Amendments Nos. 59, 60 and 61 are related and may be discussed together.
SECTION 9.
I move amendment No. 59:
In page 15, subsection (1), line 35, after "offence", to insert "if the court is satisfied that the said offence has resulted from a civil fraud a substantial mis-declaration or significant omissions of material fact,".
When I was going through this Bill the other day for the first time I drew a line after section 8. The line is a very significant one because everything that goes before section 9 of this Bill relates to the amnesties that are being proposed. They all share the feature that after the due payment date of 14 January 1994 they will be consigned to the tax history books. From that date on the tax system will operate in accordance with the provisions contained in the Bill from section 9 onwards, with the exception contained in the "three monkeys" oath in the Schedule. Unlike the amnesties, these provisions do not expire on 14 January but remain a permanent part of tax law.
A second important difference is that what we have discussed up to now deals with people who have not disclosed their tax liabilities to the extent that would be required. The sections of the Bill from section 9 on deal with all taxpayers.
I agree with Deputy Rabbitte about the Minister and his conduct in the budget and the substance he added to that budget. I would like to feel — though it would have been very indirect — that I would have has some modest contributory role at an earlier stage to suggesting that particular direction.
It is in that context that I want to move amendments that I regard as constructive in respect of section 9. The principle of compliance will not be served by this series of amnesties but the sections we are going on to discuss now, in so far as they are designed to ensure regular compliance, deserve very serious consideration.
The essential problem with section 9 is that the only penalties for which it provides are terms of imprisonment resulting in criminal records. We are talking in section 9 of people who cheated on the amnesty. I will not lose much sleep if such people are very heavily penalised, but the principle in law that is being established will be carried over to section 11. The principles behind it are important. I gave a lot of thought to this and it is those principles I want to address. I am not of the view that those who avail of an amnesty and then cheat on it should be treated softly.
Section 9 relates to the amnesty.
The principles enshrined in section 9 are the identical princples that we will find again in section 11 and they apply generally. The principle contained in the section is that if one is found by the courts to have cheated in one's tax affairs one will have a criminal record even if it involves summary conviction and imprisonment for only a day — a maximum sentence of 12 months can be imposed on summary conviction and a maximum of eight years on indictment. I see the logic of this. The Minister is using it as the stick in addition to the carrot of the amnesties provided for in the earlier sections. We should pause for thought because a later section provides that these penalties will apply to everyone who cheats in their tax payments.
If the existing situation of compliant and non-compliant taxpayers was taken as a starting point it could be decided what tax laws should be introduced. From such a starting point the Minister produced the first eight sections of this Bill. The public rightly were dismayed and outraged by these sections. Because these were so outrageous the Minister decided to introduce tough penalties in the subsequent sections, the logic behind this seems to be that two wrongs will result in a right balance.
I do not believe that the courts should have no discretion in any case at any time. The basic problem I have with the principle behind section 9 is not that tax cheats should not be heavily penalised but that the courts are given no discretion and will have a mandatory obligation to impose prison sentences on such people
Section 9 (1) states:
. . . he shall, without prejudice to any other penalty to which he may be liable, be guilty of an offence and shall be liable —
(I) on summary conviction to a term of imprisonment not exceeding 12 months, or
(II) on conviction on indictment to a term of imprisonment not exceeding 8 years.
Amendment No. 59 seeks after the word "offence", to insert "if the court is satisfied that the said offence has resulted from a civil fraud, a substantial mis-declaration or significant omissions of fact". I will refer to this later and relate it to amendment No. 61 which states: "Provided always that if the court is not satisfied as aforesaid it may impose a fine proportional to the extent of the fraud, the mis-declaration or the omission concerned". This amendment provides that the court shall have discretion to impose either a prison sentence or a fine. Some idea should be given as to whether it relates to prison or to proportional fines. As it stands at the moment, if a person is caught fiddling £1,000 or £1 million, the court's response would be the same, although the level of imprisonment would be different. There is no de minimus rule.
I wish to make a political point to the Minister because we will be dealing with this principle in section 11. My first worry is that imprisonment is mandatory and that the courts have no option. If this is the case, it might be decided not to charge people as often as they should, particularly if the only option is imprisonment. Fines should be proportional to the extent of the offence. A major offence should result in a substantial fine; a minor offence should result in a minor fine. This is similar to the Minister's proposal for long or short term prison sentences.
I did not have time to study all the proposals because of the way we are rushing the legislation. However, I referred to the fifth report of the Commission on Taxation which used the phrases "civil fraud" or "substantial misdeclaration". Some issues are trivial. The Minister said he did not want to become involved in trivial matters such as chasing the old woman and her pension in Connemara. This Bill, paticularly the later sections, includes trivialities because there is no de minimus factor in it.
There are different degrees of fraudulent misrepresentation of one's claim. The Commission on Taxation borrowed from the report of the Keith Committee in the United Kingdom on enforcement powers of revenue Departments, Volumes 1 and 2 in March 1983. The Minister and his advisers should consider fines as well as imprisonment. I am not asking that the fines be trivial fines. They should be proportional and perhaps there is a tighter way to define how that could be so. The proportionality concept should have regard for the degree of seriousness of the error or the omission in the first instance.
Civil fraud, as dealt with by the Commission on Taxation, would be a serious offence and would therefore attract a serious fine. Civil fraud was defined by the commission as the "deliberate omission or understatement of amounts in tax returns with the intention to deceive the revenue authorities, and the object of evading tax". The commission believed that its definition should be included in a Schedule to a particular Act.
Substantial misdeclaration was defined as the omission or understatement in tax returns of an amount equal to 10 per cent or more of the total taxable amount, or if less, the greater of £1,000 of income or gains or one half of 1 per cent of the total taxable amount. Alternatively, omissions or understatements below these limits which occur over a number of years.
Marginal cases were defined as "any error leading to the omission or understatement from tax returns of any amount not within the above". In other words, it was not a serious misdeclaration of 10 per cent or more accumulated in an individual year, nor was it a deliberate civil fraud.
It is important that the courts have the ability to use discretion. I am afraid that if the only option is imprisonment, people who are not imprisoned will be allowed to go free.
Under the existing remedies in the Income Tax Act, 1967, there is an imprisonment possibility, on summary conviction, of up to six months. Perhaps the Minister could tell us what the statistics are and why it never worked. As this will remain a permanent feature of the law, unlike the amnesty, I remain wary about giving more powers when the lesser powers have not worked. One is entitled to ask for an account of stewardship. We are entitled to know why more substantial powers are needed, when lesser powers have failed, before we are asked to underride laws such as this. I will return to this principle in detail in section 11. At least this part of the Bill deserves merit for dealing with the tax dodgers.
I support what Deputy Cox has said. The Minister's arguments both on radio and television suggest that he only agrees with the amnesty because the rigours of the law will be horrendous on non-compliant people whom he wishes to imprison. This is like a bank robber who becomes a vigilante. On the one hand, the Minister is saying that he will pardon all people, but, on the other hand, he is trying to imprison them. This scenario reminds me of criticisms which have been made about certain people in this city who are involved in drug trafficking.
The people who will use the Acts and the amnesty will be law-abiding.
These amendments are more applicable to section 11 than to section 9. If I was discussing this Bill again, I would draft them differently
The Minister's argument does not stand. As the Minister has upset his conscience by allowing the amnesty, he must seek retribution by putting taxpayers in jail.
It was not until Mr. Lester Piggott was put in jail that attitudes to tax evasion changed in the United Kingdom. I am not opposed to tax defaulters or those involved in serious false declarations being subjected to the ultimate penalty of imprisonment. That is a reasonable proposition. Perhaps the Minister could clarify the present procedures involved in imprisoning people, irrespective of what has happened in terms of case law.
I read with concern the submission on section 9 by the Incorporated Law Society of Ireland. It states:
The effect of Section 9 is to create a new criminal offence which is committed by a person who has in the past failed to comply with the provisions of the Acts, and, subsequently, fails to take advantage of the amnesty or, in taking advantage of it, makes a false declaration. Such a person, on conviction of the offence, is liable to a mandatory prison sentence which on summary conviction may not exceed 12 months.
Is this true? If a person, such as a publican makes an error while declaring the amount of VAT, Dirt Tax and income tax at 15 per cent he is paying, is he liable to a mandatory prison sentence? The Incorporated Law Society is of the opinion that it is mandatory and that on conviction on indictment, an eight years mandatory prison sentence will result. In their view it is an unnecessary provision and it is excessive in terms of making the amnesty mandatory. Even if one does not like it and does not believe the confidentiality aspect the Government wants to get people into this amnesty. It needs the money so badly that people will be jailed for not availing of the amnesty.
The key point, given that I acknowledge in principle that people should go to jail in certain circumstances is that we are removing the diseretion of the courts to impose fines where they are more suitable. The Minister must agree with amendment No. 60 which would empower him to establish regulations to set out a scale of offences of tax evasion which would lead a degree of severity in relation to jailing tax evaders. At present, for example, one's name is published in Iris Oifigiúil if the level of tax evasion is over £10,000. It seems that one could go to jail for tax evasion of 10p under this Bill. That does not seem to be fair.
Given that this is rushed legislation, put through in a hasty way, we need to have subsequent regulations which would allow the Minister to set out what he thinks would be an appropriate scale of penalties, a mixture of severe fines and jail sentences for a scale of tax evasion. Should a person with £38 million be treated the same as a person with £38? The quality of justice to be dispensed under this Bill will be improved by accepting that.
Section 9 (2) states:
Subsections (4), (6), (7) and (8) of section 94 of the Finance Act, 1983, shall with any necessary modifications apply and have effect for the purposes of this section. . .
I checked subsection (8) of section 94 of the 1983 Act, which states:
Section 1 of the Probation of Offenders Act, 1907, shall not apply in relation to offences under this section.
I checked section 1 of the Probation of Offenders Act, 1907, which allows a judge, taking account of certain conditions, for example, mental health, age or decrepitude, to apply the Probation Act. One cannot apply the Probation Act to this amnesty and my understanding is that either one goes to prison or the sentence can be suspended. They are the only two options available to the court. There should be other options.
I will respond to a few points that were made. Section 94 of the Finance Act, 1983, provides for sentences of 12 months to five years. Experience has shown that the courts in their deliberations in these matters impose nominal fines. The limit is £1,000. Last year I had to introduce a mandatory floor of £200 because fines of £10 were being imposed and that is the point Deputy Cox was making. The powers are there under section 94 of the 1983 Act yet have not proved to be successful. Last year when we debated the issue people wondered why we were bringing in a floor of £200 if a limit of £1,000 was already there. I recall at that stage quoting statistics to the House showing that the number of people charged over £100 was small.
In all our considerations we have to take into account that we are one part of the establishment, the Oireachtas, but another part of the establishment takes a different view of those powers in section 94. I have no doubt that when Deputy Dukes brought in that Act in 1983, he believed that he was providing for sentences of 12 months and up to five years to try to catch these people. The effect of his efforts are these fines of £10.
Sentences prescribed in sections 9 and 11 could not be described as mandatory in the usual sense in that no fixed period or length of time is provided for. The formula used is "a term not exceeding". There is no minimum term. The sentence could be entirely suspended. If it comes to that, the judge could sentence somebody convicted of an offence under sections 9 and 11 to community service. Any power or discretion available to the judge under his criminal jurisdiction can be exercised. The only discretion which has been excluded, as Deputy Cox from his research has stated, is that under the sections of the Probation Act. They are excluded by reference, to a similar exclusion in section 94 of the Finance Act, 1983.
The imposition of imprisonment only, without the option of a monetary fine, is not new to the tax code. It is already provided for in section 561 of the Income Tax Act, 1967, although this relates to making a false return as distinct from the failure to make a return. The only change is that a prison sentence may be imposed under section 9 where a person has failed in the past to make a return and then ignores or abuses the amnesty. The section will not be operative unless the taxpayer is prosecuted. It is not just a question of their going before a court; they have to be prosecuted and the Revenue Commissioners would be selective in whom they would prosecute. Deputy O'Keeffe was taunting Deputy Rabbitte about an old woman in Connemara. I said we would not be prosecuting old ladies in Connemara because the Revenue Commissioners would not be going forward with cases like this. The normal practice in the Revenue Commissioners is that cases would go through their solicitor and to their board. Not only that, in criminal cases the Revenue Commissioners must get acquiencence from the Office of the Director of Public Prosecutions before a case can be brought forward. Even if an inspector——
Are these cases going to be criminal cases?
They would be criminal cases.
So they will all have to go to the DPP?
That is the point. It will not be all of them.
Is it mandatory to give a sentence, be it suspended or not?
No.
The Incorporated Law Society is wrong about that.
In so far as I have outlined. An inspector will not be processing up to the Revenue Commissioners solicitor or the board of the Revenue Commissioners or on the DPP a case that is not going to stand up. The Revenue Commissioners are not in that business. There is a sentiment for dealing with these cases, as I said to Deputy Rabbitte this morning. It is a sentiment that runs throughout the system. Section 94 of the 1983 Act——
Will they get the death penalty?
——allows a sentence of 12 months to five years and allowed a fine of £1,000. Last year I had to change it because fines of only £10 were being imposed.
I had an incipient heart attack when I saw that my amendments are listed for section 11 on this issue. If one looks at them they have similar wording to section 9 and should have been to section 9, not to section 11. It is obvious if one looks at it.
That question has already been raised by Deputy Yates so we will come to it in section 11. We may be going over the same ground but that is how the amendments have been submitted.
It would be only on the levels of revenue that the tax inspectors, on legal advice, will ask the office of the Director of Public Prosecutions to bring a case. They will not bring small insignificant cases to court. Even if the Revenue Commissioners tried to do that, which I believe they would not, there is no possibility that the office of the Director of Public Prosecutions would allow them to do it.
I accept the Minister's statement that it would be a waste of public money to chase trivial cases. However, in practice, that does not always happen. Although I would support the pursuit of people who cheat the system I, like every practising politician, meet those who have been chased. Although the Revenue Commissioners claim they only pursue serious cases of evasion they are not averse to threatening prosecution of any person found to have been evading taxes.
The import of the case is much greater than the Minister is saying because he is conferring a significant power. Under this law people with massive amounts of money outside the system will receive a tax write off of 15 per cent. I know a person who, having increased his mortgage by a few thousand pounds, was crucified with queries from Revenue about how he spent the money before they woudl give him a tax allowance on it. If there is the slightest advantage for the ordinary person they will feel the hot breath of Revenue. As that is the case, if we legislate with no de minimus rule, the laws will be used to pressure people.
It is wrong that there is no de minimus provision. If the trivial cases do not matter — I agree with the Minister that they do not and I agree that the DPP would also be of that opinion — let us provide a de minimus provision, whether it is in the words I have suggested from the Commission of Taxation or otherwise.
If there are cases where Revenue officers, officials or inspectors, put undue pressure on individual clients, the Revenue management is always glad to hear of them. I take the Deputy's point. Let us look at the position. We have the 1983 Act, section 94 which provides for up to five years imprisonment and a fine of £1,000. In practice the fines are £10. What is de minimus a sum of £2.50. Is that to be put into the legislation? Last year I had to try and do something with that section.
The Minister should set out regulations.
I accept the point Deputy Cox is making. I have no doubt that Deputy Dukes believed that sentences of 12 months and five years would be imposed following the 1983 Act. One of my colleagues has told me that last year they went to a lot of trouble to bring a case to court and the judge fined the client 5p. This was a case they considered very serious. Section 94 of the 1983 Act allows for up to five years in jail and £1,000 fine yet the experience is that the Revenue Commissioners, having made a case, consulted with their solicitors, brought it to the DPP and brought to court what they believed to be a good case, find that fines of the order of only £10 are imposed. What kind of signal is that?
Deputy Cox will agree with me that it is unlikely the Revenue Commissioners will bring anything other than serious cases. That has always been the practice. They do not bring cases in order to frighten people. I do not disagree with the point, so I will not waste time discussing it. There may be a need for that provision but practice shows there is not. I will discuss it over the weekend rather than hold up the committee.
Can I clarify that the amendments in my name, Nos. 63 and 64, ought to have been under section 9 and not section 11. I just want to reserve my position on it.
Amendment, by leave, withdrawn.
I think that is accepted Deputy.
Amendments Nos. 60 and 61, inclusive, not moved.
Secton 9 agreed to.