Select Committee on Finance and General Affairs debate -
Friday, 2 Jul 1993

SECTION 5.

Mr. Rabbitte

I move amendment No. 49:

In page 10, before section 5, to insert the following new section:

"5.—Notwithstanding anything contained in this Act, a certificate referred to in section 2 (4) or 3 (6) (c), as the case may be, shall be evidence only that an individual was a beneficiary under this Act and shall not preclude any officer of the Revenue Commissioners from making such inquiries or taking such action as are within his powers regarding liability to tax.".

Section 7 imposes a vow of silence. However, section 5 prevents——

Mr. Yates

On a point of order, as we only have a number of minutes to deal with sections 5 and 6, could we take amendments Nos. 49 to 54 together between now and 11 a.m., so that we can debate them properly?

Chairman

The question is: "That amendment No. 49, in the name of Deputy Rabbitte, amendments Nos. 50 and 54 in the name of Deputy Yates be taken together."

Question put and agreed to.

Mr. Rabbitte

Section 5 prevents the Revenue Commissioners from analysing a person's affairs. This seems to question the self declaration which a person makes. Section 5 states that the tax inspector, or other officer, shall be "precluded from continuing with or commencing the said enquiries or continuing with or commencing the said action" unless he is successful before the Appeals Commissioners.

My amendment says that the certificate awarded shall be evidence only that an individual was a beneficiary under the amnesty, but shall not act as an excuse or as an obstacle which would prevent the tax inspector from investigating the affairs of the beneficiary under the amnesty. We have mentioned this in various sections of the Bill.

The Bill allows self-regulation, self-assessment and self-declaration by the would-be beneficiary. Once the beneficiary makes that declaration, it cannot be analysed. We are asked to accept in good faith that someone seeking to avail of the amnesty is making a true statement and when the tax inspector comes to look behind it, all the person has to do is produce a certificate which is, effectively, his licence to tell the tax inspector to get lost. It is an important and regrettable milestone in the history of our tax legislation that we would give anybody absolute immunity and protection. People may generally think it is a good idea, or it might be a good idea, to bring in an amnesty so that we could get some money back into the country and use that money for productive purposes. People have vague notions like that about it. They do not understand that it means giving a carte blanche to someone who has broken the law, thumbed his nose at compliant tax payers and, as a result of having the certificate, nobody ever may further investigate him no matter what comes to light.

Mr. Yates

I support Deputy Rabbitte. Section 5 is imprecise, vague and fundamentally bad law because it is flawed. It deals with the nub of what we have been talking about. Constantly in this debate the Opposition has argued that once this certificate is issued it will give a form of immunity from audit and from investigating the 1991 declaration that this was the total income. The Minister's argument has been considered that the immunity offered by the certificate of receipt is partial, only on face value and is ultimately reversible by the provisions of section 5.

Under this section the Appeal Commissioners will determine whether the certificate of receipt will be overturned. Why should it be the Appeal Commissioners who determine this? Before this Bill was contemplated I received representations from the most reputable accountants to say that they were unhappy with the work of the Appeal Commissioners. The only good thing they could say for it was that it was cost free, as opposed to going to court which was quite costly. They felt that it was, in essence, a rubber stamp for the Revenue Commissioners. Often former staff of the Revenue Commissioners were Appeal Commissioners, a case of gamekeepers turned gamekeepers, as it were.

We must remember that Appeal Commissioners are politically appointed. One's election agent can be appointed an Appeal Commissioner. Are we now bringing a political "stroke" or "fix" factor into this amnesty, whereby if the Revenue Commissioners are inclined to investigate behind the certificate of receipt, one can call the Minister, who is deluged with TDs lining up at his door, to ask him to ring the Appeal Commissioners and tell them not to investigate? The Appeal Commissioners are political appointees and that should be remembered.

Even with infinite wisdom these Appeal Commissioners are in an impossible position to adjudicate on the accuracy of the certificate. The criteria by which they must assess whether what the Revenue Commissioners or the claimant of the amnesty is saying is correct are extremely vague. In other words, the Appeal Commissioners must decide according to section 5 (2) (d) that:

there are no reasonable grounds to suggest that the declaration made by the individual to the Chief Special Collector . . . did not contain a full and true statement of the declared amounts.

What are "reasonable grounds?" Is it "reasonable grounds" for the Revenue Commissioners to say that they are satisfied that such a tax defaulter has lied on every previous declaration he has made? Would that suffice? Would it be the case that they would have to produce documentary evidence of third party invoices of bank accounts? What constitutes "reasonable grounds?"

My amendment seeks to clarify this in so far as I am proposing that regulations would be put forward by the Minister to specify what "reasonable grounds" means. In my view this is a legal lotto in that it is so imprecise, that it is impossible to predict. There is a degree of certainty that this will go right through the court system, to the Circuit Court, and High Court and Supreme Court, to adjudicate what "reasonable grounds" means. One can rest assured that "reasonable grounds" in the eyes of a tax consultant, and "reasonable grounds" in the eyes of a Revenue Commissioner will be two different things. We know this legislation is rushed, hastilty conceived and a grab-all attempt to raise revenue any which way, but that is unacceptable.

At hearings of the Appeal Commissioners, Deputy Cox has referred to them as acting like trappist monks. If the Government accepted our amendments it would allow the special collector to turn up at the Appeal Commissioners hearing and explain why he believed a total declaration to have been made at the time because it was accompanied by documentary evidence, for example. At present we have the worst of all worlds. The claimants who avail of the amnesty will not know what "reasonable grounds" will mean, will not know if the Minister is correct. The Minister is saying that because of the 1992-93 current assessment this certificate of receipt is not worth the paper it is written on and will be overturned.

Whatever view one takes the Appeal Commissioners must assess on reasonable grounds what is a full and true statement. It strikes me, and it is self-evident from the language used here, that we have a grey area, a quagmire into which the Appeal Commissioners are being thrust, and the possibility of political interference. This section should be reviewed at least between now and Report Stage, because already I have received queries and suggestions of the obvious, self-evident and inevitable need for litigation to determine what these causes are.

Mr. Cox

I will be opposing section 5 and I support Deputy Rabbitte's amendment since it has the effect of rendering section 5 null and void. I want to put some questions to the Minister and then I will move briefly to amendments Nos. 50 and 51.

On the general issue the Minister argued yesterday that there is substance to this confidentiality clause which is provided for in terms of the use of the certificate in section 5. In the subsequent tax year, 1992-93, if one is caught cheating or fiddling, the Revenue Commissioners can come down on the case like a ton of bricks, and all the review powers can be used. Taken as statements of the Minister's view I would accept both of those points as fair and reasonable in so far as they are stated. On the scale of things they are not proportional or balanced with each other.

We examined this in many ways yesterday with regard to looking for corroboration, supporting documentation and so on. This Bill deals with a group of taxpayers who are outside the system and whom, by definition, the system knew nothing about. They self-declare after a prolonged period outside the system having evaded and, in effect, broken all the laws relating to the tax code, on a system of declaration which provides for no corroboration or independent substantiation of what they are declaring and which provides, in the person of the chief special collector, no right to demand any corroboration. This obliges them, in a mandatory way, to issue a certificate on the foot of a declaration duly signed with the relevant details. I put it to be the Minister that with regard to the arguments about 1992-93, the self-declaring individual has all the cards stacked in his or her favour, for the obvious reason that with regard to evaders, the Revenue Commissioners have no account of the past evasion to work on.

If this is to work, the Government must signal to the evaders that it is effectively offering them immunity up to 5 April 1991 and, theoretically, there is the possibility — not the probability or the certainty — that it could investigate them. If that is not the balance of the weight of the Government's argument, the evaders will not believe that they are being offered substantial immunity. In presenting these two arguments yesterday, parallel to one another, they appear to have equal weight, but they cannot have equal weight logically because if the Government does not give more weight to the probability, if not the certainty, of immunity from any further inquiry up to 5 April 1991, then all of this is self-defeating.

I do not accept that the two arguments carry equal weight in terms of their balance of probabilities. In addition, I do not accept that the Revenue Commissioners who knew nothing about these taxpayers, can argue that they will be in a position to penalise them because, in 1992-93, a single year declaration is made. The Revenue Commissioners knew nothing about these people and such people are entitled to make up their own declaration and are not subject to any review by the special collectors. I do not accept that on the balance of probabilities the Minister's argument about draconian measures following 1992-93 can hold real weight. It may if there is fraud and so on, but I am facinated to know how the Revenue Commissioners, who knew nothing about these people, will, after 1992-93 be able to establish fraud. It stretches credibility beyond belief to argue that that is so.

The Minister is introducing an amnesty which I find reprehensible, but in so far as his logic is to be followed, there is one clear signal he must abide by to those people who have evaded. This is that their confidentiality will be protected almost to the point of certainty. If such people are not convinced of that this amnesty will not work. If the Minister is to convince them he cannot give equal weight to the argument to convince his critics on this Committee that the 1992-93 declaration effectively opens up the floodgates for future investigation. These are two arguments that are not equal because the proportion and weight and balance of probabilities must favour the cheats or this amnesty cannot work.

On these two points I will be opposing the section. Amendments Nos. 50 and 51 are being moved in due course. This is because from the brief experience I have had of the deliberations of this Committee on the Finance Bill, 1993 and on this Bill I have come to the conclusion that while it is useful in teasing through legislation for the Opposition to argue various cases it is useless in terms of having an effect on such legislation as the Minister accepts no amendments. These are two amendments that I believe should be accepted on the presumption that the disgraceful section 5 in this disgraceful Bill will be included.

I cannot understand why it is that under subsection 2 (a) an inspector can go to an appeal commissioner and as soon as practicable inform the client involved in the case. It seems to me that if an inspector has a case ready to submit to an appeal commissioner, logically the same case, if it is the same file, should be sent to the individual under scrutiny immediately. Why should the inspector who has the file ready send it to a commisioner and not to the person to whom it relates? That should be changed if this section is to stand, as presumably it will.

Regarding limits such as 30 days, there can be circumstances where such limits should be extended. Perhaps for practical reasons people may find it difficult to get information together or have material ready.

I oppose the substance of this section and I agree with the substance of Deputy Rabbitte's point because it destroys the need for the section. I want to hear the Minister say clearly that his message to evaders is that more likely than not the Government is offering them a clean bill of health. If the Minister is not prepared to say that unequivocally, then anyone who is evading tax would be best advised to stay out because the Revenue Commissioners will be investigating them later. I do not believe that this is the Minister's intention in constructing this monstrosity. If it was, section 5 could be removed as, in any event, it would make no difference.

Mr. B. Ahern

I accepted several amendments to the Finance Act. Perhaps they were brought forward in a slightly different format on Report Stage and I did not object when certain Deputies claimed in the national media that their parties had put them down.

There is a misconception that a person can meet a special collector, declare his undeclared liabilities prior to 5 April 1991, complete a form for 1992-93 and all is forgotten and forgiven. That is not the position. If Deputy Cox is asking me to say this to people outside so that I can induce them to be included in the tax net, I must reiterate that this is not the position. The very fact that 1992-93 and the years thereafter is written in means that there is nothing to stop the Revenue Commissioners going back on this. In the case of fraud they can go back on this indefinitely.

An absolute immunity will be conferred on the non-compliant taxpayers provided they disclose full facts and full information. Every detail may not be correct going back five or six years. However, if most of the detail is correct, and they will have to stand over this later to the appeal commissioner and perhaps in subsequent audits, they will get absolute immunity. Otherwise it would not be an absolute immunity but a conditional immunity. In the circumstances such non-compliant taxpayers would be foolish not to be able to stand over their declarations.

The absolute immunity is conferred when everything is factually declared and such facts can be corroborated. It is an immunity based on the non-compliant taxpayer declaring himself or herself, completing the 1992-93 forms and the subsequent forms in a consistent manner. Otherwise the Revenue Commissioners will begin to investigate.

Let us take the logic of this. There are people who have been outside the tax net for years. I am not sure how they have done it, but they have managed it in some way. These people feel uncomfortable about this. Perhaps there are those who could not care less but others worry that they have a house or property, that they have money offshore or onshore, that they have money in a bank account or whatever and they want to clear up their affairs. They feel uncomfortable because perhaps they have not told members of their families about this.

Deputy Cox is right when he says that we want to get these people into the tax net. We want to get away from the position of having non-compliant taxpayers who can go free and whom we want to hit hard afterwards. We must get these people into the tax net. If I were to introduce a revenue powers Bill today and if I were to send out a revenue posse as soon as this Bill was signed, involving the sheriffs, the courts and warrants, this room would not just be full up for the vote it would be full all the time as it was last year when we were discussing elements of the 1992 Finance Bill. Look at the number of questions put down by Deputies about pubs. I have given them 15 months to get their affairs in order and there is half the House, from all sides, down on top of me. They keep saying there is no money in selling drink; you lose money if you sell drink. How can they pay for their licences?

Let us see what case or reasonable grounds will be put up when a diligent inspector believes he has found misinformation in the 1992-93 form, or subsequently where he believes the information as per the certificate given to the special collector was wrong. That is a reasonable ground. Deputy Cox has the 1967 Act in front of him and he will see that ‘reasonable grounds' is used throughout tax legislation. The form is clearly understood every day of the week by peace commissioners when people are putting forward a case.

Deputy Cox made a point about 30 days and I will look at that. The concern was that the balance might be back with Revenue and that it would suit Revenue to have a longer period but may not suit the other side. That would lead to a situation where people on the other side would claim that this is giving Revenue more time. Quite frankly, it would suit the Revenue position to have the extra days, but I will look at the balance in relation to that.

Mr. Rabbitte

I am in an awkward position because of the time agreement. I do not know how this will read on the record if the Opposition does not call a vote on what is a critical area in the Bill. At the same time I think it would take up precious time. The Minister challenges my statement about absolute immunity.

Mr. B. Ahern

I did not answer the key question of where this is in the Act. It is in section 5 (1) (a) and (b). The inspector must show to the satisfaction of the commissioners that (a) "enquiries made or action taken in relation to the liability to tax . . . of the individual for any period commencing on or after the 6th day of April, 1991, indicate, or (b) there are reasonable grounds which indicate . . ." and it goes on. Under that section the tax inspector can come in and say: "These are my reasons; this is why I believe that this individual told an untruth."

Mr. Rabbitte

We could spend a great deal of time on this section. It suits the proponent of the Bill to deal with it section by section as if one section was isolated from another. When the Minister challenges my statement that it effectively confers absolute immunity on the beneficiary he is playing with words. In practice it confers absolute immunity. He may well point to sections 5 (1) (a) and (b) in the sense that there is a theoretical possibility that somebody will be caught out, but he will only be caught out where he trips himself up. If he makes returns and if his advice is of such poor quality that they are inconsistent as between his 1992-93 returns and the self-declaration, then he may indeed be caught out because he tripped himself up. Let us relate it to the other sections of the Bill where the special collector is given no authority to question or challenge the statements made to him or to her. The Minister effectively legislates in the Bill to exclude tax inspectors who are the ones with the skills.

The Minister may jump in and say he has not done that but that is effectively what he has done. He has refused to take on board an amendment — and it comes up again in section 7 — to define the special collector as being drawn from the ranks of the tax inspectors, in other words, someone who by training and skill could make an assessment and see a hole in a ladder. The Minister has agreed that as the situation stands you can tell, to quote his own language, "a pack of lies" to the special collector and he would have no way of knowing. Despite the fact that this encourages partial disclosure in return for getting this amnesty certificate, there is no way of going behind it and Revenue is stopped from attempting to investigate or probe it. Deputy Yates is right in saying that it is a critical area. It is the nub of the Bill in many ways, so I think I should press it to a vote.

Mr. Yates

I wish to withdraw the amendments to section 5 in my name.

Mr. Cox

I will withdraw my amendments pending any amendments the Minister may table on Report Stage.

I will quote one phrase the Minister used when referring to tax evaders, which is, "We want to hit them hard afterwards". He also pointed out to Deputy Yates the phrase "reasonable grounds" which he was contesting is already in the tax law and in common use, which indeed it is. I used the phrase "with the balance of probability" which is also common currency in terms of logic. While the Minister describes the immunity certificate as conditional — and formally he is correct as it is conditional because there are some conditions here — the key condition is that we have to believe that the Revenue, who knew nothing about this individual in respect of evasion will — out of whatever the individual chooses to reveal for 1992-93 or subsequently — know so much that they can actually disprove that everything that had gone before was wrong. I simply do not believe that these certificates of immunity will in effect be conditional, because the key ingredient to determining their conditionality is information and the only person in possession of information is the cheat and the evader. If Revenue already had it they would be in the system and, by definition, would not be non-compliant evaders. The Minister is trying to tell us that he is giving a conditional certificate of immunity in a context where information is the key, and that is the one thing about which his officials are absolutely blind ignorant currently, because these people are outside the system. I do not believe that section 5 is essentially conditional; it is theoretically conditional, but in practice virtually absolute.

Mr. Yates

This section is a legal minefield and it will go to the courts. There is no point in quoting tax law as this is unprecedented. If a person has declared £38 million and someone is trying to wipe away his black certificate, one can rest assured that it will go to the Supreme Court. I ask the Minister to furnish the Committee with figures over the last two years of all the hearings by the Appeal Commissioners and how many times it came down in favour of the Revenue Commissioners and how many times in favour of the taxpayer. My understanding is that 99 per cent of the time, the two commissioners came down on the side of Revenue. Perhaps the Minister will clarify that. I will be pressing a vote on this section.

Mr. B. Ahern

I will check what information is available. Regarding Deputy Cox's point, if one argues the case that he mentioned where the Revenue Commissioners have absloutely no information and a person has managed to run the gauntlet over the years and there are no facts whatever, the 1992-93 statements will now be available.

Mr. Cox

That is providing it is complete.

Mr. B. Ahern

There is now a track where there was no track previously. That is progress.

Mr. Cox

One can do nothing more with it, if that is all one had been given.

Mr. B. Ahern

That is not the end. It is the starting line. If that person in the future, in next year's form or in the form the year after, starts to go back to their old ways, then they are open to the full rigours. It is obvious in such a case that it will show up. If a person takes the benefit of the amnesty in 1992-93 and vanishes the following year, or if they come in 1992-93 with £20,000 and the next year they go back to £5,000, it will show up. If they come in with £20,000 and an audit shows that the figure should have been £120,000, that track is there.

Mr. Cox

The Minister is effectively confirming for the evader that the Revenue has a blank sheet on them. The cheat will put a number on that blank sheet in 1992-93 and that is the only number in the entire history of that evader that the Revenue Commissioners will have to go on. The Minister is telling me that that can be used to come down on the cheat like a ton of bricks when that represents 100 per cent of the non-blank sheet information.

Mr. B. Ahern

To make the point for the hundreth time, it is not a blank sheet. The 1992-93 statement is the opening to the individual's case for the first time.

Mr. Cox

The only information available will be what the cheat provides for 1992-93. It makes a mockery of all of this stuff about chasing him or her.

Mr. B. Ahern

It is a ridiculous point because the person must write down something that can be stood over. They are into the system and will be followed and checked.

Mr. Yates

They tell half the story in the 1992-93 statement.

Mr. B. Ahern

Then they are open to rigours of audit. I am sure every Deputy here has met people recently who have been through an audit. An audit in a very small company nowadays takes about four hours. It is not a simple matter.

Mr. Cox

This will be my last intervention because we could continue in a circle on this matter. Revenue cannot have a file on the evader; currently it is a blank sheet. That evader will go through this process and will cleanse his past up to 5 April 1991. He will then give Revenue information which better be, at least from then on, bona fide and consistent or Revenue will be alerted. The only thing Revenue will have to go on is the declaration by the person who fooled them or evaded them up to this point. Provided that he sticks consistently with whatever inconsistency he put in on day one, he is fine. The evader has an absolute certificate of immunity since the only information beyond a blank sheet is what the cheat chooses to give to Revenue. The information is the key but it is all in the possession of the cheat. Since Revenue has no other information on this tax file, the certificate effectively is absolute.

Mr. B. Ahern

Deputy Cox is acknowledging for the first time that the 1992 certificate gives us the person into the system. We now have an audit trail, and we are making substantial progress in this legislation in bringing the non-compliant taxpayer into the net.

Amendment, by leave, withdrawn.

Amendments Nos. 50 to 54, inclusive, not moved.

Question put: "That sections 5 and 6 stand part of the Bill."

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

Tá
Ahern, Bertie.	Kenny, Seán.
Ahern, Michael.	Martin, Micheál
Ahern, Noel.	Nolan, M. J.
Broughan,Tommy.	Ó Cuív, Éamon.
Connolly, Ger.	O'Keeffe Batt.
Ellis, John.	O'Leary, John.
Ferris, Michael.	Penrose, William.
Hilliard, Colm M.	Smith, Brendan.
Kenneally, Brendan.	Upton, Pat.
	Walsh, Eamon.

Níl
	Doyle, Avril.
Boylan, Andrew.	Finucane, Michael.
Connaughton, Paul.	Keogh, Helen.
Cox, Pat.	McGrath, Paul.
Currie, Austin.	Nealon, Ted.
De Rossa, Proinsias.	Yates, Ivan.

Question declared carried.

Mr. Yates

On a point of order, my understanding is that from now until 12.30 we will take sections 7, 8 and 9. There are no amendments to section 8. Sections 7 and 9 are quite controversial. In case section 7 takes up all the time, I propose that no later than 12.10 p.m. we leave section 7 and that any vote be at 12.30 p.m.

Chairman

Is that agree? Agreed.