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Dáil Éireann debate -
Wednesday, 28 May 2003

Vol. 567 No. 6

Other Questions. - Offshore Trusts.

Thomas P. Broughan

Question:

52 Mr. Broughan asked the Minister for Finance the investigation which has been held into allegations that tax improprieties may surround trust operations in a bank (details supplied) in Jersey; if the Revenue Commissioners have reached a determination as to whether or not these trusts facilitated tax evasion as distinct from tax avoidance; and if he will make a statement on the matter. [14630/03]

I am informed by the Revenue Commissioners that the investigation is at a very preliminary stage and therefore the commissioners have not made a determination as to whether these offshore trusts facilitated tax evasion. The initial work involves the establishment of the facts and if this indicates that there are tax liabilities, action will be taken by the Revenue Commissioners to recover the tax together with any interest and penalties.

In response to an earlier question of mine, the Minister disclosed that the Revenue Commissioners know the names of the individuals involved in these offshore schemes in Jersey, which are giving rise to such concern. Will he tell us about the agreement he says is now being reached with the Swiss authorities? According to a recent edition of the Sunday Independent, which carried out an investigation into this particular scheme, wealthy Irish clients with money offshore were queuing up to meet a Swiss bank official who had hired offices in Dublin to relieve their distress. As regards getting information out of Switzerland, the official said: “Ah, that is very, very difficult to get. For us to disclose information is very, very difficult. For us here, it is very unlikely.”

An Leas-Cheann Comhairle

The Deputy is exceeding the one minute time limit.

In the context of the capital revenue shortfall and the poor outlook for 2003, how can the Minister accept that his officials should be so slow in tackling this major source of potential tax evasion by some wealthy people in Irish society? We have heard that there is as much as €5 billion in some of these offshore schemes. Is the Minister not concerned?

As I pointed out to the Deputy in my earlier reply, using the figure of €5 billion includes all the assets held in those particular banks. As I pointed out also, not all the deposits in those particular banks would be held by Irish residents.

Can the Minister give us an estimate of what he is concerned about?

The Deputy made a suggestion earlier regarding the tax avoidance industry. I have read recent reports by tax experts who say that I am the greatest bane of their lives who has ever become Minister for Finance. It is due to the powers I gave the Revenue Commissioners in 1999 that information relating to these particular trusts has been obtained from the banks. I would wager that most of the money deposited in those trust operations goes back many years, long before my time as Minister for Finance. The Revenue Commissioners have made progress in this regard as a result of the powers I gave them.

Regarding the Swiss matter, the taxation on savings directive has been going on in one form or another since the late 1980s, and in its most recent form for the past six years. One of the factors holding up the finalisation of that directive, until the recent trouble over the Italian milk quotas, was the attempt to reach an agreement with non-EU countries about it. It was said at the ECOFIN meetings that many EU countries have major banking industries and if a non-EU neighbour had no reciprocal arrangements with the EU, money would automatically transfer out into that jurisdiction. Negotiations have been going on for a considerable time in the EU and Commissioner Bolkestein has been leading this on our behalf.

Steps have been taken by the Swiss authorities to have reciprocal arrangements in certain circumstances and Deputies will have followed the ECOFIN debate in this regard. The Swiss have now agreed to have reciprocal arrangements in fairly tightly controlled circumstances but it is a major breakthrough. The Swiss sought other things in other areas which they have succeeded in obtaining, although not in the area of taxation. If we sign off – hopefully at the ECOFIN meeting next week, if we get the Italian matter resolved – these agreements will operate with the Swiss authorities when the directive comes into play. Under the terms of the agreements, it is intended that if any EU member state has evidence concerning a particular taxpayer, it will be able to obtain information from the Swiss authorities. That will be the situation, which I am pointing out for the benefit of Deputies as well as for people outside the House who may be reading carefully about this.

Is it true that the Revenue Commissioners have written to some of the banks involved with these particular offshore trusts to say that if they indicate by the end of this month that they are willing to come in from the cold and sort out their affairs, penalties, including tax payable, may be mitigated? If this is so, why has the Minister not advertised this more publicly so that the compliant taxpayer can know that his officials are pursuing those involved? These are the people who are robbing our health and education services. They need to be brought back home to pay their fair share of tax, as compliant taxpayers are doing. Will the Minister confirm if the Revenue Commissioners have given people until the end of this month to act?

An Leas-Cheann Comhairle

Deputy Boyle.

The Minister should not answer two questions at once. He referred to the additional powers he gave to the Revenue Commissioners, and undoubtedly he has given them extra powers. Could he update the House on the progress of the review taking place within the Revenue Commissioners in regard to the effectiveness of the use of these powers? The fact that the review is taking place puts a question mark over whether they are being used effectively.

In reply to Deputy Burton, the Revenue Commissioners have not written to the banks to inform them about the deal. What has happened is that the banks have written to their customers telling them that there is a code of conduct in place. There is a code of practice for auditors for voluntary disclosure. The banks have pointed out to their customers that, under the code of conduct, if they dealt with the Revenue Commissioners at an early stage, depending on the circumstances, they could possibly comply with the mitigation involved in the code of conduct. I understand that the banks have written to their customers. The Revenue's code of conduct for voluntary disclosure has been published for some years. I understand the banks have informed their clients about this way of doing things.

The banks told their clients they were so advised by the Revenue Commissioners.

Because it is a public document, the Revenue Commissioners have told the banks what the procedure is.

In relation to Deputy Boyle's question, I set up the Revenue powers group to study the powers. The chairman is a former judge, Mr. Frank Murphy. I have mandated a report by the end of October, if possible. I promised such a review in 1999 during Report Stage of the Finance Bill as a result of the additional powers given to the Revenue Commissioners. The Revenue powers group will determine whether the powers are adequate or whether they perhaps go too far in particular areas. Many people said the powers I gave Revenue in 1999 were draconian, which is the case compared to the powers in many other jurisdictions.

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