SECTION 3.

I move amendment No. 32.

In page 8, subsection (4), line 26, to delete "14th day of January, 1994" and substitute "14th day of December, 1993".

I referred earlier to the concern I have that the real motivation for this amnesty is that it is a political stroke to shore up the 1994 budgetary situation. There is no reason to believe, if we look through previous amnesties, that this amnesty should be extended into 1994. A much more logical cut-off date would be some time in December of this year so that the proceeds would go into this year.

I believe the reason people are being given this extension is not some sort of holiday Christmas or New Year bonus to get their affairs together, but a deliberate attempt to massage the Exchequer borrowing requirement for 1994. The Exchequer borrowing requirement for this year would have been over £900 million but for the fact that the capital receipts of privatisation brought it down to £760 million.

Here we have a once-off sum of money that is going to come in. The sooner it comes in the better, because it will choke up the whole system in the Collector General's Office. The audit process will have to go on hold, so we should bring the amnesty period down to the shortest possible time. I do not know what all the staff in the audit section are going to do. Maybe they will be busy receiving these large brown envelopes in the Castle and filling up these declaration forms of immunity for tax defaulters. From the passage of this legislation, they are being given over six months. By any evaluation a final date in December is reasonable.

I would like the Minister to confirm that what he is trying to do is not actually to create a current budget to minimise the current budget deficit this year, but to ensure that there is money coming in that will pay the £260 million of deferredProgramme for Economic and Social Progress commitments on 1 January. This type of jiggery-pokery and three card trick with the public sector accounts is very undesirable and even unethical. I would ask the Minister to do the honest thing and put the receipts of this year into this year, not into next year, and to accept the amendment.

I take the point Deputy Yates is making that one could bring this money in, potentially, at any particular point. Given that the points being set at 14 January 1994, can the Minister explain why we have to rush this legislation through? Even if we did it in the autumn there would be plenty of time for people to get their affairs in order by 14 January next.

The scheme will, hopefully be in operation the week after next. As far as I know the Dáil is not coming back in August but the way things have changed in the last few days in this committee I suppose anything is likely. On the basis that the Dáil will come back at the end of September or October we will have about two months to comply with the scheme, which is a tight enough period. If people pay the money up front any time up to Christmas the money will be in for 1993. I hope a good amount of the money wil be in this year. The final date is in 1994. It is impossible to speculate at this stage but I imagine a lot of the payments will be made either before the end of November, or between that and the cut off point.

A number of the people who will be paying will have to liquidate assets which will take some time. The records will be in by the end of November and then the final date will be six weeks after that. We are working on a fairly tight time schedule. One of the complaints about the amnesty in 1988 and one of the reasons cited for the amnesty not taking in the kind of people we are hoping to take in in this amnesty, is the fact that the accountants and the tax practitioners were under so much pressure with their existing clients, trying to get them to comply with the various records and data, that they had no time to get to other categories. This amnesty is clearly directed at a different segment, at people who are non-compliant either fully or partially. The time scale is short.

I will make no estimate of what will be achieved. My main priority and objective in this amnesty is to see that, at the end of the day, we have more compliant taxpayers. We will then try to move towards a more compliant tax society. If we achieve that I will be pleased.

I notice the Minister did not respond to my general thrust, which is that he is trying to cook the books for 1994.

Deputy Yates made that horrendous allegation before today and in spite of all the people who are always trying to get me to spend money and do all kinds of things I am tolerant, but I never managed to cook the books.

Could I make two points? The Minister talks about the accounts and getting everything in order, but is is not the case that the declaration deadline under this provision is 30 November? If people have to have their affairs in order by 30 November and have their declarations, their pieces of paper and their black certificates organised, why not have the payment date the same?

It is totally inconsistent to allow a further period of several weeks after that. There is no logical explanation. Once you have done the computing of what you earn and what you are prepared to declare, that is the day you should pay it.

Would the Minister not now admit that what happened was Deputy Spring said in Cork that no more State assets would be sold, with the result that the stroke the Minister pulled off this year cannot be pulled off next year, that then he was forced into this and tried to push this into the next year?

Is there an objection to getting money from this amnesty now that we have decided to go down this road?

The objection is to putting it into the next year rather than the year in which it accrued.

I hear Deputy Yates complaining about what we might use this money for. I hear him complaining that we might pay ourProgramme for Economic and Social Progress. One day he is complaining about the Programme for Economic and Social Progress and now he wants to complain about how we are going to pay it. While we are in Government we will ensure that our agreements on Programme for Economic and Social Progress are honoured, irespective of what the Deputy says.

(Interruptions.)

Deputy Ferris should stick to industrial policy, his area of expertise.

And Deputy Yates should make up his mind what his financial policy is before the election. Ever since debate on the Finance Bill started he has changed so many times I have lost track.

The Minister, without interruption.

My only concern is to make the system work, to ensure that by the end of November we give people an opportunity of making a declaration. It is unrealistic to expect that they could pay by the same date, because hopefully, if it is a success, many people will have to liquidate assets to pay the tax on what they have declared. We have to give them some time to do that.

Presumably many of them, particularly the people who owe smaller amounts of money, might pay quickly and get on with complying with their 1992-93 tax return. That is probably what will happen.

Amendment, by leave, withdrawn.

I move amendment No. 33:

In page 8, subsection (4), lines 32 to 34, to delete paragraph (b).

This amendment went in very late last night to a very overworked Bill's Office. Either through their mistake or my mistake it contains an error. It ought to have related to subsection (4) (a) rather than (4) (b). In any event, it provides me with the same opportunity to argue that neither should be there. This and my subsequent amendment are old style Fianna Fáil style amendments, as distinct from the very constructive amendments I have been arguing all day. The purpose of these amendments is merely to cock up the Bill to the best of one's ability because, of course, it is a deplorable Bill. I am seeking here to ensure that interest and penalties may not be waived.

We have now disposed of Albert's amnesty. I know the Minister for Finance is happier with this amnesty, which is his amnesty, but he has made very compelling arguments against himself. He says that these people are by and large already in the net. If they are already in the net, why do we have to give them a reward for bringing their affairs up to date when they are competing with other people who have paid their full taxes up to date?

We have agreed already that some of them are people who benefited from the 1988 amnesty. Let it be noted, for all his diplomacy and so on, the Minister has refused every single amendment that the Opposition put forward today. He has rejected every amendment, so in fact we are now living in an amnesty culture. If you do not jump on this amnesty there will be another one coming. People who benefited under the 1988 amnesty will benefit again — we will waive interest, we will waive penalties. It is not an insignificant competitive advantage to these people as against those who have tried to observe the law. I cannot see any reason for this at all.

The only reason for this is that the Minister for Finance knows from the expert advice available to him that Albert's amnesty was a nonsense. It was not going to bring in a fraction of what was being bruited about. It was only to do favours for a few powerful people in this society. So the Minister decided if we are to have an amnesty let us have a general amnesty and let us bring in some real money, it will help with the budgetary figures. As a result we are back down the same old road of the amnesty again.

I explained courtesy of RTE the other day, that, believe it or not, I met a tax cheat at the weekend. I meet tax cheats regularly. Lots of people, as the Minister said, do not declare a few pounds in the post office or whatever to the full extent they should. I am not making an issue of that because it is neither here nor there. I am talking about somebody who thought it was a matter of great amusement to report that in 1988 he paid £39,000 under the amnesty then applying, to bring himself up to date. His joke was that he told the inspector to have a good look at the cheque telling him it would be the last one he would see until the next amnesty. Lo and behold, he has turned out to be a prophet. Five years later, we have another amnesty and he is eligible to benefit from it.

The Minister cannot expect people who continue to pay to run the social services and the State services to comply with the law while we bring in a regular cycle of amnesties for those who break the law.

Section 2, Albert's amnesty, goes up to April 1991. This section deals with the interest and penalties on taxes up to what date? In other words, is it just to 1991 or is it taxes up to date?

It is undisclosed liabilities up to April 1991. Any penalties or taxes following that would have to be paid in full. To explain why we brought in the other taxes and the 1988-type amnesty for interest and penalties——

To get money.

I hope we get money. Compliance with the general amnesty is mandatory and taxpayers, including companies, with arrears for any period to 5 April 1991 must pay the full amount of those arrears by 14 January. It is not just paying income tax, capital gains tax and the levies. They must do the same with all of the other taxes. The incentive amnesty of 15 per cent only applies to those two particular taxes. We will then have to look at VAT and the other taxes. There was no way I considered giving an amnesty of 15 per cent on VAT or the other taxes because it is not their money it is money they collected for others. In the other areas, they must by law pay the full taxes, plus interest and penalties.

The thinking behind it was that if interest and penalties were waived more people would avail of the amnesty than would be the case if they had to pay the full rate of VAT, capital acquisition and other taxes and then pay the interest on top of it. They would then be in the system. It was suggested in letters from people who were pro-amnesty that we should also set the rate at 15 per cent for the other taxes. We could not do that.

I do not find the Minister's argument convincing. The point is that the majority of evaders, if not all of them, are already in the net. The Revenue Commissioners are doing their job more effectively and efficiently than ever before in the history of the tax collection system in the State. Therefore, sooner or later, they will clear up the arrears in this area. It is merely to provide window dressing for the disgraceful section 2 we have just passed which was designed solely to reward liars, cheats, dodges and criminals who have stashed their money abroad or in false accounts here.

The Minister in the debate on the Finance Bill told us that there were towns in this country where something in excess of 54 per cent of the accounts are registered outside the State. It is an extraordinary situation. I do not believe that having this kind of amnesty will change that culture. I am utterly opposed to it but for the sake of making progress, I will withdraw my amendment.

As regards people who apply for the 15 per cent rate, even if they are known to the Revenue Commissioners they probably have suppressed VAT. They would be unlikely to pay the 15 per cent on the income tax side while realising they could be caught for suppressed VAT payments. The only way is to make them pay the full VAT but waive the interest and penalties. At least then we know their VAT position for the future because they will have to declare it.

If that were the position, the Minister should have accepted amendment No. 15. Amendment No. 15 sought, in the form of declaration of income, expressly to include the submission of full accounts for the relevant years together with VAT and PAYE computations. The Minister says that is covered in section 4 (c). If the Minister is happy that all outstanding VAT and PAYE deducted from workers is covered under paragraph (c). I do not see why he does not legislate expressly for that.

The Minister has not accepted a single amendment. Report Stage is fixed for Tuesday evening. If the Minister does not want to accept my amendment he should bring forward an amendment that expressly provides for this area being cleared up in line with the commitment given by the Taoiseach. The Taoiseach gave a very explicit commitment that he would guarantee that was done before anybody would benefit from the amnesty.

As I said earlier, under the 1986 Act, PAYE will still be paid to the Collector General and in doing so, one would give full details to the Collector General, but with VAT an omnibus sum would be given to the special collector. PAYE must be paid to the Collector General.

My conviction as to why this amnesty, which has been described loosely as "Bertie's amnesty" on top of "Albert's amnesty", was introduced is that the Minister knows full well that the original amnesty proposed caused extraordinary outrage among the public in general. The Government probably underestimated the strength of the public reaction. More than that, I think they thought the honeypot was bigger than on reflection they presumed it to be. When the Minister was forced reluctantly, and perhaps by his lights prematurely, to account briefly for himself in the House after a long debate on the Report Stage, he extended the hot money amnesty. Even then I believe he was not convinced, having suffered the misfortune of getting it wrong, that they would really get sufficient money to make the amnesty worthwhile. The reason for this 1988-style amnesty is it is likely to be the one that will raise most money.

I want to refer to the point Deputy Rabbitte mentioned. The amendments on transparency and accountability were rejected. The Minister's theory is that these errant taxpayers now want to become tax compliant. If that is so, he should have accepted the amendments. Under Albert's amnesty one pays 15 per cent on income tax, income levy and capital gains tax but one must account for it. Bertie's amnesty carries over some of the pollution from Albert's amnesty in its logic.

In the middle of section 3 is the system in relation to VAT which explains why Deputy Rabbitte's point is being dismissed by the Minister. One can make a VAT declaration without providing any corroborative evidence, get a certificate and use it as a shield, like a clove of garlic against Dracula, the taxman, who comes to suck the two taxes from you. A huge part of the structure of the section we are dealing with carries over the polluted logic from section 2 into section 3. My guess is that the Minister's adviser's came to the conclusion that a big part of the fiddle was more likely to be undeclared sales from the point of view of VAT and that they better include the black hole mechanism, the Trappist monk mechanism and the certificate of immunity mechanism to VAT or they would be left high and dry on the revenue side. This is a vulgar grab for Revenue to sort out whatever will be dicky with next year's budget or whatever problem is being carried over from this year.

Bertie's amnesty is not nearly as innocent as some of the descriptions would have us believe because it has at its core as big a piece of offensive pollution in terms of the integrity of the tax system as everything that goes to underpin section 2 of the earlier amnesty we discussed.

I listened with interest to the Minister's explanation of section 3. It is the first time that he has gone through the thought process of how he arrived at this amnesty. I understand he was up all night with the Revenue people and when he thought through the first amnesty he realised that he had to give relief on interest and penalties to those who would make declarations at the 15 per cent rate, whereas we all thought that when he realised he was not going to get the money in on the first amnesty he made a grab for money by using something that had a track record of bring in money, as it did in 1988.

This is new information and when I reflect on it, I have to say that it does not match with the Minister's major thesis which is that the purpose of the first amnesty is to deal with undisclosed money and bring it into the net for the first time. Section 3 deals with disclosed money not undisclosed money. In other words, it would have been possible to frame this legislation so as to give relief on interest and penalties on undisclosed money but the Minister did not do that. He went further.

I am more inclined to think that, like me, the Minister spoke to people in financial institutions who told him there were a couple of key reasons this money was not coming home. First of all, people are not paying any tax on the interest and they have no intention of disclosing that money because from then on they will have to pay DIRT on it. If they put the money back abroad they will have to declare it when they remit the money home and pay it at their marginal tax rate. That is the first big loss. Secondly, whether they have the money in a hot money centre or in Northern Ireland, the Revenue Commissioners are not going to get hold of it, so why should they give them 15 per cent when they have successfully evaded the system?

The most the Minister will get from the first is £30, £40 or £50 million but the other one has a track record of bringing in big money. The Minister knows that disclosed uncollected arrears, according to the Comptroller and Audit General's report, are £2.5 billion — some of that would be post-1991. Leaving aside liquidations and money that is uncollectable, there is a potential £1 billion there to be collected. With interest rates at 8 per cent or less, people are going to borrow money and get their tax affairs up to date.

I have no doubt that this is not a knockon corollary of something the Minister had to do because of Albert's amnesty, this was a grab for money. I am absolutely convinced of that and nothing he says will convince me otherwise.

If I were to follow Deputy Yates' thinking, I would have to assume that everything is black and white — that we are talking about, on the one hand, totally non-compliant taxpayers and, on the other, totally compliant taxpayers. That is not the case. Deputy Yates will agree that what we have are businesses that are, by and large, compliant or believe themselves to be compliant but they have a subsidiary that is actually non-compliant. We are trying to get them to be fully compliant. If you have somebody outside the net altogether, they are not outside it just for income tax, capital gains and levies; they are outside it for surtax, corporation tax and every other kind of tax. We are saying to them that under the law, there must be full and complete disclosure otherwise they can be trailed and the certificate will not afford them any protection. They will be caught for the full amount. They run the risk of imprisonment and face the other very tough penalties. They must pay their full tax. They are marked down in a black book by the Revenue Commissioners and are definitely in the follow-up category.

It is good logical that, having settled their affairs, the interest and penalties were waived. They pay their full VAT and declare all the other taxes straight into Revenue. They do not go near the special collector. I believe that is a good way of doing it.

The Minister could have gone a different way about this. The two principal ways of tax evasion that I know about are this. Take the case of somebody exporting to the UK. Say, for example, the price of the sale was £40,000, they get an invoice for £30,000 and get the other £10,000 put into a non-resident account in Birmingham. They cream off the top and that money goes out of the system. It never appears on the invoice at all. Secondly, they have a business and they put down as a business expense every month some consultancy service from Luxembourg. It is a direct debt system going straight into a hot money account in Luxembourg for some illusory business service. Take both of these cases. They are looking at this amnesty, and they scratch their heads and see exactly what tax they might have paid and avoided. There is no VAT on exports, it is really just comporation profits tax or income tax they have avoided. What is more likely to crack those down in an audit system, going through these Luxembourg invoices, checking if the costs of exports match up to the levels of profitability of competitors and so on. Consider the audit system over the last two years before the 600 staff were there. In two thirds of audit cases they have achieved substantial money. The type of money we will get from Albert's amnesty we would have got by an effective audit anyway. The real attraction is for someone to get the black certificate to wave at the Revenue audit personnel, not to evade payment because he is already successfully doing that.

Perhaps the audit system would have brought in much of the money in the pre-1991 amnesty, but one can never be sure, and I think the audit's investigation unit or the other sections would have been examining it. At least there is a general belief that a large portion of that money would not have been brought in, but I know the Revenue Commissioners have been closing in on that. I remind Deputy Yates that the amnesty covers the pre-1991 period. The audit trail will continue to deal with the current position. That is where there will be cross linkages in time, 1993 to 1994 to 1995, so they will be caught in that.

Deputy Rabbitte, is the amendment being pressed?

Yes, Sir. What signal is the Minister sending out to people who are paying their taxes? The Minister is saying this is the second general amnesty and if this Government are re-elected as its architects intend it will be——

In perpetuity.

——no doubt the arguments will be as compelling in 1997 to get money, to find money, to do all these things that Deputy Cox unintentionally gave Government backbenchers the opportunity to talk about for ages today, from that water scheme in Killarney by Deputy O'Leary to that hip replacement in Mullingar and so on. The arguments will be as compelling then. I would like to remind the Minister that the 1983 Finance Act provides for virtually draconian penalties. They have rarely been used and, of course, nobody has been imprisoned, so there is no point in telling me to look at the penalties we are bringing in this time. They will fold their arms and say there will be another amnesty on the way. That is the signal being sent out. It undermines the audit system Deputy Yates referred to. Having said that, I withdraw the amendment and reserve my right to correct the paragraphing on Report Stage.

A brief note. While the 1993 powers at the time seemed very effective, the ten intervening years have proved that, because of the burden of proof required by Revenue officers, the rate of successful prosecutions has been very poor. That is why tomorrow morning we will be discussing particularly section 11 of the Bill which tries to address the issues I have formulated, based on talking to people who tried to make it work.

Amendment, by leave, withdrawn.

I move amendment No. 34:

In page 9, subsection (6), lines 1 to 6, to delete paragraph (a).

I am happy to take amendments Nos. 34 and 35 together.

Is that agreed by Deputy Rabbitte?

VAT is collected and paid for not by the taxpayer but by the consumer. Interest relief on VAT strikes me as being quite different from interest relief on profits tax or income tax because they have had the cash flow benefit of this money which they have absorbed. Secondly, if one takes the postion of two competitors side by side, publicans or hairdressers for example, with very keen competition, it is very unfair if one puts the VAT in a bank account and the other remits it to the Revenue Commissioners every two months. PAYE is exactly the same, it is someone else's money deducted. Deputy Rabbitte made reference to this point earlier and the Minister quoted a different section saying that it was included. I am seeking that PAYE be treated under this Bill exactly the same as VAT. Perhaps it is already the case. That is why I am asking that "and PAYE" in amendment No. 35 be added in after the words "value-added tax" in lines 5 and 6.

I agree, without going over those arguments. The significance or purpose of adding in the words "and PAYE" is to enable the Minister's tax inspector, whom he is so interested in assisting, to track it. The very fact that PAYE is included gives the tax inspector a hope — a forlorn one, admittedly, but a hope nonetheless — that he may be able to track it as a result of the PAYE remittance being included. It is a very forlorn hope because people powerful enough to deliver on this amnesty in the first place will be powerful enough to get the tax inspector off their backs.

Let me explain the rationale. VAT is a fiduciary tax. It is collected by businesses from their customers as an agent of the Revenue Commission and, as I have said, there would never be any question of extending the incentive amnesty to VAT. To put VAT in at a 15 per cent tax would be entirely wrong because it is collected by an agent on behalf of the Revenue Commission. Many individuals evading income tax may in practice also have practised VAT fraud. The most obvious area of fraud in the State is, unfortunately, in the suppression and non-return of sales figures and the relationship that has with VAT. Unfortunately, it is prevalent in Irish society in many trades and professions. It is an integral feature of income tax evasion, possibly to the point where VAT and income tax evasion are inseparable. That is the answer to Deputy Cox. People must pay the full amount because it is very difficult to separate them. In such circumstances undischarged liability in respect of VAT could be quite substantialvis-�-vis the liability on undisclosed income. That point has been made already. A waiver of income tax liability alone might not be sufficient incentive for such persons to put their affairs in order and that is what we are endeavouring to do. To try to make the incentive scheme a success we took the view that it would be necessary in relation to value added tax to replicate the amnesty arrangements for income tax. There will be similar assurances in relation to Revenue investigation of the pre-1991 period, but on the basis of full discharge of the VAT liability to the chief inspector. That can be subsequently followed through. That is the start. In some ways it would be even easier to follow the VAT through. From your own constituency, Sir, you have experience that that area is very successfully rooted out nowadays. To remove that facility to allow non-compliant people who wish to become compliant would damage the chances of success of this scheme

The Minister could accept the amendment?

No. There is no link between PAYE and undisclosed income.

Is amendment No. 34 being pressed?

Amendment by leave, withdrawn.
Amendment No. 35 not moved.

I move amendment No. 36:

In page 9, subsection (6) (b), line 13, after "declaration" to insert "audited accounts or substantial documentary support".

I am taking amendments Nos. 36 and 37 together because they are the same dimension. I have already argued the principle of this for section 2 but I wanted to deal with it in section 3 because, as I said earlier, section 3(6)(a), (b) and (c) on page 9 refers to bringing VAT fraud and VAT non-declaration into a twilight zone, in the sense that one must pay the full amount of tax due but forgoes penalty and interest. Part of it comes under Albert's amnesty because it is not just an incentive amnesty, as it is called but the incentive amnesia of the special collections system.

Since this is the Minister's half of this tax write-off equation, why under section 3 should someone who has been engaged in VAT fraud who wants to come clean and be an ordinary, decent citizen in the future in respect of tax compliance, not be obliged expressly to set out in his declaration, as amendment No. 36 provides, audited accounts or substantial documentary support? The VAT we are dealing with surely on the agency basis should be part of the ordinary tax collection system.

Secondly, and it is the corollary of having documentary evidence, I do not believe it is right in principle to say at the tail end of this that a certificate shall be issued to such a person by the special collector following a declaration without, giving some discretion to the special collector. We have discussed this under section 2, but section 2, as I understand its logic, was confined in the definition to income tax, capital gains tax and levies. My guess is that the Minister's advisers have told him that a large part of the money skimmed and creamed off in tax dodging comes out of VAT fraud and non-declaration of sales and that he wants to get at the income and capital gains or whatever related prior to that in section 2.

We are dealing with one of the core pillars of the tax system in terms of VAT and the agency basis on which it is collected. We are entitled to ask that in this section, the Minister will consider that supporting evidence be given. If such evidence is given its corollary is that someone has a right to review it and say " I think it stands up; I will let you go ahead". The Minister, in addition to the first travesty and injustice in respect of the tax code, is adding into it the same "Trappist monk" system whereby you go along, make your declaration, with no annualised accounts, no base point, no evidence provided to support it, no accounts to support it. The person who receives it is obliged to take your word, issue a certificate and when the Revenue Commission inquire about VAT in the future, the immunity certificate will be waved in their faces.

This is part of amnesty, part of his grab for cash, not that he has a bad name for undermining the tax code. It includes the same odious features for VAT as section 2 did. I recommend he table amendments similar to amendments Nos. 36 and 37 on Report Stage, in order to put some substance and respect into the ordinary system of tax collection.

I support the amendment. It is impossible to establish the validity of claims made under this self-declaration system unless there is some supporting evidence. That has been a basic routine, common thrust and procedure in respect of all taxes. When you are sending off monthly returns, there is a basis on which it is done for PAYE and PRSI. One has gross earnings, nett earnings, gross sales etc. I used to be in a family business which sold clothes and sports goods, and time had to be spent each week filling in all the relevant columns. One did a huge amount of compliance work. Now these people just walk in, and think of a number — for example, take a publican or a retailer who has been evading VAT for 20 years; how could he reasonably remember the amount? He would have to go through some form of invoices to prove it. It will be impossible for the appeals commissioner or the audit people to make sense of this. It is a fundamental tenet that there must be some supporting proof that what the claimant, whom we know to be a tax defaulter, is saying is in some way true.

Let me make the point again that when you pay to the inspector or the special collection unit, there is not absolute immunity under that but a conditional immunity particularly in the case of VAT.

Conditional on having information which you never get because of the silence clauses the Minister has built in.

I remind Deputy Cox that in VAT you have the norms of the trade, the industry, and that is what the inspectors watch. If a person who has managed successfully over the years to evade tax liability by supression of sales, pays up, it is difficult enough to catch him, though the audit scheme would have caught some of these persons. There are so many complicated ways of doing this and there is no need to mention examples here in Committee. I am sure the Deputy knows as much as I have heard of them. I hope the Revenue Commissioners could continue to try to catch them through the audits, but I am not too sure that even audits would catch some of the more sophisticated. Where they can catch them they will do that. The fact that a person has declared himself and come straight would suggest he is getting an extraordinary deal and would have been caught anyway, but even with all the powers, all the staff and all the checks some have not been caught. That is the position and we are asking them to come forward and declare their liabilities. They have to make their own assessment of their liabilities. If they go straight, from the 1992-93 tax year on, they may or may not be asked to explain themselves. There is no guarantee either way.

What is likely is that if they start ignoring what they put forward in their assessment and then go back to their merry ways, they will walk into the trap, but I do not believe individuals will do that.

Going back to a point made earlier about the reason for the special allowance for the 1988 tax, the fact is that most of those who availed of the 1988 amnesty came in on the correct figures afterwards. That is why I do not believe there is much money in that area. There was a change in people's attitude, they came in and paid up; they got their affairs in order. They were not people who were outside the system totally, partially outside it, perhaps——

In terms of VAT evasion, if there was ever a VAT price and a cash price for anything it is in the building trade. Take for example a builder who built a scheme of houses but who went out of business, leaving the estate unfinished and has been out of work for a little while. Now with things starting to pick up, with low interest rates and some recovery in the residential sector, he may go looking for a C2 cert. He will say he has not had any work for some time, that he has made a full return of income and would like the certificate. When he is asked about his tax affairs he will say he has one of those black certificates. The 1992-93 system is not fail safe. People can say there were fluctuations in their business in 1992-93 as compared with the period prior to 1991.

The Appeal Commissioners are asked to adjudicate a matter on which they have no entitlement to knowledge of the basic evidence which would constitute the basis on which they could make a valid decision. All they can know is what is written down on the certificate.

The case would be put forward at the hearing.

They cannot know the substance of the case that the defendant, in this case the errant taxpayer, the one under the appeals investigation, can produce. The Minister's logic is to say this is a chance for people finally, if they have a mind to do so, to avail of the last of the amnesties, to clear up their affairs. The Minister believes there are sufficient incentives through the various schemes to induce people to do that. Am I correct in paraphrasing the way the Minister has described the position?

If the Minister believes that, and if people want to clear up their affairs, why is it wrong to say that in doing so they must establish the bona fides of the declaration they are making? If that is the substance of the Minister's position would they not be more than happy, as they would be cleaning up their act, to reveal their errant ways of the past? Why does the Minister object to including such a clause in this if he genuinely believes it is designed, as he says it is, to allow people who genuinely want to do so, to come clean, to get back into the system?

Deputy Cox is right in describing my logic. Many of these people have been non-compliant for about ten years. It looks as if much of it started when tax rates were 65 per cent in the early eighties or perhaps earlier. Does the Deputy believe that if there was no special collection unit, these people would come in anyway? If that were the case then one might ask why they are not calling into Revenue every day now? The fact is they are not doing so, they have not called into Revenue in the last ten years, even when there was an amnesty in 1988, and there were subsequent amnesties on stamp duties and other charges. They have never come forward. They are not interested in that. They remain non-compliant. Some of them are concerned, others are not.

There are some who continue to take so much off the top every year either in the way Deputy Yates described or as I described. One has to give the carrot to try and get them in the door. At the moment they have declared nothing. In subsequent years they will have to show, by way of their income, their sales and their accounts the level they are at. If a case is in dispute and they go to the Appeals Commissioner, he will be using as the basis of his case undeclared income. He will be looking at it from his investigations. That is what will happen.

Rather than harping on that all the time, I would rather believe that these people, as Deputy Cox has said, will once and for all stop working on their illgotten gains, stop being totally non-compliant or partially compliant taxpayers and that they will come into system, pay what is a discounted amount and stay in the system thereafter. That is what has happened in relation to all other amnesties not only in this country but in other countries. One cannot get certain people to come into the system unless there is an inducement.

The Minister has explained again that he accepts the broad logic of the argument and that this is a chance for people to come into the system , to come clean. He says they have not done so up to now and asks why they should do so. According to the way this scheme operates — we will come to the penalties side in the next day or two — the Minister is now saying to tax evaders, "we want you to come in and clean up your affairs, we are offering you for the income part, the capital gains part and the levy part you avoided, Albert's amnesty, section 2, 15 per cent, a bargain basement price, and confidentiality as well. For the balance of it we are offering a waiver of interest and penalties but for the future, we are going to come down on you like a ton of bricks and convert you instantaneously, with mandatory sentences, into someone with a criminal record." If all these sticks and carrots are built into this Bill I cannot understnd why, in respect of the VAT, it is not open to the Minister to ask those people to give some account of the basis on which the fraud occurred.

Deputy Cox has summed the day up correctly. It is the view of people who are dealing with this and catching non-compliant taxpayers, the accountants, the tax experts and the Revenue people that the cross relationship between VAT and income is inseparable. That is the answer to the Deputy's question. They find this day in, day out. The suppression of sales and how that relates to VAT is affecting the income declared.

On a point of order, we are now going to vote on a grouping up to amendment No. 48. There is a cluster of amendments 42 to 46 which asks that, as well as 1992-93 which the Minister has made such a play on, 1991-92 be thrown in as well. The Minister has put his whole reliance today on the fact that the details of 1992-93, the current income return, will catch out the evaders. We are saying that if the Minister wants to tighten that up further he should include 1991-92 as well. We will not get a chance to debate that. Would the Minister be inclined to accept our argument or would he be prepared at Report Stage to bring forward his own wording? When he summed up on Second Stage he indicated a willingness to look at this proposal.

Or does he still believe in the tooth fairy?

In respect of all of the amendments which I have proposed to sections 3 and 4 I would like to withdraw them and have the right to bring them back on Report Stage.

Could I signal to the Minister one concern in advance of Report Stage on one of the amendments, without developing the point, because we are out of time? In respect of amendment No. 48, my concern is that there is a provision to render null and void the certificates that are given if one is found to have given false declarations. There is no procedure laid out by way of appeal or judicial determination of that. It is simply stated baldly in the section. I put the Minister on notice that I intend to raise this matter at Report Stage. I believe it may be unconstitutional in that it may offend Article 37 of the Constitution. If you render a certificate null and void it may have the effect of leaving someone open to criminal penalties for evasion or misdeclaration under section 9. Article 37 of the Constitution expressly excludes exercising judicial powers in respect of criminal offences. It seems to me that there could be a very serious issue there and also in relation to section 13.

I will look at that. In reply to Deputy Yates, I looked at the 1991-92 figures and about 85 per cent of those returns are in. If we were to include them we would find people changing returns and I am not sure it is possible.

As it is now 5.30 p.m. I am required to put the following question in accordance with an order of the Dáil: "That sections 3 and 4 stand part of the Bill."

Question put.
The Select Committee divided: Tá, 19; Níl, 11.

Ahern, Bertie.

Ahern, Michael.

Ahern, Noel.

Broughan, Tommy.

Briscoe, Ben.

Ellis, John.

Ferris, Michael.

Killeen, Tony.

Lawlor, Liam.

Fitzgerald, Brian.

Moffat, Tom.

McDaid, Jim.

Ó Cuív, Éamon

Doherty, Seán.

O'Leary, John.

Penrose, Willie.

Smith, Brendan.

Upton, Pat.

Walsh, Eamonn.

Níl

Crawford, Seymour.

Kenny, Enda.

Finucane, Michael.

Flaherty, Mary.

Keogh, Helen.

Cox, Pat.

McGrath, Paul.

Owen, Nora.

Nealon, Ted.

Rabbitte, Pat.

Yates, Ivan.

Question declared carried.
Progress reported; Committee to sit again.
The Select Committee adjourned at 5.45 p.m. until 10.30 a.m. on Friday, 2 July 1993.