sins of modern Irish life, he expressed with some candour what he felt – political correctness always demands otherwise.

The committee, its chairman and the sub-committee are to be complimented on a wonderful job. Their report did this country a considerable service. It also did this House and politics a considerable service. The report was important in four major respects. It showed that a parliamentary committee could function within the system. Moreover, it showed that a parliamentary committee could function in a sensitive way and could deal with an area which is complex, difficult and requires detailed work. In many respects, this marks a watershed. The work of the committee marks a critical departure point in the life of politics in this country, particularly in the manner in which parliamentary business is conducted in this and the other House.

For many years there have been arguments about the role parliamentary committees could play within the system. There have been questions as to whether parliamentary committees could deal with these complex issues. This sub-committee dealt with a very complex issue. There have been arguments that the willingness and partisan nature of politics is such that a committee could not handle political hot potatoes. This sub-committee dealt with an issue in a markedly non-partisan manner. It dealt with an issue which could have become an exercise in finger-pointing and futile political blame-laying. This did not happen. It has also been suggested that committees did not have the capacity to produce meaningful reports. That is a nonsense; it is mendacious. We all know committees of both Houses can produce well focused reports that contain a wealth of good advice.

The report of the committee also proved that a committee can work not only in a timely but extraordinarily inexpensive manner. Deputy McCormack made the point that the overall costs of the committee were less than £830,000. In reality, the cost is in the order of £600,000, which is nothing when compared to the fees paid not just in the case of the two ongoing tribunals, but in the case of the tribunal into the beef industry. That extraordinary tribunal went on interminably and produced results, but I guarantee if one asked 99% of the Members of this House to outline the ten major issues in that report, they would be stumped after five. This sub-committee has done us all a service, it has done politics a service and has proven that parliamentary committees can work well.

The committee illustrates something I have suspected and spoken about on more than one occasion. There is a serious problem in the banking and financial services sector in this country. There has been a rather club-like atmosphere between the banks, the financial institutions and the controlling institution. The Central Bank does not come out well from this inquiry and, more importantly, neither do the commercial banks. The report reflects little credit on many of the commercial banks, including the State-owned ACC.

The report shows up the AIB in particular in an utterly shameful manner. Its performance in this issue has been reprehensible and I have not heard one utterance of apology to the public. The people, not very long ago through their taxes, stood by that banking group when it was in difficulty with a major insurance corporation acquisition. It was bailed out by the taxpayers and by other bank users. That company went from strength to strength after that debacle. It owes a debt of gratitude to the people, which it has repaid in a very bad way. When one reads through this excellent report, one cannot but conclude that white collar crime of a high order was endorsed institutionally in some of the banking institutions. Moreover, one cannot but conclude that the oversight agency, the Central Bank, if not turning a blind eye, was certainly not wide awake. The reality is that there was widescale knowledge in this State about what was happening in regard to DIRT. It was not just a minor episode, it was something which was institutionally grounded throughout the financial institutions. Thousands of people must have known at an institutional level what was happening and, of course, hundreds of thousands of people in the public knew what was happening.

The report also illustrates in a graphic manner how a wide spectrum of the Irish public, once respected, institutions, a wide spectrum of professional bodies and professionals were willing to behave in the matter of taxes. A motto over the IRS building in Washington reads, "Taxes are the price you pay for a just society". It is extraordinary that so many people in Ireland – there were more than 200,000 accounts, a high proportion of which were fraudulent – were willing not just to dodge, but to fraudulently avoid paying the costs of living in a just society. There has been much cynicism in recent years about standards in political life. A great deal of that cynicism has been deserved in specific cases because some of the revelations about political life would make anyone who cares about democracy or politics cringe. However, the reality is that low standards did not just exist in political life, they existed in the Irish banking industry and in some of the major banking institutions. A cavalier attitude to standards existed in the financial oversight agency, and within the general public there was a willingness on the widest scale to avoid paying taxes.

The banking industry and professionals in a wide spectrum of society participated willingly in this fraud. That is very evident if one reads this report. Another issue that is clear from reading the report, considering the response in the past few months, is the willingness of people to move on without learning the lesson. I find that disturbing. It is disturbing that there has not been a more incited analysis into what this says about modern Irish society. I find it extremely embarrassing that there has not been an apology from the institutions involved. It is difficult to comprehend why the professional bodies, some of which have been trying to put their houses in order, have been less forthcoming in instituting a debate on what this report illustrates about Irish society. Deputy Jim Mitchell and his committee held up a mirror to Irish society and the image reflected is not a good or handsome one.

A fourth point in this report which gravely concerns me is what it has to say about the accountability of State-sponsored bodies. Since the foundation of the State we have set up a variety of State-sponsored bodies, commercial and non-commercial, and we have not, at an institutional level, paid anything like sufficient attention to the control mechanisms which are allowed to operate in a free-wheeling fashion to link those to public accountability. This is an issue that interests me academically as well as politically. I recall a few years ago when the Oireachtas Joint Committee on State-sponsored Bodies produced report after report and at the core of many of those reports were issues about the reporting and control relationships between parent Departments and the State-sponsored bodies. To say the least, the good work of that committee was ignored and in many cases cynically disregarded. In some cases it was resented. I remember one or two senior executives in State-sponsored bodies reacting in a way which was negative in the extreme. The control mechanism that exists between the State-sponsored bodies and the parent Departments and, more importantly, the control relationship that exists between the State-sponsored bodies and this House is called into question. I shall return to that issue if time permits.

Much of the debate to date on this report is focused on the facts contained in the report and, in particular, on the role of the banks. Other than the comments I have already made about the banks and the low standards which they have been willing to apply and the fraudulent standards which they have forced their staff to apply, I do not intend to say anything further on that issue. I want instead to focus on the institutional implications.

The report illustrates in an important way the capacity of Oireachtas committees to do work which is complex, tedious and painstaking. The potential for committees has only recently begun to be realised and to be appreciated. For many years committees of the Dáil and Seanad have not been well focused. They were cumbersome and were generally regarded as having nuisance value. Members looked at the time given to committees as a distraction. I remember being warned if I paid too much time to membership of a committee that I would inevitably endanger my Dáil seat.

Over the years there have been exceptions to the rather negative image of the committees. The Committee of Public Accounts, under the current chairman and previous chairmen, has been a glowing example of a good committee doing good work and producing value for money. The Joint Committee on State-sponsored Bodies produced 16 or 17 excellent reports during its life. The Joint Committee on European Affairs does very good work in scrutinising a whole volume of secondary legislation which arose from EU membership. Those have been exceptions.

The reforms introduced in the last two Dála have meant that the committee system has begun to play a more meaningful role. The problem is that there is an unwillingness among Members of this and the other House to accept we can play a meaningful role. A lack of confidence in our own capacity prevents those committees from rising to the true standards they could reach. This report is welcome because it shows to every committee just how much can be done.

The report illustrates just how meaningful a role the committee system can play. There are, however, still problems in joint committees that have to be resolved. The committees are grossly under-resourced, even the Committee of Public Accounts which has, effectively, a constitutional status. The chairman, Deputy Jim Mitchell, has made that point on several occasions and I have made that point as chairman of other committees. When we argue the case for more resources we have to argue it with the Department of Finance. The amount of money available to all Oireachtas committees for consultancy is ludicrous. No parliament in the world would accept that the National Treasury Management Agency should manage how it goes about its business. I would argue that the treasury oversight which exists in this House and the manner in which it impedes parliamentary committees is of dubious constitutional standing.

There are also staff problems. We have few staff from whom we can draw. It should be possible for us to draw staff into the committees from the widest range of the public service. A period spent servicing a Dáil or Seanad committee or a joint committee should be regarded as a positive step forward in a young public servant's career. It should be possible for the committees to second people from the world of business, commerce and academia. There is also the problem of accommodation. Even when the new block is built there will not be sufficient room to physically accommodate committee work. The research and other back-up available to committees is remarkably lacking. The IT cost of this report at £200,000 plus was not wasted or spent on a once-off project but is an investment in the whole parliamentary system and in democracy.

Members of committees have a difficulty in allocating their time. This point has been referred to time and again by Members. I accept there will be no reform of Dáil committees without reform of the electoral system. Our electoral system begets constituency slaves. It does not deliver parliamentarians. It may well be that that is what the people want. All the opinion polls, from the original MRBI polls at the end of the 1970s to date, show the issue most favoured by the people when they put No. 1 on the ballot paper is constituency service. There is something fundamentally wrong in a modern democratic developed State where people are of the view that the only way they can get those services to which they are entitled is by going cap in hand to their TDs, Senators and public representatives. In this regard electoral reform and parliamentary reform are intimately inter-connected with reform of the public service system.

In his response the Minister indicated his personal concerns at the manner in which the ACC handled its affairs and the way in which the board was able to keep the Minister abreast of what was happening. The board was not able to keep the Minister abreast of what was happening. That is a fundamental breakdown. The role of the board and the chairman of a State-sponsored body has been prescribed since 1927. The board and the chairman of a State-sponsored body are meant to be the bridge between the State-sponsored body and the Minister. They are meant to be the guardians of the public interest and in this case there was a serious breakdown.

I compliment Deputy Jim Mitchell and his committee. It is a sign of how poorly we take this issue that this long-awaited debate is poorly attended by the ladies and gentlemen of the media who frequently tell us about our failings.

Mr. Gormley

I compliment Deputy Jim Mitchell and his team on their outstanding work. I was hoping Deputy Mitchell would not be present today because it is always difficult to praise someone in his presence. During the hearings he suffered from a back complaint. It is difficult to do good work when one is in the best of health but the fact that he worked so well and so incisively when suffering from a complaint of that sort speaks volumes for Deputy Mitchell. He drove the process forward. He was dedicated, he took no nonsense and got the best out of his team and the staff of the Houses. The staff were absolutely brilliant.

The DIRT inquiry shows what can be achieved in the House. The report recommends Oireachtas reform which is needed. I agree with Deputy Roche in this regard. I have always advocated a change in the electoral system and we need this urgently. Many Deputies would hesitate to become members of a sub-committee of this nature, involving a huge volume of work, because by doing so they would neglect their constituencies. Deputies do not have sufficient back-up, even to do their ordinary work. I have enormous sympathy for the members of the Committee of Public Accounts sub-committee. While the sub-committee sat, each day was taken up with its very important work and members cannot have had an opportunity to deal with constituency matters.

We need a change in the electoral system, as is proposed by the Minister for the Environment and Local Government, Deputy Dempsey. I am not sure if the Minister will receive the support of his parliamentary colleagues for this reform or if he is merely flying a kite. If we are to be parliamentarians and legislators we should be elected to do that job and not on the basis of the number of doors we have knocked on, how many leaflets we have delivered and how many favours we have bestowed. Our current system is demeaning but we comply with it because it is the only way to be elected.

The DIRT inquiry shows what can be attained. The questioning by the members was incisive. The television coverage was particularly welcome. It allowed us to see that our Deputies could elicit the truth from the best brains among the witnesses. I commend TG4 for televising the hearings. It is regrettable that our tribunals are not televised. This would be a relatively simple matter. The format of the inquiry with people sitting around a table was good. The stuffy and off-putting adversarial system which we see in our courts was not used. When members and witnesses sat around a table questions were thrown and the Deputies got down to the nitty-gritty, and this helped.

The recommendations in the report, including Oireachtas reform, must be followed up. The Attorney General has been asked to examine the methods of holding tribunals and inquiries in other countries. We must make those comparisons. This work will require huge investment. Deputy Roche has referred to AIB. Members of this House have very little back-up or remuneration. When an increase in remuneration is contemplated we must go to the review body which is headed by Mr. Buckley of AIB who is paid £500,000 per year and who tells us what we can and cannot earn. When I consider the history of AIB this sticks in my craw. As Members of the Oireachtas we must respect ourselves. We need greater investment in the Houses and greater back-up. The Minister for Finance must learn from the inquiry and act on the recommendations in the report.

The sub-committee's method of carrying out its business, particularly its use of section 7 of the Comptroller and Auditor General's Act, 1923, was quite innovative. This showed how quickly legislation can be put into effect. The legislative changes took only eight weeks. This was due to the stewardship of the chairman.

Reference has been made to the central findings of the sub-committee. We need a new consolidated Revenue Act. There have been complaints from the IFSC that the Revenue Commissioners are being over-zealous. I would prefer to see them over-zealous than too lax in carrying out their duties. The report makes it clear that there was laxity in the past.

Ordinary people who watched the proceedings on television had nothing but praise for the sub-committee. However, I am continually asked what punishment will be meted out to those involved and I can only answer that I do not know. Many of those involved will probably escape punishment and this is regrettable and disappointing. It is not what the public wants to hear. The public wants to see action taken and people punished.

Deputy Mitchell said that while the financial institutions are perceived to have conspired in tax evasion and are branded as corrupt, this view is too simplistic. I do not agree with him. I believe that is the plain and unvarnished truth. It was also said that the laxity of the public authorities was at fault rather than endemic corruption. One can only conclude from the report that corruption and tax evasion were endemic in the country. Bogus non-resident accounts were held in various towns throughout the country. This is an indictment of ourselves. I was asked recently why we are such a dirty nation and why we have such a litter problem. I was reluctant to agree that this was the result of something in the Irish psyche. However there is something in the Irish psyche which believes that laws should not be obeyed if one can get away with not obeying them. We have an individualistic streak which leads us to admire a person who can get away with breaking the law. We suffered the final indignity when it emerged that a member of the sub-committee was an Ansbacher account holder. This did not damage the findings of the sub-committee but it did great damage in terms of public perception and was very regrettable. This happened despite the fact that a screening procedure was in place and questions were put to this individual. In future we must examine in detail Members who are being appointed to committees and we must also find ways of dealing with those who bring committees into disrepute.

The inquiry has been a welcome exercise. It has exposed corruption in our society. However, we must ask ourselves is anyone who was involved in this corruption feeling uneasy at the prospect of being prosecuted. I do not think so. Let us look at what has happened since. Certain politicians in this House have been found guilty of certain activities and gone on to top the poll. This says something about the Irish psyche. Deputy Foley need not worry therefore about his political future; he will do quite well.

In terms of cleaning up the political and financial systems this has been a very productive committee, which has done us proud. The inquiry is now suspended but I hope we will learn from the mistakes made, which were few. The central message is that this House needs more investment. The inquiry cost just over £800,000, which is nothing when compared to the cost of the tribunals, in respect of which there is great cynicism among the public about the length of time being taken up. Many see them simply as offering a sinecure to certain individuals. Some, however, are doing fantastic work, although the people were disappointed with the beef tribunal. What was good about this inquiry was that its findings were so clear. There is a need for clarity when it comes to tribunals of inquiry. To do our work effectively we need to follow through on the report's recommendations and treat ourselves with more respect. To this end there is a need for investment and resources.

Mr. O'Malley

I congratulate Deputy Mitchell and his colleagues on the sub-committee of the Committee of Public Accounts on the work they did so effectively and expeditiously and to which they had to devote considerable time without any form of remuneration in contrast with some of the others involved in advising some of the parties. I cannot help contrasting the speed, clarity and effectiveness of the report with what happened at the beef tribunal in the manner of the hearings and the nature of the report, which was shameful.

In the report some very serious findings have been made, primarily in relation to banks but also in relation to the Central Bank, the Department of Finance and the Revenue Commissioners. The findings in regard to certain external auditors are quite startling. I will deal in some detail with that aspect of the matter.

This report is a watershed in relations between Parliament and Government. This relationship in which Parliament is supposed to be supreme has been clouded in recent decades by the growth of Executive power and the decline of parliamentary power and accountability. The sub-committee is right to draw attention in its report to the need for parliamentary reform, particularly in the fields of parliamentary questions, transparency, accountability and investigation. The consequences of the Haughey case in 1971 were very serious because they stultified effective parliamentary inquiries for nearly 30 years.

The close relationship between agencies of the State and major economic interests as exemplified in the report is disturbing and should be terminated. I hope this year will see the introduction of the various legislative and other administrative changes for which the report clearly calls. I am glad this work has already started in the Finance Act and the various steps taken by the Tánaiste in particular.

The findings of the report point to a need to raise standards, not just in the banking sphere but across a wide range of business and professional activities. Sadly, the findings of the Committee of Public Accounts are confirmed daily by what is being brought to light in various tribunals and the inquiries undertaken at the instigation of the Tánaiste. Raising these standards either by way of improved, transparent and credible self-regulation on the part of professional bodies, or by way of new legislation which is effectively enforced, is as important to sustaining our prosperity as lowering taxes and increasing competition.

In a fast moving and increasingly competitive global environment we will only continue to attract high quality investment if we conduct our business affairs in a manner which is above reproach. I have considerable experience in promoting investment worldwide and I am clear that while investors do not want petty bureaucratic red tape, they will favour those countries which have a clear, straightforward legal and regulatory structure which is enforced without fear or favour. Such a regime thus attracts the best type of investment and creates a stable prosperity where people need not be concerned about the threat, either real or illusory, of capital flight. Such a regime is also necessary to sustain the reduction in tax rates to which my party and I are committed. People wish to see effort and innovation rewarded provided that they are sure that the money is made from legitimate business activity and people pay what is lawfully due in taxes.

During the past year or so, in addition to the problems highlighted in the report, there has been a steady flow of complaints from members of the public who have been unhappy with the investigation by the recognised accountancy bodies of complaints made against their members. As a result of the issues raised the accounting bodies need to give greater recognition to the following elements of their investigation and disciplinary regime: (i) transparency – investigation or disciplinary findings should always be published; (ii) the standing of the complainant – his or her rights are often less than the member's in the process of investigation and this imbalance needs to be corrected, and (iii) independence – greater participation by independent persons in the decision-making structures needs to be provided for in order to provide public assurance of the fairness of the investigation and disciplinary regime.

While such steps would be welcome, there is also a clear need for an overall review of auditing. In this connection I welcome the decision of the Tánaiste late last year to establish a review group on auditing under the chairmanship of Senator Joe O'Toole which is due to report by the end of May. It will examine and report on various issues dealing with auditor independence, the auditing of financial institutions and legislative changes recommended in the DIRT inquiry report. In addition, having regard to recent developments, it has been asked to examine whether self-regulation in the auditing profession has been working effectively and consistently and whether any new or revised structures and arrangements are necessary to improve public confidence and, if so, what form they should take. I am sure the group, under the able chairmanship of Senator O'Toole, will come up with practical recommendations which can be implemented speedily.

I have some experience of the need for these changes to be made quickly. When I was in the Department of Industry and Commerce in the early 1990s certain matters came to my attention and I invited the then chairman of the Institute of Chartered Accountants in Ireland to discuss these concerns which were of a disciplinary nature relating to his members. In the course of the discussion I asked him when was the last time a chartered accountant had been struck off or how many had been struck off in the previous ten years, and he told me that he could not give me the answer off the top of his head but that he would communicate with me in a day or two, which he did. It transpired that one accountant had been struck off in the previous ten years. His was a small, one man practice in a small town in a remote part of Ireland. When I inquired about him, I discovered that he had a drink problem and he had lost control of his practice. That was the extent of the disciplinary action taken.

At that time I was aware from the evidence given to the beef tribunal, for example, of serious dereliction of duty by auditors, but no action was taken in that case. Some of it has been made clear in that evidence. While I do not rely on the beef tribunal report or its findings, it is convenient for the purpose of quotation to refer to some of what came to light in the course of that tribunal. There were serious instances of major tax evasion by a particular beef company and it was clear from the evidence that that evasion had come to the knowledge of the company's external auditors. The rules of conduct for auditors include rule 24, that "a member should not continue acting for his client while suspicious of his conduct". In this case, of course, the firm concerned continued to act for the client and continued to facilitate and connive at major serious tax evasion amounting to many millions of pounds.

This morning I inquired from the Department of Enterprise, Trade and Employment, which is seized of these matters, whether the accountancy profession or institutions had taken any steps of a disciplinary nature arising out of the beef tribunal against any of its members and I was told the answer was no, they had not taken any steps. That is regrettable.

The auditing function is one which has become increasingly less important in the minds of some of these larger firms. The Institute of Chartered Accountants in Ireland, which is the primary institute of this nature, tends to be dominated by a small number of very large firms situated in Dublin 2. It appears that because they dominate the institute they seem to be exempt from any form of effective control, whatever the lip-service may be at a given time.

Part of the serious difficulty which has now emerged arises from the combination of auditing and consultancy advice. The consultancy advice is frequently extremely lucrative from the firms' point of view. I am told that in some cases auditing, which is a statutory procedure for the protection of the public and shareholders, is looked on by these firms as a kind of loss leader so that they can get their leg in the door and make a great deal of money from the consultancy side of their activities. I hope that the review group set up by the Tánaiste and Minister for Enterprise, Trade and Employment and chaired by Senator O'Toole will come to grips with that problem.

I have read the long list of recommendations by the sub-committee under Deputy Mitchell and I find myself in agreement with them. The great majority of them should be taken on board and if there is not proper self-regulation in the auditing profession, it must be imposed by legislation. If that is necessary, I hope that that legislation will be introduced before the end of this year.

It is difficult to disagree with any of the recommendations of the sub-committee in this regard. The recommendation, for example, that an audi tor should be allowed a maximum term of five years to audit a financial institution is correct. That will give rise to a much greater degree of independence. In addition, the auditor to a financial institution should be appointed not by the institution itself but by the Central Bank. The auditor, therefore, would be in no way beholden to the institution and could operate effectively and independently. Some of the other recommendations hint at some of the other difficulties which seem to exist, but these are among the more serious ones and I hope they will now be tackled in an effective way.

It is clear from this report and other reports that it is not just professional bodies which need to get their house in order. It is also necessary that the State examines its own conscience and ensures that legislation is appropriate and properly enforced. I welcome the new powers given to the Revenue Commissioners in the Finance Bill and I hope that the Government will respond positively to the other recommendations without undue delay. However, there is a need to act in other areas also.

The report of the Company Law Compliance and Enforcement Working Group, established by the Tánaiste and Minister for Enterprise, Trade and Employment in 1998, only served to confirm our worst fears about the low level of compliance with the most straightforward filing requirements in company law. It was also made clear in the report that appropriate resources had never been made available by the State to ensure that company law was properly enforced in Ireland. The group concluded that those who were tempted to undertake serious breaches of company law, of whom there are many, had little reason to fear detection or prosecution.

The working group made a number of detailed recommendations for changes in company law and in the manner in which it is enforced. The Government responded positively to these recommendations and I understand that the heads of a Bill which are necessary to give legislative effect to these recommendations have been drafted. I understand that the Bill will be published in May and I hope that it will get a speedy passage through this House.

One of the proposals of the working group was the establishment of a new office of director of corporate enforcement. I welcome the fact that the Government went beyond the recommendation of the working group and decided to transfer from the Department of Enterprise, Trade and Employment to the new director primary responsibility for company law investigations. The director will lead a multi-disciplined team, comprising staff with legal, accounting, administrative and criminal investigative expertise. This team will have the necessary skills required to investigate adequately suspected instances of corporate fraud and malpractice and, where evi dence of such is found, to prepare cases for the prosecution of offenders.

The establishment of a company law review group was a key recommendation of the McDowell report. The company law review group, which has been established, will play the lead role in ensuring that Ireland has a company law code which embodies best practice for the development and regulation of the corporate area.

The work of the Committee of Public Accounts on this report illustrates what can be achieved by a committee of this House when it acts with determination. The report already has a positive effect in bringing about the changes which are needed if we are to move to being a fully developed true democracy of which we can all be proud.

Mr. J. Mitchell

I thank the Members, including the Minister, who contributed to the debate and who expressed kind sentiments about me and the sub-committee.

By their nature inquiries look at negative issues, but a hallmark of my approach in public life, and in life in general, has been to dwell on the positive and not excessively dwell on the negative. We have had enough negatives in the sense that we have had calls for so many tribunals in recent years. There is among people a widespread view that politics and society are corrupt, whereas in reality, and without being complacent, we have a society which compares to the best in the world. What has been happening in recent years is good in the sense that wrongdoers are being exposed, but because a small number of wrongdoers are being exposed we should not extrapolate and say that the generality of politicians or people are corrupt, something I do not believe to be the case.

We should be terrier like and determined in exposing wrongdoing wherever it occurs. It is particularly apt that the final speaker was Deputy O'Malley who has been one of the great terriers of accountability in the House for so long. I am happy to seek to emulate his efforts over so many years.

It was in that context that I expressed the view today and previously that there was not endemic corruption, something which was criticised by Deputy Gormley. I do not believe anybody who sees or examines the evidence will believe there was endemic corruption in any of the public services or financial institutions. Because of what I call laxity, bad habits were allowed prevail.

Deputy Gormley went on to talk about the litter problem, another classic case of public sector laxity – it is a management problem. The major private shopping centres, which are used by tens of thousands of people, are spotlessly clean. The litter problem in a sense is similar to the DIRT problem. Because of the lack of provision and political will in terms of enforcement, the problem was allowed fester. Sometimes this comes from the belief that people do not want enforcement. However, all the evidence is that people want enforcement. Let us take the example of clamping vehicles in Dublin. There was initial criticism, but now people are delighted with it because it has certainly improved parking in the city. Similarly, people want effective Government. When the Government eventually addressed the public finances problems in 1987, with the assistance of the Opposition, its popularity increased. Contrary to all expectation the Government was popular for cutting expenditure and for doing what was right and necessary. This is the approach we should have to all these issues as we have a duty to lead and be sensible and effective.

The House is not effective. We are a shambles, appallingly organised and resourced and not independent of the Executive as we should be. The Minister's response today was excellent in all respects bar one. I do not agree with the criticism expressed about the Department of Finance. That Department co-operated with the inquiry from the outset in the most positive way under the leadership of the now retired Secretary General and his successor. Similarly the office of the Attorney General has been positive in its response from the word go. The Revenue Commissioners have also reacted positively from the word go, so there has not been resistance to the inquiry only full co-operation, something which is worth repeating. The one area where there seems to be very little progress is where progress is most urgently needed, namely, getting our act together in this House. We are surrounded by empty chairs, which is the norm, and that is what the public sees on television, adding to cynicism about politics. It is corrosive, debilitating and dangerous. It is necessary to address the conclusions in the report which seek urgent Oireachtas reform, including making the Houses of the Oireachtas financially independent as is the case in most other jurisdictions so that we do not have to return to the Executive for approval for expenditure on all sorts of minor things leading to the possibility of things being delayed and frustrated. It is wrong that we should have to do this. We should have the independence and resources necessary to decide the priorities.

Resources is a major issue. One of the great things in this inquiry is that we received the resources, both individually and as a committee. That the Minister for Finance approved a personal assistant for each Member to help them in their research and reading was an absolute Godsend. The inquiry could not have continued at the pace it did but for that because when we finished at 10 o'clock at night those people read the files for the next day and were able to brief us fully early the next morning so that we were ready to ask the probing and relevant questions.

This House meets at the same time as two or three committees and parliamentary party meetings. Deputies are running backwards and forwards to be present or raise a question. I know of no other Parliament which operates in this way. For five years I was a member of the parliamentary assembly of the Council of Europe where committees never sat at the same time as the plenary session of Parliament, and we should get to that stage. Question Time has become a charade because of well meaning changes over the years which have effectively deadened what was once the great tool of parliamentary accountability. Opposition Members are not properly resourced to do their research to hold Ministers to account. Chairpersons and Members of committees are not properly resourced to do their work. There is much we can do and if we do it there will be lasting benefit to the public administration and people of the country. What is more, Government will benefit. A Minister who thinks it is wise to avoid or duck accountability and not answer questions in the House is undermining his own power and authority in his Department. It is the road to failure.

There are many people whom we should thank. I already expressed my thanks to the clerk of the committee and the Ceann Comhairle and Clerk of the Dáil and all the other staff of the House who were magnificent. We were extremely well assisted by the Bar Council from the outset. Mr. Frank Clarke, SC, was nominated by the Bar Council to act pro bono publico which he did for the first several weeks. He was later assisted by Mary Irvine, SC, and Paul Gilligan, SC, who were very wise and committed counsels to the committee. We are extremely grateful to them and to the junior counsel, Emily Egan and Emily Farrell, who did so much good work on the avalanche of documentation. Our financial advisers, Eugene McMahon, a partner of Chapman Flood Mazars, and his assistant, Mark Kennedy, were incredibly effective and committed, working extraordinarily long hours. In addition, my staff, in particular Noreen Flynn, my personal secretary, and P. J. O'Meara, my personal assistant, both of whom were an incredible help to me throughout the inquiry; Larry Byrne, the liaison officer, and the research staff under Tony Carberry, Pauline O'Dwyer and Eamon O'Halloran were brilliant, as was the Comptroller and Auditor General and his staff.

The work will not be completed unless and until we, in this House, urgently adopt the Oireachtas reform proposals which are such an intrinsic part of this report.

Question put and agreed to.

Dáil Éireann debate - Thursday, 30 Mar 2000

Parliamentary Inquiry into DIRT: Motion.

Dáil Éireann debate -
Thursday, 30 Mar 2000