Skip to main content
Normal View

Select Committee on Finance and General Affairs debate -
Thursday, 11 May 1995

SECTION 153.

Amendments Nos. 130, 131 and 132 are related to amendment No. 127 and all may be discussed together.

I move amendment No. 127:

In page 162, between lines 10 and 11, to insert the following subsections:

"(1) This section shall not come into effect unless an order for its commencement, made by the Minister for Finance has been laid before Dáil Éireann and Dáil Éireann has passed a resolution approving the making of such order.

(2) If no order under subsection (1) has been approved by Dáil Éireann by the 1st day of November, 1995, this section shall stand repealed.".

There are a number of amendments in my name to this section. Amendments No. 137 and 132 are similar; amendment 128 is different. Deputy McCreevy and I have indicated our opposition to the section in its entirety.

Having regard to what transpired here yesterday, as far as I am concerned the features of this section which are designed to impose a duty of reporting in regard to reportable offences on lawyers, tax advisers and other people who are furnishing legal advice, are clearly unconstitutional. I have thought that from the moment I heard this was the way the particular recommendation was going to be expressed in statutory form. Would the Minister indicate whether the Government has been advised that it is unconstitutional and would he give a clear indication to the committee? The committee is entitled to have the best advice — that is not always necessarily my own — to decide whether what we are doing is possible having regard to the terms of the Constitution. In my view the present wording of section 153 is not consistent with the Constitution.

I do not believe that the constitutional arguments apply to the question of auditing per se. It is worthwhile reminding ourselves in that regard that since 1990 auditors are obliged to draw to the attention of the Registrar of Companies if books of account are not properly kept under section 194 of the Companies Act, 1990. Under the Act, keeping proper books of account requires that all the company’s business is correctly recorded, all transactions are correctly explained, the accounts should, at any time, enable the financial position of the company to be determined with reasonable accuracy and it will enable the directors to ensure that the balance sheet profit and loss account complies with the requirements of the Companies Acts.

There is a proviso in that section to the effect that something which is minor or inconsequential does not detract from the proper status of books of account. I was interested to hear Mr. Gannon confirm that since 1990 it has undoubtedly been the case that auditors of companies who uncover large scale fraud in that company in a manner which seriously falsifies the solvency of the company, and who discover that the accounts kept are not a proper account of transactions, must report those discoveries to the Registrar of Companies. It is not widely appreciated that if an auditor does not do that, not only does he or she commit an offence, but he or she can, if the company becomes insolvent as a result, be made personally liable for failing to report the inadequate books of account of a company. I mention all that because it is undoubtedly the case as the law now stands that auditors have this public reporting duty no matter what.

It is also the case that auditors are not there to furnish legal advice primarily to the company. They are there to police the company's accounts and to make sure that the public interest, the shareholders' interest and creditors' interest is properly looked after. Therefore, I believed at all times there was no constitutional objection to making auditors liable, as Mr. Justice Hamilton recommended, to report any serious Revenue fraud to the Revenue Commissioners.

In relation to the recommendation on page 336 of the report, which the Chairman read the other day, the committee should note that this was made by the chairman of the tribunal having regard to the fact that he had been told the behaviour of the auditors in respect of the Goodman companies was in accordance with their society's guidelines and accounting standards.

I do not want to abuse my privilege, but I radically disagree with the proposition that any auditor could have signed off the accounts of the Goodman company as true and accurate while knowing that there had been £4-6 million cash payments to employees. If one takes the consequences of such a fraud, which was uncovered, and add the double penalties for deliberate tax fraud, there was a contingent liability, if the Revenue's attention was ever drawn to this fraud, of £10-20 million on the Goodman accounts.

Without criticising the individuals unfairly, I believe they grossly departed from the duty of auditors in this particular case. Irrespective of whether there was the Companies Act, 1990, or the accounting profession changed their standards, no auditor could or should have signed off the Goodman accounts in the condition in which they were knowing what those auditors knew.

It is relevant to note that the chairman of the tribunal found himself in a position that a senior member of the accounting profession came before him and defended his behaviour by reference to the ordinary rules of the accounting profession. Mr. Gannon stated that disciplinary proceedings are in progress in that regard. However, it is not to the credit of the institution that the suggestion, that it was possible to ignore a fraud of that size, was not publicly repudiated by the accounting profession at the time. There were perhaps reasons repudiating that particular viewpoint would have embarrassed the accounting profession. I am attempting to be as fair as possible and I am not seeking to sensationalise my points, but there was gross dereliction of duty, which ought to have been admitted as such, in relation to the auditing of the Goodman accounts.

Deputy Broughan stated yesterday that the facts uncovered showed that the professions in question were not to be trusted. I strongly repudiate that viewpoint. The great majority of the people in all the relevant professions act honourably. There are, of course, a few bad eggs, as there are in every area of life. However, Deputy Broughan and Mr. Browne, the head of SIPTU who made a statement in the newspaper this morning, should bear in mind that, although this was known to one auditor who, in my view, failed in his duty to bring it to the attention of the public and failed to qualify the accounts in his possession, it was known to thousands of people in the country who received the cash payments.

It was known to their union officials, including their shop stewards and branch secretaries but not one word of protest ever emerged and not one word of apology has ever been put in the public domain by the unions which condoned, and in many cases demanded, this practice. I find it rich that anybody speaking from their perspective should announce that, in those circumstances, the accounting profession or lawyers are not to be trusted.

I have come to the conclusion, and I would find it interesting to hear other Deputies' views, that there is no constitutional reason auditors should not be made liable to report offences given that at present, under the Companies Act and their own basic accounting rules and standards, they would be obliged to qualify any accounts and draw the attention of the Registrar of Companies to any situation where a fraud of this nature was taking place. I take the view that requiring them specifically to draw to the attention of the Revenue Commissioners as opposed to the Registrar of Companies is not a huge step in terms of legislative reform. I would agree in theory with Mr. Justice Hamilton's recommendation that auditors should be obliged to report significant revenue offences. The same provision as exists in section 194 in relation to minor matters should apply as well.

If the Minister is revising this duty he should have regard to what is in section 194 and the mechanisms for disregarding small and minor matters that are set out in it. Another question then arises. Assuming it is, as I believe, constitutionally open to us to make auditors liable to make these reports, there are several consequences that flow from that. First, as I understand it, Irish companies' accounts can be audited by UK auditors. In that context also Irish companies of any size can arrange their affairs by moving their audit centre, or their group centre if they consist of a group of companies, out of this jurisdiction. If we go down this road in pursuit of a reporting requirement, it may simply have the effect of pushing audit business out of Ireland, outside the moral control of the Revenue Commissioners and into the hands of people who have no moral community with the Revenue Commissioners in this country and who do not co-operate with them.

An audit reporting requirement of this kind may well have the effect — though it is something that is intangible and could be argued both ways — of driving out good auditors and bringing in bad auditors and shady practitioners. That is another practical reason why we should hesitate in making auditors report.

In addition, I believe that what Mr. Gannon said here is substantially true, that there has been a significant change in the whole tax structure since 1989 and earlier years when these things took place. First, there is self-assessment; second, there are greatly increased revenue powers; and third section 94 of the Finance Act 1983 makes it a serious offence to aid, abet or assist in any way in falsifying company accounts.

Those things, taken together with the measure in the Companies Act that I referred to, may be sufficient to achieve what Mr. Justice Hamilton was talking about. If we survey the defence adopted by the auditors before the tribunal, we may come to the view that it was not a substantial defence.

From a practical point of view, the vast majority of accountants work well with the Revenue and have an essential role in mediating the affairs of enterprise with the Revenue authorities. They are essential intermediaries in that role and it would be a big mistake unnecessarily to undermine the present system — which is working, where companies trust their accountants and the Revenue trusts and co-operates with accountants — by changing fundamentally the function of accountants, as such, in relation to their companies' affairs.

If the upshot of the constitutional argument is that auditors are required to report, yet ordinary accountants tendering tax advice and solicitors doing the same thing are not, then it comes down to whether auditors should, in any event, be tendering tax advice to large firms. One could easily make the case that auditors should not be rendering other services, such as advisory services, to companies whose accounts they audit — and that would apply to large scale companies if one wanted to make it apply in terms of small businesses, in smaller country towns with only one or two accountants in practice the requirement of a separate auditor and tax adviser accountant is not workable. From that viewpoint there is another practical difficulty with Mr. Justice Hamilton's recommendation. I am opposed to the section in its entirety because other measures achieve the same results and for practical reasons.

The position is the same as in the play A Man for All Seasons by the late Robert Bolt, where Sir Thomas More asked Roper if he would cut down every tree and hedge to get at the devil, meaning whether he wanted the State to have major powers; and Roper said he would. Sir Thomas More then asked, when you have cut every tree and caught the devil but he turns against you, where would just men hide.

There is a strong argument for having a law requiring auditors to report serious tax offences. This is provided for in section 194 of the Companies Act, 1963. Given that the reportable offences range from the trivial to the serious, this measure will do more harm than good. I will be no more passionate than that but in five years if this is still in operation the damage done will outweigh the number of offences which will have been reported. Since it will not do more good than harm I am against it.

Deputy McDowell's amendments are Nos. 127, 128 and 132. I call on Deputy McCreevy to speak to his amendments, Nos. 129, 130 and 131.

I will confine myself to the general principles of this type of legislation; later I will deal with other matters. It is as well to face up to realities and be as frank as possible, notwithstanding the political parameters within which we must work.

My party was in Government with Labour and before forming that Administration we gave an open-ended commitment to implementing the recommendations of the beef tribunal report. When we were in Government with the Progressive Democrats we also gave that commitment, in advance of seeing the beef tribunal report. When the report was published Fianna Fáil and Labour, who were in Government at the time, again gave that commitment.

Not much attention was given in the Dáil to this provision. On the famous weekend which went into political folklore, I read the beef tribunal report, saw the provision and realised that it would cause difficulties if it was introduced in the next Finance Bill, as recommended. I read the section as a chartered accountant, although I was not practising at the time and still am not. However no one in the Dáil remarked on it and it was not the genesis of the beef tribunal report.

It is well to recognise that some people have changed from one side of the Dáil to the other since the publication of the report, and that we all want to be seen to be on the side of the angels because we would have been ravaged by the newspapers and other Deputies if we had not given that commitment on any of those occasions. That is the political background to the provision.

I recognise the political difficulties in which the Minister finds himself and if I occupied his position I would be experiencing the same problems, given the background to the provision, which covers other events not related to tax evasion. It is as well to state the facts and own up to them. I will do it even if no one else is prepared to do so. Mr. Justice Hamilton, in the beef tribunal report, would not have overconcentrated on this provision, nor would he have thought we would have come to this stage. Future Governments notwithstanding the current era of political correctness beloved by some politicians and adored by some political commentators should take a step back and reconsider the section. This provision in section 153 is a bad one, for many of the reasons outlined in the past couple of weeks.

The political difficulties in which the Minister and the Government find themselves are not easy to countenance. If the Minister withdraws this section to study it again, he will be pilloried by some members of his party, of other parties and by many media people for stepping back from this thorny subject. If he goes ahead with this in any form, it will be a bad law. It will not be the first time politicians and Ministers introduced bad law on foot of political pressure. There are many examples of it. Irish politicians are afraid to admit they might be wrong because we will be pilloried, principally by people outside the House and often by the media. Fianna Fáil in Government gave blind commitments to introduce legislation to cover whatever was in the beef tribunal report.

Blank cheques.

We did so because, if we had not, we would have been politically murdered. In recognising the Minister's difficulties, I suggested last weekend that he take a step back. In the past 12 years, successive Finance Acts have given a myriad of powers to the Revenue Commissioners, none more so than the Finance Act, 1992. The 1983 Act makes it a grievous offence for anybody to assist another person in falsifying a tax return. That includes accountants and anybody else. In various Acts, since then we introduced more and more powers for the Revenue Commissioners. Though we have moved in recent years, particularly since the introduction of self assessment many people still want to live in the past, either because they do not know that the situation has changed or because it suits certain peoples political constituencies.

I suggested to the Minister last weekend that he repeat what he did with regard to company law. He set up a review committee to look at all aspects of company law and report back. I suggest he do the same with reference to all of the Revenue Commissioners' powers, in the areas of tax evasion and so on. They are in various Finance Acts. I suggest that the body be made up of representatives of employers, the professional bodies and trade unions. It would investigate if the powers on the Statute Book are appropriate for a modern society. It may be necessary to come back and consolidate all those powers in one Act. Then we could discuss it in a cool manner. The Finance Act has to be passed by 8 June, which is four months from budget day, and that does not give much time for discussion. The approach the Minister adopted on company law is the approach I would like to see him adopting here. I will go further than my statement last weekend on setting up that review group. Why not go back and ask Mr. Justice Hamilton to chair this particular review body now that he is Chief Justice? He could nominate someone, either another judge of the High Court or Supreme Court or an eminent counsel, to take it totally out of our hands. Everyone could sit around such a body. Since the Competition Authority gave its report on the newspaper industry, the Minister for Enterprise and Employment, Deputy Richard Bruton, took the approach of having a forum of all the interested parties. Why not do the same here? That is my suggestion.

Deputy Michael McDowell is right to say this will encourage rogue accountants, if anything. The honest accountant will have no chance at all. For example, in a small town a person would get a reputation from those trying to do him down who would say "You had better not go to him because he is strict. He will report you." That accountant will not be in a position to sue because it is not defamatory.

What about the guidelines of the accountants' institute?

I will come to the guidelines of the institute. We introduced a lot of laws on foot of European directives. I have always believed, and I have said so in the Dáil, that some of the European directives and laws we must enact are not suitable for the Irish situation. We often had to do that. Strictly speaking, if Ireland was big enough and we had a lot of big companies, there should be a role for a public auditor, totally divorced from giving tax advice at all. That would be the role of the auditor. He would audit the books on behalf of the public interest and the shareholders and would not even speak to the directors or anybody else. He would go about his business. Anyone who gives tax advice would be totally separate.

In large companies in the United States and Germany it is possible to do that but there are 160,000 small companies in Ireland. Our problem has been that through successive company law Acts, not through the Revenue Commissioners, we have had to implement laws on foot of European Union directives which deal with large companies. These large companies are in other countries and that does not apply here. As my colleague says, it is not possible to break up tax advice and auditing advice in the Irish situation.

The informer culture is not part of the Irish psyche and I do not care whether anyone in the Dáil or my party disagrees with me. I do not believe, notwithstanding the great era of political correctness in which we live, the informer culture will form part of Irish thinking in my political lifetime. Irish professionals are being asked to incorporate that particular culture. If this is the new type of "think", it will have to apply to everybody. When anybody is seen doing anything wrong in whatever profession — whether you are walking the street and see a fellow with no tax on his car or a journalist sees something wrong, or gets a tip-off — we are going to have to report it to the authorities.

What about an ordinary criminal?

I say this on behalf of myself alone. I do not accept that type of thinking is part of the Irish way of life with which I am familiar. I do not want it to become in my lifetime the kind of "think" that goes with the new era of political correctness and I imagine I speak for the vast majority of the Irish people.

This provision asks professionals to go down that road. It has been pointed out that all these matters are covered in the Companies Act, 1990. This particular provision would be more appropriate in some form of company law Bill rather than a Finance Bill. The Minister is caught because the beef tribunal report made reference to this being addressed in the next Finance Bill. It did not say in another Act of the Oireachtas and I recognise that too. I am sure the Revenue Commissioners will agree that, since self-assessment has been introduced, the level of compliance has risen by an extraordinary degree. That has happened as a result of a very enlightened approach by the people in Revenue and the taxpayers. Perhaps the Revenue Commissioners could give their views before the suggested review group with Mr. Justice Hamilton possibly presiding. They cannot give them here because it would not be fair to ask them. It has come about due to enlightened co-operation on both sides and has worked well.

I have put down certain amendments which I will discuss later. In principle, it is a mistake to move in this direction. I ask the Minister to remove the section and put it before a review group. If that review group then recommends certain powers they can be legislated for and the entire ambit of Revenue powers can be put into one piece of legislation which will satisfy everyone. There is need for further discussion which we will not have by 8 June. Consequently, I hope the Minister is in a position to withdraw the section.

There is no doubt that section 153 has become the focal point of the Finance Bill. It appears that everybody is focusing on this part of the Bill. I see two sides to the argument. However, as I see it the proposed legislation possibly goes too far. I am worried about the underlying effect it could have on the client confidentiality aspect. That is the biggest problem I see with this section.

No democratically elected Parliament could possibly disregard the solemn conclusions of the chairman of the beef tribunal, which cost almost £40 million. If our systems of inquiry stand for anything then we disregard at our peril the subject matter of a report of that size and stature. No matter how it is considered, tax evasion occurred on a grand scale in that particular matter. It is in the report and no one can deny it. We would not want to send a signal to the people that we are trying to side-step our responsibilities in this regard. Something will have to be done. I appreciate what the Minister is attempting in this section. I would not be the first person to say that the whole thing should be scrapped. Major changes should be made to it.

Some of the information imparted to us by our learned brethren from the Incorporated Law Society and the Institute of Taxation was quite enlightening. However, they would say what they did, would they not? It was a good exercise and they put their case very strongly. That is what they are paid to do, the same as any other pressure group in society. They did it very well. It would not be fair or reasonable for us, as elected representatives, to be swayed one way or the other by what they said. We should show our own backbone with regard to what we believe. That is what we are elected to do.

From what I have seen in the past four to five years — particularly in the last two or three years — I understand that tax collection procedures have been greatly improved. That is what my constituents tell me. They say it is a totally new ballgame. It was stated earlier that self-assessment — particularly the audit system — has streamlined the system.

What I can only call the scourge of the delaying tactics of the appeals system have more or less been rooted out as mentioned in some of the presentations here yesterday morning. There has been a dramatic decrease in the amount of appeals. Under the old system while the appeal was going on somebody effectively had the use of the State's money for next to nothing. I am led to believe that some of the appeals went on for a couple of years. Obviously, one cannot have a tax collection system subject to that. I assume, because of the tidying up procedures, the introduction of self-assessment and the audit system, we are gradually getting over that and that the tax collection system is now beginning to work. Some people will argue that it is not working well enough.

If we go through with this section as proposed will it be positive or negative? Accountants and others who deal with clients in certain areas of the country, particularly in the northern area, may lose a lot of business. I do not know if that is good for clients or if the fear of this is greater than the proposal itself.

It is important that whatever we put in place will be seen to stamp out tax evasion in so far as that can be done. There are many ways one could amend the Bill. Much has been made of client confidentiality, and I would not like to see that bond broken provided it is not used as a shelter from which to defraud the State of badly needed revenues. I represent all sorts of people in my constituency and I do not condone anybody not paying their due share — there has been enough of that. If we are to get any value for the £40 million that went into the beef tribunal we are obliged to learn the lessons outlined by Mr. Justice Hamilton.

The Minister has given a lot of thought to this and has handled the brief well up to now. I hope he will consider carefully what we are saying. If the Bill is to be amended a number of practical steps will have to be taken. The threshold indicated is far too low. Section 153 should include measures to catch the big fish, such as were involved in the Goodman case.

Deputy McCreevy proposed a review group to report to the Minister in a short time so that the matter would not drag on. A proposal drawn up with the combined wisdom of all involved would leave little room for anybody to hide. Perhaps that is the way forward.

I have met more accountants in the last seven days than in the previous 17 years. They are obviously very upset about the issue, as are solicitors. I was disappointed by Mr. Murphy of the Law Society of Ireland yesterday. I do not care whether it is the IFA, the Law Society of Ireland or anybody else who has good reason for not implementing the law we enact in this Oireachtas, I do not like it. If, in our wisdom as a parliament, we decide on a law, every sector in society should implement it unless there is something terribly wrong with it. I am surprised at the gung-ho approach taken yesterday by a body for which I have had great time over the years.

I have a long list of speakers and I will be drawing alternatively from the Opposition and Government sides. The principal spokespersons from Opposition parties and the Ministers may intervene from time to time if they wish. The order in which the speakers are listed is: Deputies O'Keeffe, O'Hanlon, Penrose, Wallace, Finucane, Broughan, Boylan, Cullen, Dermot Ahern and Michael Ahern.

I thank the leader of my group for allowing me to speak on section 153 because I am not a member of the committee. I came here because of concern expressed in my constituency, not alone by the accountancy firms and the legal profession but also by the business community. I have been in the Oireachtas for 13 years and I have never seen such a high level of correspondence. It was still pouring in today and I have sent some of it to the Minister for Finance who might assist me with a reply to the effect that he has deleted the section.

The Deputy will get the same reply as everyone else.

Over the years, many issues have been contentious and of interest but none has caused as much dissent as this section, which is draconian, heavy-handed and reminiscent of heavy gang tactics. It will have serious implications for business in general and people involved in the risk business of trving to develop industry and create employment. The Garda operate with very limited power. At present drug trafficking is the order of the day in our villages, towns and streets yet the Garda need search warrants and cannot knock down a suspect's door to find out what he is doing.

Section 153 does not implement the beef tribunal report's recommendations. Page 336 of that report speaks for itself. It clearly says that auditors must report material tax abuse, namely evasion, to the Revenue Commissioners. Section 153 seeks to make an adviser report a variety of tax administrative breaches to the Revenue Commissioners. In 1988 we changed our tax system and introduced a pay and file system where one pays one's taxes and then files a return. That was acceptable. The Revenue Commissioners were given additional powers to enable them to audit or examine the return, meaning they now have more powers than any other organ of the State, including the Garda. Will Revenue audits now be necessary? In many instances they can take up to three weeks. Will we ask our auditors and accountancy firms to replace the system? There is little point in having private and Revenue audits side by side.

Since 1983, it has been an offence to aid and abet tax abuse, the adviser can be punished and if an auditor connives or consents to a tax abuse, he can be sent to jail. Since 1989, if someone makes a tax plan and relies on the law to defend it, the Revenue Commissioners can strike it down. Since 1992 every business has a duty to report payments in excess of £3,000 to third parties under the payments penalty.

Since 1992 a business can be visited or raided and employees may be questioned. Since 1993 a business person owing over £100,000 in tax arising from a bad business deal can be sent to jail, although nobody has been sent. The only protection a business person has is the charter of taxpayers' rights which guarantees the presumption of honesty. That will go out the window if this section is passed. There is no presumption of honesty when an adviser on tax matters must report the business person if he believes there is any abuse. Even if the adviser is wrong, the person suspected of abuse may go to jail.

Section 153, if implemented as it stands, will created a legitimate fear on the part of business people to take advice. It will deter businesses considering locating in Ireland and this has been spelled out the by the media. It will drive the financial services industry to base itself in the North and in England and more jobs may be lost. Small firms, industries and manufacturers will face difficulties. Somebody must get some sense.

Is section 153 necessary given that the Revenue Commissioners have not sought to send anyone to jail under the post 1988 legislation? It is an easy way out when political pressure is exerted to add more puritan and repressive legislation to the Statute Book. It will be used on a limited basis with a nod and a wink to those in the know. The non use of section 153 is irrelevant; its very presence has damaging consequences. Ireland will be worse off when competing for business with its European partners.

The tax officers have been effective over the years. The wild demands of the past, where people had to prove that they did not owe the true figure, have gone. We now have self — assessment which is efficient, effective and working well. Why at this early stage damage the credibility which the Revenue Commissioners and tax officers have with the client, agent and the system?

I appeal to the Minister, one of the few members of the Labour Party who understands business and the entrepreneurial system which operates in this country and the fact we must promote business to create necessary jobs, to adhere to the philosophy he identifies with and convince the extremists in that party who have nightmares about Mr. Goodman and other business people to get sense and to run this country as it should be.

On a point of information, I understood a request was made to the Minister to make available his advice after the principal speakers. We are in a vacuum and a lot of what has been said may be superfluous. If we had an indication as to what may happen, we would be better able to focus. I thought the Minister was to intervene at that stage.

I listened carefully to the views of the bodies here yesterday. However, I did not have to wait for the views of the Law Society of Ireland to formulate my opinion on the inclusion of legal advisers and solicitors in this section. That breaches what I thought was a client's and legal adviser's constitutional right.

I am concerned that this section, as drafted, will have a serious impact on the client's right to confidentiality. I understand that a legal person must inform the Revenue Commissioners if he believes a tax offence has been committed, although that information could have come to his attention on a separate occasion. It is not possible, based on the current legal principles in our Constitution, to impose a statutory obligation and duty on a solicitor or legal adviser to breach the confidentiality which underpins the relationship between a legal adviser and client. If a solicitor or legal adviser is of the opinion that a client is involved in tax evasion, deliberately or otherwise, he must advise the client of his position and ensure that these matters are rectified. The section, as drafted, means that a solicitor must serve a specified notice on the company and, if it is not attended to within a specified time period, he must deliver a copy of that notice to the Revenue Commissioners.

Other people are more competent to speak about auditors and accountants, so I will discuss this matter from a legal perspective because I may have something to offer in that area. Confidentiality is the nub of the relationship between a solicitor and his or her client. If we draw this to its logical conclusion, a solicitor could, if this is implemented, be compelled by subpoena to attend court and to give evidence against his client concerning the nature and content of information revealed to that solicitor in confidence. That undermines the protection against self-incrimination which has been recognised by the court as a right embedded in Article 38.1 of the Constitution. It is an essential feature of a right to a fair hearing. Various criminal cases, no later than a few weeks ago, spelt this out as a constitutional right to a legal adviser. It is an essential part of a free and democratic society that one has unrestricted access to a legal adviser.

Legal professional privilege is a secondary aspect of the constitutional right to access to a lawyer. The law in relation to advice given by a solicitor to a client and its subsequent use has been carefully considered in a number of cases as far back as 1833, as I said yesterday. As Deputy Michael McDowell will appreciate, the privilege attached to any communication between a client and his legal adviser at that time was clear, although no litigation was contemplated by the client at the time of giving that advice. It must be possible to refer communication to that relationship and this was spelt out clearly 160 years ago. It is my understanding that legal professional privilege is that of the client, not the solicitor. However, there are certain occasions when it will not be allowed to apply, for example, when the communication is made to facilitate a crime or fraud. This was also recognised in case law. Documents which are privileged must not have an unlawful purpose or be contrary to public policy. This section, as it applies to legal advisers, is clearly unconstitutional. I listened carefully to the Law Society of Ireland and was taken aback at the decision to recommend to its members that they should not comply with the section if it is enacted in its current form. This is not a proper way to proceed. The society should know better than most that if the section is implemented in its current form, it can proceed to challenge it in the courts on the grounds that it is incompatible with the Constitution. No professional body should advise anybody to ignore statute law as enacted by the Oireachtas. I urge the Minister to look at the section in view of what I have said.

I was in business so I know a little about the business framework and environment in Ireland, even though I am a member of the Labour Party. Some people have the view that we in that party know nothing about business but we may know as much as anybody else.

The self-assessment system has brought about major improvements in the taxation system, particularly as it applies to the self-employed. Undoubtedly, there has been a major improvement in tax compliance since its introduction. Accountants and advisers have played a major role in this improvement. Parallel to these improvements there have been significant increases in the powers and capacity of the Revenue Commissioners to take action.

I ask the Minister to look again at this section between now and Report Stage and take on board the deeply held views which were expressed in this committee.

The confidential relationship between the professional and the client is of fundamental importance. There are times when it has to be breached, for example in the reporting of child abuse. The general principle should be that the State should not interfere in relationships such as those that exist between doctors and their patients, priests and those from whom they hear confessions, solicitors and their clients and accountants and their clients. These relationships are sensitive as well as being confidential and are based on mutual trust.

My concern about this section is that it will breach that professional relationship and will also be counterproductive. Instead of a relationship based on trust, there will be a certain amount of distrust. Clients will not trust their professionals. It certainly will increase the costs to clients. Many people use the services of accountants, which, in my view, is to the advantage of the Revenue Commissioners. They probably collect more money because of people in the PAYE sector who do not need to use professionals but do so. There is no doubt, particularly in Border areas, that people will avail of the services of accountants, solicitors and lawyers outside the State.

Deputy Penrose spoke about the obligation on solicitors to give evidence in court. If we accept this principle with regard to this section, it is very hard to see how some other Minister and Department might not say that if a serious crime were committed, the solicitor should also, even though he or she might be defending a client, disclose certain aspects in order that the State might secure a conviction. It is a dangerous area for the State to get deeply involved in unless it is essential. This country is fortunate in respect of its professional bodies and self-regulation. In this instance accountants can sever connections with their clients or qualify their accounts. They can also tell the client that they are not prepared to deal with them or that they will have to report to the Revenue Commissioners.

Perhaps the Minister could compile the legislation of the last ten years or so — and there was some very tough legislation — introduced to ensure that there would not be collusion between professionals and their clients in tax matters. I understand that the 1983, 1986, 1990 and 1992 Acts, for example, introduced relevant measures. It would be useful to know what those measures were and how effective they are.

Will the Minister take on board Deputy McCreevy's proposal of a review group? We are all agreed that the tax system must be fair and equitable. That is fundamental. However, it is important in looking at this issue that we are clear about how much legislation and what type of legislation is appropriate. The Minister said that he intends to consolidate our finance law. In the context of that consolidation a review group could look at the legislation already in place to deal with tax evasion and the role of professional advisers, how much more legislation is appropriate and what that legislation might be. We might thus ensure that we would not — as we appear to be doing in this section — introduce legislation which will be counter-productive and will not achieve the Minister's objective.

I am glad there is a moderate tempo to this discussion. The use of words such as "draconian" and "heavy-handed" is not appropriate to the debate on section 153. Saying that industry will stop locating in this country if this section is included in legislation implies that industry will not come to this country if we have laws to deal with fraudulent behaviour and so forth. I doubt that industries look at the possibility of locating in Ireland in the context of whether section 153 exists.

I was appalled and astonished by the Incorporated Law Society's statement in the newspaper. I could not appreciate how a legal profession could make a statement to the effect that if a law was enacted it would not co-operate with it. It debases the currency of its profession by making such a statement. However, I empathise with the many solicitors working at local level who have written to me regarding their concerns about section 153. All the letters were similar in format so I conclude that they were orchestrated on a national basis. Local solicitors were encouraged to write to their public representatives about this section.

We have read much about this issue over a period of time and there appears to be widespread concern. Colleagues have already mentioned that in our capacity as public representatives we receive many appeals from businesses, probably because the Revenue Commissioners have become more professional as a result of their accountancy and computerisation systems. We get many appeals from people to do something about PRSI payments, late VAT payments, interest, penalties and so forth. Whatever happened in the past there has been a considerable tightening up in recent times. Indeed, having been an Opposition member of the Select Committee on Finance and General Affairs over the past few years I have seen much legislation passed which has obviously improved the system. There is a great deal of concern and I hope the Bill will be amended. Professional advice is available to the Minister and, at the end of the day, he will do what is right. I have the fullest confidence that he will take into consideration the various points put forward in coming to his conclusions.

We had debates on this in previous Finance Bills, with concerns expressed with regard to probate taxes and so on, and modifications were introduced by way of legislation. However, I do not remember anybody, in the years I have been on this committee, threatening the committee that it would not implement legislation emanating from it. I was amazed by the attitude of the Law Society to this legislation and I came in especially to make that point.

I wish the Minister well in his decision because he is trying to act responsibly and in the best interests of the economy. I also hope in regard to this section, that he will take into consideration the distilled wisdom of the members of the committee and introduce the best and most compassionate modifications. We will just wait and see.

As already said, this section arises from the recommendations of Mr. Justice Hamilton at the beef tribunal and imposes an obligation on auditors and other persons who assist in making tax returns to report certain revenue offences. We heard the different professional bodies putting their case here yesterday. The accountants' case was articulated by Deputy McCreevy and Deputy Penrose put the case for his profession. I sympathise with the Minister because he is trying to be all things to everybody and post Budget/pre Finance Bill is the time for lobby groups.

There is genuine concern, which I share. I do not condone any irregularities in relation to people's obligations to the State. However, I have met many accountants and they are concerned about the implications of this section. They referred to the fact that people outside the State, particularly in Northern Ireland and other parts of Great Britain, will not have to comply with this regulation, and there is a clear possibility that certain people may transfer their business outside the State. Bringing in this section is not addressing the problem.

I ask the Minister to take on board the points made by Deputy McCreevy because, as I am sure he knows, there is genuine concern that we will not achieve what we are trying to do there. The amnesty, which was greatly criticised, brought many people back into the system. It is feared that many of those people will now go down that road. At the end of the day, the hopes of the Minister in bringing this section into law and ensuring that it will serve its desired purpose will not be achieved.

I also endorse the comments made in relation to the Law Society. None of us is above the law and if this section is passed I will comply with it, the same applies to everyone else. No profession can tell me here that if this comes into law, it will not implement it. We would need a special law for these people if that is their attitude. I hope good sense can prevail, that the amendments can be taken on board and the Minister will endeavour to do what he can to allay the fears of the professions that are affected by this provision. If this is the best way to bring those people into this net, we should do it but the case has been made to me that this is not the best way, and the Minister is familiar with the views of many people on this.

In the contribution from the beef tribunal that you gave to us, Chairman, our current Taoiseach summed it up well when he asked this question about Mr. Goodman.

Ordinary individuals who evade tax cannot simply go to the Revenue Commissioners, have a few meetings with them and then have everything regularised. This is not available to me or to any other taxpayer. Is it possible to have things quietly regularised if one is a big company but not possible if one is a small company or a private individual? Do we have equality before the law with regard to tax matters? This matter must be sorted out in this public inquiry, otherwise those on PAYE will feel there is one tax law for the rich and another for everybody else.

In that statement, the Taoiseach put in a nutshell what the Minister is trying to address in this section, that is, whether there is one tax law for the rich and those who have powerful advisers and another for the rest of us, who, like most Members, are PAYE workers.

I have not changed my view. The Minister should stick to his guns with regard to this section. My party felt overwhelmingly that this was the case, that it was necessary to implement one of the key findings of the Goodman tribunal and to ensure that one of the purposes for which my party exists — the aims of greater equity and equality in society — would be addressed.

Comments were made earlier by a Member of this committee about extremists in my party. I have been involved in small local community enterprises for the last 15 years; I am still a community director of a small business centre. I am well aware of the problems of small businesses. I am also interested in encouraging them in every conceivable way but the regime should be fair for everybody. I yield to Deputy Penrose's legal expertise on the professional relationship involved, but we could very well be in danger of continuing the situation that existed in 18th century France before the deluge of 1789 when its parliaments, who were composed of powerful and wealthy lawyers, ran the country for themselves.

Has anything changed?

My power is immense, Deputy.

It is, unfortunately.

A Deputy

His income is anyway.

We must stand up to entrenched and powerful interests.

I also notice a quote in this interesting contribution from the miscellaneous legal, ethical and practical guidance issued by the Institute of Chartered Accountants in Ireland. it says that "If a member discovers that he has submitted fraudulent or negligent tax returns in the past because he was misled by his client, he must advise the client to disclose the inaccuracies to the Revenue authorities and if this advice is not heeded, he must inform them.". Looking at that area — and I am sure Deputy McCreevy, as a practising accountant, is familiar with those guidelines — there is nothing different in this section as far as auditors and accountants are concerned, except that this will be a statutory requirement and there is a legal requirement to carry out the guidelines put down by the accountants' and auditors' associations.

I accept Deputy McCreevy's point on the improvements in tax collection in recent years. Both you and I, Chairman, went through this issue thoroughly on the Public Accounts Committee. Obviously the Deputy attributed this to an enlightened regime but we came across huge amounts of money outstanding, serious deficiencies in companies and we made recommendations to the Dáil. The PAYE sector does not have a choice. I speak on behalf of PAYE people in particular; we want an even playing pitch for everybody. I encourage the Minister to stick to his guns. This Bill went through Cabinet, I understand, and it has presumably been cleared by the Attorney General so I expect the Minister will implement this section.

Perceptions of the beef tribunal were that it was one of the most expensive exercises ever carried out, that there was no result from it, and, except for some poor journalist, no culprits were ever found. The only definitive recommendation we are left with is the one dealing with this issue in the Finance Bill. If we do not face up to it we will be seen as never having taken the tribunal seriously.

Deputy McCreevy was right in putting the issue into its political context. It would be dreadful if the perception went out from this committee that the belief was that only PAYE workers adhere to tax law. PAYE workers certainly do, but I reject the notion that tax evasion and tax fraud are rampant throughout the business society. That is certainly not the case, although the way section 153 has been debated and certain comments which have been made give that impression.

Legislation enacted as a result of a particular incident or case is in many instances bad law. We need to stand back when we find ourselves in this situation and take a good look at the consequences of our actions. Outstanding taxes in this country is a general term but it sounds as if it is tax evasion. This was very much the case prior to the introduction of self-assessment when the Revenue Commissioners sent out massive bills to everybody. I remember receiving a tax bill when I was in business that I would have been proud to have grossed, never mind to have been in a position to pay. These estimates, which ran to hundreds of millions were classified as tax owed, and in many instances were not. Much of the unpaid tax today is owed by insolvent companies. I do not condone that; many PAYE workers have suffered where PRSI contributions etc. have not been paid in full.

The playing pitch has been levelled quite substantially in the last few years and much of that is due to the approach of the Oireachtas and the Revenue Commissioners who recognise that we do not have a "them and us" society If society is divided in this way, you will not get the best out of everybody. People must work together to ensure that relationships of trust exist so that economies can work and business communication can flow. Since the introduction of self-assessment that situation has improved substantially. The advent of modern communications has made a huge difference to the computer systems operated by the Revenue Commissioners.

I am deeply concerned about potential damage to the confidential relationship that exists between these professionals and their clients; Deputy O'Hanlon referred to the sensitivities that exist within that context. I am worried that the Minister may now take the view that, for the constitutional reasons that have been outlined, that lawyers will be excluded and others, specifically accountants, will be the only people included. I worry about this because many people are both practising lawyers and accountants. Which hat will they wear when they are giving advice?

I also worry about the fact that there has been an explosion in the number of so called "tax experts" in this country. They have no qualifications whatsoever, but I see offices springing up in all types of areas. I worry that the Minister's haste in relation to section 153 and legitimate professionals will further expand the growth in the number of these so called experts. These people have very questionable backgrounds and motives and they are not concerned about the well being of the Revenue Commissioners or level playing fields.

They are simply in the business of trying to organise things in such a way that the people on whose behalf they operate do not pay tax at all. They do not exist on any legal basis and they will not be obliged under any law, and this section in particular, to be in any way responsible. I am deeply concerned that there will be a growth in the number of these so called tax experts. The Revenue Commissioners recognise that 95 per cent of legitimate people conduct their business genuinely and to the highest professional standards.

The has been speculation in the media that the Minister will proceed with some amended form of the provision. I am unclear as to what shape it will take on Report Stage, but if it is along the lines I suggested, it will not improve the situation. It will make a bad situation even worse. If there is a need to strengthen this area, it should be done through the Companies Act. There are already strong legislative conditions laid down in that Act regarding the responsibilities and behaviour of accountants in relation to uncovering fraud.

I would have no difficulty with strengthening that provision by including reporting to the Revenue Commissioners. At present, reports must only be made to the Registrar of Companies. This avenue is open and would meet many of the requirements outlined by the Minister earlier. All members have received a deluge of correspondence with regard to this issue, much of which expresses genuine concern. If there is to be a way forward, there are two options. For example, the Minister for Enterprise and Employment could introduce further measures in the Companies Act.

However, if the Minister for Finance feels there is a need to include this matter in the Finance Bill, we should stand back in the short term until this issue has been properly defined and we can decide the best way to proceed. This would ensure that the playing field is level and to everybody's advantage. We do not want to encourage those in the black economy to participate or to see a growth in the numbers who seek out opportunities to advise clients in circumstances where they have no obligations under law.

There has been a substantial increase in revenue flows in recent years from legitimate business and from black economy activities coming into the regular economy. There has been much soul searching and pain on the part of those in the black economy to begin that process. However, if people feel the first thing they will encounter is this section when they consult a legitimate practising accountant, they will not be interested in trying to regularise their business or paying proper tax. They will feel they are under the cosh before they even start this process.

Many of these people have gone to accountants in recent years, following encouragement from the Revenue Commissioners and accountants, but this section could put a brake on that type of participation. I agree with much that has been said, particularly the points raised by Deputy McCreevy with regard to a proper review of how we should proceed. Perhaps there is a need in the interim to go the road of the Companies Acts and maybe come back to the Finance Bill next year. I do not say that we should not proceed in this way forever and day but the way we are proceeding is leading to too much concern and there is not enough time for it to be properly decided upon.

The Minister should withdraw this section, about which I have received strong representations from both the legal and accountancy professions in the Cavan-Monaghan constituency and the north-eastern region generally. Like other public representatives, I have received representations over the years from well-meaning people as well as those with a chip on their shoulders. I can truthfully say, however, that the representations on this issue have come from well-meaning people who are concerned about their businesses.

Section 153 has come about solely as a result of beef industry malpractices exposed by the beef tribunal, and in particular by one firm of accountants, one of the big players in this city. Because of the malpractice of that firm, all the accountancy practices in this country are being wrongly branded with the same label, as is the legal profession. As Deputy McDowell said, you will find shady people in every walk of life but it is wrong to categorise everybody in the same manner. From my dealings with accountants and lawyers I have found them to be very hard working and trust-worthy people. There are good and bad, but because of competition between all the practices that are springing up — particularly in the accountancy business now that everybody is being dragged into the tax net — if people are not getting the service they soon move their business elsewhere. There are accountancy firms in every town now and we do not know their stature. Perhaps Deputy Cullen is right in saying that that matter should be examined.

Nevertheless, it is wrong to brand them all in the same manner as one big practice in this city, and I would ask if they have been dealt with. Are they going to be dealt with by dealing with everybody else first? That is wrong. I would ask the Minister to withdraw the section and to reconsider the matter.

I would also like clarification on another issue. It seems to have been indicated that the Minister is taking the legal profession out of this section, but that the accountancy people will not be. That is totally wrong because instead of going to their accountant for advice, clients will go to their solicitor who may offer a tax service. The Minister is impinging on the accountancy firms while giving liberty to the legal practices. Rather than going half way in dealing with this, the Minister should go all the way by withdrawing the section.

I agree with Deputy McCreevy that we should set up a committee to look into this in depth and come back with proposals that would be acceptable to everybody. As public representatives we should not have to put our hands up and say that we do not condone malpractice. It should go without saying. I certainly do not condone it and nobody else here does. Everybody tries to get the best value they can and nobody can blame them for that. People are perfectly entitled to get the best advice they can, and they should be able to do so in confidence, discussing their affairs without having them reported. Telling tales and reporting to a higher authority is not part and parcel of the Irish tradition. The Revenue Commissioners and the Garda have plenty of powers, and if they are insufficient then let us strengthen them, but let us not have neighbour squealing on neighbour. That is not the way to develop society and we should back off it. I would ask the Minister to do so.

Earlier Deputy Broughan suggested that there would possibly be one law for one group of people and another law for another. I cannot understand what he meant by that because, in relation to the tax code, there is no regulation or law which says that a PAYE person should squeal on another, or someone in any other walk of life. That is what is being proposed in the amendment, but it is not in any other code. I do not understand what he is saying but perhaps it depends how

I am the only member of the Law Society at this meeting. Sometimes over the years I have had difficulties with what the society has said publicly in relation to certain matters and in common with other members I am not entirely happy with its statement that it would not implement the law. The society should have said that if the law was implemented it would challenge it immediately.

It is fundamental in any democratic jurisdiction that a person is innocent until proven guilty. This section puts a person into the position of a court; the adviser, whether a solicitor or an accountant, has to make a judgment as to whether the person is guilty of fraud. That happens even before the person has had the right to go to court to have evidence laid against him. Quite apart from the breaking down of confidentiality between adviser and client, that aspect of the provision is difficult to understand. How can those who have phrased this section square that with the presumption of innocence?

I will not repeat what has been said by previous speakers because those around the table have, broadly speaking, articulated the views of the Irish people. Some may find difficulty with some aspects of the provision.

Did the Minister or his Department inquire of any of our industrial development agencies what implications such a section of our tax code would have for inward investment? Deputy Finucane may feel the existence of this provision will not affect a company's decision to come here, but when a company intends investing in this part of the world we have a hard enough job competing with agencies which exist within 50 miles of us. Undoubtedly those agencies will tell any prospective customer not to go to the Republic of Ireland because of its informing tax code. Has the Minister taken on board any representations from the agencies about that?

I may be repeating myself but living near the Border one gets a certain mentality. Especially given the climate of peace and prosperity across the Border, this section will cause difficulty to those close to the Border in that inward investment will go to the North. Not only that, people seeking tax advice from solicitors and accountants may seek advice in Newry rather than Dundalk — a number of accountancy firms have offices in both towns. The tax consultant would not be amenable to the law in that instance.

I ask the Minister to take into account the detrimental effect on the attraction of industry to this country if our opponents portray Ireland as a country which has brought in a regime which is inimical to business. I agree with Deputy Boylan and I do not condone tax evasion but this society must carefully look at the balance between those who provide work and wealth and those who take it. Governments, of which my party was a part over the last five to ten years, have brought in legislation which has made it far more difficult for people to go into business. That it is recognised. We have to bear in mind the difficulties that people have. It would be far easier for someone to sit at home and claim the dole or become a PAYE worker and not to go out to create wealth or a few jobs or try to better himself. We have to look at that aspect in all legislation we bring in because we may be getting to the stage where there will be no self-employed people and where we will all be PAYE workers or else living on social welfare. I wonder if that is the way we should be going. In latter years, unfortunately, there has been a perception that anyone who is self-employed is out to buck the system. I do not accept that.

We should look for a balance which will assist entrepreneurs to provide work so that people will become PAYE workers and will come off social welfare. That is where we should be going. Leaving aside all the arguments in relation to legal advisers, I cannot see how one can make fish of one group and flesh of the other. If the Minister is withdrawing this provision in relation to solicitors, he has to do so in relation to accountants also. If it is withdrawn for solicitors and it remains for accountants, I may think again and go back to practising law full-time.

As the Chairman knows, I produce a political directory. After the last two weeks, I am thinking of expanding into the area of a directory on accountants and a directory on solicitors. All the research has been done by their lobbying and all the names are now on my desk. I appreciate the difficulties being created for them. I also appreciate what the Minister is trying to do but the principles and issues involved are too great to be handled in a section of the Finance Bill which, of its nature, is a rush measure. We require further time on this issue. There have been various opinions given that the section's provisions may be unconstitutional for lawyers and not for accountants, but my immediate reaction was that this was an unconstitutional provision. My firm belief is that if this goes to the courts, it will be turned down as being unconstitutional.

The overall principles have been argued by many speakers. I would like to confine myself to the particular effects the section would have on accountants and lawyers, particularly in the Border counties. I represent a Border constituency, Sligo-Leitrim. We all know the kind of movement across the Border that occurs — sometimes a stampede — in search of better value in goods and services. This better value is often perceived rather than being an actuality. If this measure is brought in, people in the Border counties — I am not talking about people who seek to defraud the Revenue Commissioners or not pay their due tax but the ordinary people — will see the accountant or the lawyer on the other side of the Border as a freer agent, with fewer constraints than the lawyer or accountant south of the Border. There will be a very substantial movement. We heard Mr. Joe Gannon, president of the Institute of Chartered Accountants in Ireland, who runs a substantial practice in other Border counties, saying that he would immediately feel compelled to open an office in Enniskillen. That is what he told us at the meeting on Tuesday.

Without any doubt, there would be a movement of people. With the peace process, we would like to see that cross-Border activity. I like to go into Enniskillen myself nowadays and people from Enniskillen come to Sligo but we need a level playing pitch for all on both sides of the Border.

There are serious issues. We do not want to thwart the Minister in any way in what he is seeking to obtain in the overall objective but I believe this will benefit greatly from further thought and consideration. The overall desire of the Minister can be attained in another way that will leave him free to seek a better method of doing this and not bring us into conflict straight away with a constitutional challenge or create problems with the section and the Bill. With that consideration and pleading the special interests of my own Border area which would be affected directly by it as far as the professional practices are concerned who are directly involved, I ask the Minister to have another look at this to see what can be done. I do not think it will be possible to do the necessary repairs in time for the Report and Final Stages of the Bill. I think there is a lot of work still to be done before we get it absolutely right and attain what the Minister is trying to do without bringing the damages that have been highlighted by many contributors to the debate.

We all agree that the beef tribunal report is the reason behind this section. Behind that was the particular case that brought forth the ruling by Mr. Justice Hamilton. We also have to accept other cases that came to light over the years where auditors gave clear audit reports when they should not have done so. I am an auditor myself, so I am speaking against some of my colleagues. We cannot condone that. It not only damages the auditing profession but brings it into disrepute across the board. It is the same in many other sectors of society. People who are under pressure and afraid of losing clients take a chance but it is not acceptable.

Over the last number of years, especially since this case, our whole taxation system has changed with the introduction of self-assessment. With the revenue audits there is greater compliance now than ever before. There are, correct me if I am wrong, around 900 revenue auditors in operation countrywide and the number is increasing day by day. Any auditor who thinks, like 10 or 15 years ago, he can take a flyer with the type of reports he gives and the accounts he presents for tax purposes is flying fairly close to the wind.

Due to those changes, this section has brought about a friction between the accountancy and auditing profession and Revenue. Hopefully, that friction will be sorted out because we do not need it. Co-operation between Revenue and the accountancy professions had improved enormously, benefiting not only Revenue but also the accountancy profession. For years the problem many accountants had was getting taxpayers to provide their books and records so that we could send in returns. I have noticed over the last number of years, especially since self-assessment came into operation, that the standard of records being kept by people has improved enormously. It has been of benefit to Revenue, to accountants and to taxpayers themselves. People now have their accounts up to date and can plan for the years ahead. In many cases in the past they were two or three years behind. They were operating in the dark. Three years later, when the accounts were brought up to date, they could see that they should have gone out of business. Some have now done so. They were too late to take corrective action.

Many extra powers, with regard to investigation and penalties, have been provided in the past number of years. I believe that Revenue now has quite sufficient powers. This section puts fear in the minds of taxpayers with regard to their advisers. In this case it applies to auditors and not accountants. It only needs a further step to move into that area. Many auditors deal with client companies formed by a husband and wife — small shopkeepers or builders — who do not have the sophisticated knowledge to keep their affairs up to date. We can discuss VAT returns later but having them in the Bill is unnecessary.

The confidence which exists between an auditor and a client is such that a person might confess some slight wrongdoing and can be advised about correcting it. I cannot accept that it is then the responsibility of the auditor to pass that information to another agency. He must put a proper report on his accounts which, if a disclaimer or exceptional report is given, should immediately open the eyes of the examiner that something is awry. With so many Revenue auditors available — and more on the way — there are enough people to do the work and obtain the required information.

In the past number of years the accountancy bodies have recognised the need for high and proper standards. A practice review has been introduced which means that a person can appear at the door one day to check the files. If they are not up to standard the auditor can be told to put them in order or they will lose their certificate to practise. An ever-increasing number of financial reporting standards and auditing standards are being introduced to ensure that accountants and auditors give proper, up to date advice to their clients and obey laws that have been enacted. There is no benefit to the client if an accountant does not comply with these standards. If an accountant is suspected of not playing by the rules all of his clients are likely to be examined as a result. My experience, from talking to my colleagues, is that while they might have taken chances in the past, they have now changed their whole attitude with regard to their reporting standards. I believe that if, as has been reported and been stated here, the Minister is intending to withdraw this section as it applies to solicitors, he will also have to withdraw it for auditors. The principle underlying the section applies equally to both.

I received many letters from accountants and solicitors over the past two or three weeks. Every accountant and solicitor in my constituency wrote to me. I was impressed with the recognition and attention until I discovered today that they wrote to everybody else as well. I have not received more representations on any subject except the recent abortion information legislation.

Does that confuse the Deputy?

No, I am not confused. On that occasion most of the people claimed to be supporters of my party or of me. The lobby on this issue did not claim any such distinction.

Will the Minister state if there is a question of this being unconstitutional? Does the provision go beyond the recommendations in the beef tribunal report? Does it remove the client-professional relationship which could, in turn, seriously erode the right to a defence? Could this cause transfer of business to Northern Ireland? What happens if those people covered by this provision are not aware of clients' late returns? Will this provision seriously damage the self-assessment process?

Conscious that I am not a bona fide member of this committee my contribution will be no more than an intervention.

Is the Deputy a bona fide member of the Law Society of Ireland?

He is the second to address us this afternoon.

Such an interest should be declared. As a member of the Law Society of Ireland, I share the concerns of the Law Society as to the constitutionality of this section as applicable to members of the legal profession.

In his reply will the Minister provide the committee with the constitutional advice he may have received on the matter of the right of confidentiality in the solicitor-client relationship? Deputy Michael Ahern said that the Minister stated he has already withdrawn the application of the section to the legal profession. If that is the case I welcome it.

He was referring to media reports.

Perhaps the Minister will outline the position? The constitutionality of the provision is of fundamental importance.

If this issue arose only from the lobbying of interest groups our duty as legislators would clearly be to resist them and do what we felt was right. This is not a party political issue. There appears to be widespread support for the principle the recommendations of the beef tribunal. The concerns expressed seem to be of a practical nature in relation to the section as drafted.

The beef tribunal will cost between £30 and £40 million. Many of those who came under the scrutiny of the beef tribunal enjoyed the benefits of the tax amnesty in the meantime. Substantial tax, which would have fallen due as a result of the exposure of the beef tribunal, did not fall due. The beef tribunal was a bonanza for lawyers and the State ended up as the sucker paying all the bills. The danger is that this section, as drafted, might just be another bonanza for lawyers and the State could again end up paying the bills.

Many people believe that the beef tribunal had next to no effect despite the large outlay of public funds. No one seems to have been found guilty or sanctioned. The point has been made ad nauseam that the need for the beef tribunal would not have arisen if Ministers had answered Dáil questions honestly and comprehensively and if there had been an effective Dáil committee system. We now have a larger and more widespread committee system. However, despite the expanded role of committees and new terms of reference, there are a number of deficiencies.

The interest groups which appeared before the committee yesterday said that all their legal advice is that the section as drafted is unconstitutional. This is supported by the only eminent counsel who is a member of this committee, Deputy Michael McDowell.

Deputy Penrose is also a member.

I apologise. Deputy Penrose is a lawyer and has also said this. However, the committee has no legal advice available to it. During my term as chairman of the Committee of Public Accounts I became increasingly conscious of the need for ongoing legal advice on procedural matters and other issues. If there is to be an effective committee system, there is a need for a legal services office within the House. We would not then have to get the consent of the Department of Finance followed by three quotes from senior counsel. We should have an independent legal office. The Attorney General is the legal adviser to the Government, not the legal adviser to Parliament. No committee has its own independent legal advice.

As chairman of this committee, I am inclined to the view that the section, as drafted, is unconstitutional. It would create a precedent if I, as chairman, ruled the section out of order on that basis. However, I do not believe I have the power or authority to create such a precedent but is a real issue.

We will support you, Chairman.

By necessity, the annual Finance Bill is the subject of a time motion. In this case it is not a guillotine but an agreed time motion for the completion of the Bill because it has to give effect to the budget. It is a money Bill and, therefore, unlike other legislation, it cannot be referred to the Supreme Court to test its constitutionality. However, if the section as drafted is enacted, it will be challenged in the Supreme Court and that will give rise to much delay and many problems.

I have been impressed during the debate at how the Minister for Finance has listened to and taken on board many of the points made. I do not remember a Finance Bill in my time in the House where the Minister has taken on board so many suggestions. I have known the Minister for about 20 years in public life and that has been his form. I am sure he is also listening to the points made today. There are possibly two ways of dealing with this. First, is to approve it as it stands and for the Minister to come back on Report Stage, but at that stage we will have approved the section without having any further say in it. Second, would be to remove the section and constitute it as a new finance Bill which the committee could consider in the next few weeks in more detail — that would give us more time to amend the section. We would not throw out the baby with the bath water: we would accept the principle and we would have time to go into the practical effects of this, and, maybe, improve the legislation. There may be other possibilities.

If the committee was a free agent and not subject to the inevitable whip, it would not pass this section as it stands.

I appreciate the manner in which this controversial section has been addressed by all members of the committee.

The accountants, lawyers and the others who have been so agitated about this measure — I say this in support of an opinion expressed by, I think, Deputy Cullen — have done an outrageous disservice to compliant business taxpayers. They have created an impression that every small business is basically involved in confidential discussions with them as professionals, the object of which are to defraud and not to minimise tax. Everybody wants to minimise tax; that is only common sense. However, in their earnestness to ensure they do not lose market share in a competitive environment they have created a damaging impression of a business community for which I have the utmost respect and in which I have considerable interest.

The professionals are well able to look after themselves but they have done their clients a great deal of damage. I bitterly regret it and I refute it utterly. In my experience the vast majority of business people want to be compliant. Frequently their greatest problem is knowing how to be compliant so they can comply with the complexities of the law.

The lobby on this issue has been unprecedented but it would be nothing to the other lobby that would unfold if we were to cave in to it. Deputy McCreevy described on Tuesday afternoon, how caving in on the mart sales proposals at the Fianna Fáil Ard Fheis in 1979 to a lobby of a couple of thousand articulate farmers brought nearly three quarters of a million irate PAYE taxpayers on the streets.

This should all be put in context. I am delighted the Law Society, the accountants and the Institute of Taxation made presentations to the committee. Although I watched some of the proceedings on the monitor, I chose in consultation with the Chairman not to attend as I felt my presence would have been a distraction in that their remarks would have been addressed to me and not to the committee.

I welcome the development in having a lobby group come and explain its position directly and have a question and answer session. The Chairman is to be congratulated in this regard and I hope it is in compliance with the rules of the House.

Deputy McCreevy summarised the history of this matter as succinctly as anybody could. I am bound by the decisions of the Oireachtas as a Minister. The Oireachtas decided last year to give effect to this recommendation. My predecessor, now leader of the Fianna Fáil party in Opposition, Deputy Bertie Ahern, gave a commitment to introduce it in the Finance Bill. I am honouring a commitment which I respect and support and in trying to do so, have had consultations with different groups.

There should be no doubt about one essential issue. The compliant taxpayer should have nothing to fear from section 153. It concerns fraud, nothing less and nothing more. To the extent that the section counters tax evasion, it has much to commend it. There has been a deal of overreaction to section 153 but its essential intent has been either ignored or forgotten. All those who want the section deleted are careful to make it clear that they condemn tax evasion in any form but yet see difficulties in reporting evasion when they come across it.

Much has been made of the Revenue Commissioners' existing powers to detect and investigate evasion. There is no doubt that those powers are extensive but this does not rule out the State requiring those in the best position to detect evasion to assist the Revenue Commissioners in this regard. The beef tribunal obviously believed so. Last autumn the Government and the Oireachtas accepted the recommendations and as Deputy McCreevy said, there was nothing like the current reaction then.

When I or my officials met the representative groups objecting to section 153, we asked what amendments they proposed to meet their objections. They made it clear that they want the section withdrawn but the general points raised concentrated on several main areas. The first suggestion was to confine the lists of reportable offences to real tax evasion such as filing false returns, claiming false relief, producing false invoices and consistently failing to file returns. This would exclude those offences dealing with late payment of tax, failure to keep records and the destruction of records, all of which, though tax offences, are not tax evasion in themselves. I am prepared to consider those points.

The second suggestion was that we should apply materiality to all reports both at company level and at the level of reporting to the Revenue Commissioners. This would avoid an adviser or auditor having to report every minor tax matter to the board of a company with consequent paperwork and added cost. This is sensible and acceptable. The third suggestion was that we should clarify that the auditor or tax adviser need base his report only on information gained in the ordinary course of the audit or work for the client. This would rule out the need for special investigations of every aspect of companies' affairs. It was also suggested that the auditor or adviser should be allowed a clear period in which to be satisfied that a reportable cause exists in the first instance and I am prepared to address these points. Others related to the imposition of prison sentences on auditors and advisers for failure to report tax evasion and I am prepared to reconsider this, certainly in the case of summary conviction.

The question of constitutionality and the application of the section to legal advisers was raised extensively. We sought in the current draft to address this point by providing a defence to prosecution where information was obtained in assisting a company to prepare for litigation. The Attorney General advised that, for constitutional reasons, the reporting requirements of section 153 as it stands could not safely be applied to legal advice provided by solicitors or barristers and thus a defence would have to be allowed to cover such cases. The effect of this exclusion would be that some advisers on tax matters would be subject to a reporting requirement while others would not.

The extension of the reporting requirement beyond auditors was to ensure equity and a level playing field between the tax advisers. This cannot now be achieved in the manner proposed in the Bill. In light of this I am examining how the section needs to be restructured to meet the situation and to keep within the objectives of the beef tribunal recommendation. I have not yet concluded this reassessment although this afternoon's debate has been particularly helpful in that regard. However, I will propose amendments to section 153 on Report Stage.

It can be seen from all of this that I am prepared to be flexible and, as the Chairman indicated, to listen to what has been said. However, the reaction of some representative bodies has not been as measured. Withdrawal of cooperation from the tax authorities and advising members to ignore the law if enacted are not the reactions one associates with professional bodies. I will let the utterances of the Law Society hang on the public record for all to see — people can come to their own conclusions. As Deputy Wallace said, none of us is above the law.

I am prepared to meet people halfway. I hope this will be reciprocated by all the interests concerned. I have addressed most of the questions that have been asked. I will try to address some others asked by Deputy McCormack. Deputy Dermot Ahern referred to an office in Newry and an office in Dundalk. The office in Dundalk is liable to comply with the law of the State, even if the work is done in Newry. The person would have to move to Newry. Clearly, nobody wants that to happen and we are anxious that it would not happen. For those and other reasons we are considering the points that were raised. Significant points have been raised constructively by members and visiting members to the committee.

As we have gathered from recent media reports it appears the Minister will remove references that relate to lawyers and solicitors. That is the nub of what he is saying. His second point is that the nonsensical provisions regarding reportability of offences will be removed and an effort will be made to confine the section, as far as it goes, to what would be evasion. It appears from the section as drafted that officials given the job of drafting it without much thought lifted a section from the 1992 Act.

Some of the provisions in section 153 are nonsensical, as I said on Second Stage. However, the principle I referred to earlier is the same. The Minister will thus make a distinction between auditors and those in the legal profession. The big six firms will be able to avail of that distinction quite easily. At least one of the major six firms in Ireland at present has international branches of solicitors who will be able advise on one day as solicitors and on the next day as accountants.

I am au fait with the background to the consultations the Minister undertook with some of the professional bodies who conducted their affairs in a non-confrontational manner. Those consultations proceeded quite nicely. In endeavouring to square and level the playing pitch the Minister inserted this other provision.

One of the professional bodies — the Incorporated Law Society — was so affected in what it said yesterday morning that it did no favours for any of us. It was an absolute disgrace and I was the first to raise it yesterday morning without naming the body concerned. However, I might as well name it now since everybody else has referred it. It was no help at all. To say what was said to Members of the Oireachtas and to a Minister was a disgrace. However, as they say in Kildare, there will be another day. If that is the attitude of some members of that profession, then God help us.

The result will be discrimination. Other Deputies and colleagues agreed with my earlier suggestion to the Minister and it is still a good idea. All the legislative powers granted to the Revenue Commissioners should be considered in the same way as the review of company law. Given the climate which exists in consequence of this situation, if the Minister accepts my suggestion he will be blamed for sending it to a committee on the basis that it is the easy way to get out of it, and he will, therefore, invite political difficulties. It is not easy for Governments to make these changes in the full glare of public scrutiny as it is viewed as weak and procrastinating. However, it could be done if a time limit to report was imposed, as was the case in the review of company law. In this respect, a separate Bill would then be introduced. At present, we are working to a deadline and this does not give time for real and fruitful debate. I recognise the Minister's political difficulties, that he would like to go as far as he can but that his hands are tied.

It is proposed that we differentiate along the lines suggested by the Minister, in accordance with the constitutional advice he received, mainly from an eminent lawyer and various bodies. The Minister is aware of my views, both from the time we served together in Government and before, regarding the opinions of legal people. Seven or eight years ago, long before the beef tribunal, I expressed my views on a television programme entitled "Hanley's People". Lawyers make money by giving advice, and I always feel sorry for the poor client who, when deciding to pursue a case is told that his chances of winning are very good, while the person against whom he is taking the case is also advised that he has a good chance of defending himself. A jury decides the case, but there is a big pile of money in the middle and all the lawyers get some of it. These views do not reflect on the legal profession; it is the way the system works. People give different legal opinions and it is not an exact science.

It would be unfortunate not to have a rational approach to this issue. My suggestion is the best one, and I framed amendment No. 131 last Friday to reflect my remarks last weekend. It should be read before amendment No. 130 to fully understand it. This is the way we could proceed. We were aware that the Bill would have had to contain some provisions on this issue, and I had, therefore, discussed the matter with the Department of Finance for some time.

Perhaps the Minister could withdraw the section, notwithstanding the political difficulties which he believes he may encounter. There is enough common sense among the public to realise that we are making a mistake and should not proceed with it.

Speaker after speaker has attacked the Law Society in increasingly intemperate terms. The position of the society, as expressed, was correct and it was essential to speak in the manner it did. The Law Society was advised, as the Minister has now been advised, that any measure which trenched on solicitor-client confidentiality was repugnant to the Constitution. Deputy Wallace used the phrase; "No one is above the law". The legislators, especially, are not above the law, and the Law Society, representing solicitors, which told its clients not to operate the Bill if passed in its present form, was doing no less than its duty to its clients. If it complied with the law and broke all its clients' confidences and informed the Revenue Commissioners of everything it knew, that would be irretrievable. It was perfectly right to say it will ignore this law until there is a constitutional decision on it, that it will challenge it and is quite confident it will succeed.

If a criminal justice Bill obliged every barrister to report what his client did to the Director of Public Prosecutions, I would stand before the Dáil and say I would ignore that law; that Deputies could legislate until they were blue in the face but I would ignore that law until I was told I was wrong by the Supreme Court. The Law Society was correct to tell its clients it would not be bound by a law it knew was unconstitutional, and it would not breach clients' constitutional rights because it was directed to so do by an unconstitutional law.

I uphold the position of the Law Society and most of the criticism levelled against it is due to a failure to realise that it is in possession of its clients' confidences and is obliged to protect them. When it said it would ignore the law, it may have sounded as if it was saying it did not care what this House did on any matter. However, I listened carefully and as soon as Mr. Murphy had finished his submission to this committee, I said I was 100 per cent on his side. I am still totally on his side and he is absolutely right to uphold his clients' constitutional rights. We have no right to pass legislation which threatens that. If he feels his clients' constitutional rights are under threat, his duty, and that of the law society is to uphold those rights until a court tells him otherwise.

I know there is a presumption as to the constitutionality of legislation. However, if in a criminal matter this House decided I had to inform the DPP of what my client had said, I would say no a thousand times, and I would ignore that law until the Supreme Court told me I must inform on my clients.

Would the Deputy not agree the impression that the law society was above the law was conveyed to a wide public, the vast majority of whom is not as au fait with the constitutional protection of Article 38? If it said it considered this provision unconstitutional and it would immediately initiate a Supreme Court challenge if it is enacted, since the matter would then, in effect, be sub judice, the probability is that the Revenue Commissioners would not require us to implement it.

Unfortunately, and I stand over my criticism, a professional body, whose members are officers of the courts, conveyed, willingly or unwillingly, an impression that it was above the law. Deputy Wallace would be the epitome of the average, everyday person and he expressed his attitude to this as eloquently as any of us could.

We have had enough of that, we have 55 minutes to decide——

With the greatest of respect——

I just want to concentrate the minds of the Select Committee on the issues. The points for and against the law society have been made.

They have not. Speaker after speaker here has fortified themselves in their error and, eventually, we ended up with the statement that what the law society did was a disgrace. I applaud it 100 per cent and I reserve my right to say I think it was correct. Every solicitor had a right to be notified by his professional body that if this provision is enacted, he should not inform the Revenue Commissioners until its constitutionality has been decided. The law society was perfectly right in what it said. It is not fair on the basis of one radio interview — or perceptions of a radio interview — to come to the conclusion that it did anything other than that. It acted properly. If I thought otherwise, I would join the chorus.

The Deputy is in a minority in this.

Of course, and this is the point I am making. We do not like being told that we may do whatever we like, but that they will not obey the provision. However, we must remember that we are not above the law either.

I do not mind the other Members of the committee staying quiet about this matter but I want to make my point. Deputy McDowell is entitled to defend the Incorporated Law Society. It is usually solicitors who brief barristers, I understand, in this State.

That is an accusation of bad faith.

I listened to the same interview as the Minister, Deputy Quinn,and others and it was quite clearly the way the Minister explained it. Deputy McDowell is entitled to his opinion, but it is not correct to tell me that there was something wrong with my hearing the other morning.

Deputy McDowell, I allowed you to make a point without interruption. I do not underestimate its importance but we only have 54 minutes. I want to try to focus the committee's mind on how we proceed.

Can we deal with the meat of what the Minister said? It is very important. If the Minister is to proceed with a regime whereby auditors must report serious tax fraud to the Revenue Commissioners, questions that Deputy McCormack and various other people raised about the practical effects of such a regime and whether the Republic can have such a system must arise. In response to the Minister, the category of reportable offences was always too wide and I welcome what he said about narrowing that category. Under section 194 of the Companies Act, 1990, auditors already have these reporting obligations; it might be better to insert a provision in that Act saying that where a failure to keep proper books of account arises from revenue fraud — revenue fraud can be defined in a further subsection — then subject to the materiality provisions in that section, in addition to notifying the registrar it is also necessary to notify the Revenue Commissioners. That would make a neat sensible section in the circumstances. I query — I still stand with Deputy McCreevy on this — whether this is such a great idea. I query whether section 194 as it stands — or amended as I suggested — is not sufficient to deal with it. I am afraid that the auditor-company relationship will be unnecessarily upset if section 153 is brought in. It would be far better to amend the Companies' Act. This in effect is Companies Act legislation; it could be amended to insert an obligation on the auditor to inform the Revenue Commissioners as well as the Registrar where the failure to keep proper books of account arises from a series of scheduled revenue offences. If that is done, I think the Minister will satisfy everybody and will emerge with credit.

We have all been saying how we do not condone Revenue fraud. As a State we have not responded properly to Chapter 9 of the beef tribunal report. I wrote two days ago to the Taoiseach, the Attorney General, the Director of Public Prosecutions and the Minister for Enterprise and Employment, Deputy Bruton. I drew to their attention that there are provisions in company law for disqualifying people who engage in major fraud from having anything to do with the management of companies in future. If we are really outraged — as we should have been — by the massive, sustained fraud in the Goodman case, the very least we should do is ensure that an application is brought in the High Court regarding the people named at the top of page 336 of that report, the small group of top management who organised this in a highly professional way, stating that they should be disqualified for a period from having a management role in a company.

However, instead, we have the extraordinary case of the Minister for Agriculture, Food and Forestry effectively welcoming back into autonomous control of that company the same team at which Mr. Justice Hamilton pointed the finger. If we are serious about stopping tax evasion and fraud, every possible step should be taken. I do not know if it is possible to bring a prosecution because I do not think there is sufficient criminal evidence.

However, there is plenty of material in that report to disqualify all the people who had any hand, act or part in that fraud from having a management role in a company for a couple of years. If the High Court did that, the message that one does not cheat the State would be given to business in a way that no amount of crawthumping or breast beating will ever achieve in a Finance Bill.

I did not mention the Law Society in my previous contributions. However, I took the same meaning from the remark as the people. I fear legal opinion. Last week, a man from Connemara came into my office, he purchased a bullock from a man in County Laois for £1,600. However, the animal did not sire any calves or, at least, they thought it had not sired any, and it cost the man £12,500 in legal costs to prove it. This case was brought to my notice last week.

Both sides would have been told that they had the greatest chance of winning the case.

I do not know how they were advised. I would have advised the man to bring back the bull and not feed him. However, I did not get an opportunity to advise him in time.

The clock will keep ticking.

I am not suggesting myself as an adviser in these situations: I am just a political adviser. However, the Minister made a valid point when he stated that the beef tribunal report was adopted by the Dáil. We cannot forget that the Minister is attempting to enact the points which were adopted by the Dáil as a result of the tribunal report. This includes chapter nine, page 336.

I was most encouraged by the Minister's response to this debate. I understood him to say that when he has finished considering the debate in terms of the possibility of introducing amendments, section 153 will only deal with fraud. If that is the case, I am sure it will have the unanimous support of the committee since all the Members who mentioned tax evasion stated that they do not condone fraud. If the Minister goes as far as I understand he intends to go in amending this provision, I am sure he will have the unanimous support of the committee.

Deputy McCormack asked a question in relation to the IDA and the possible counter productive effects of this provision and I omitted to answer him. There was informal contact with the IDA and it did not express a view that the provisions of section 153 would drive away business. Indeed, the business it might discourage was not the type which the IDA is interested in attracting to the country in the first place.

On that note, I recall in 1992, when I was in Opposition, that considerable fears were expressed about the extensive powers given, and which were confirmed today, to the Revenue. A view was expressed that this would be counter-productive in attracting business to the country, but that has not been the experience.

As I am not a lawyer, the conversation earlier about differing legal opinion was interesting. If it was not for differing legal opinion, perhaps Deputy McCreevy would be Minister today, rather than sitting on the Opposition benches.

Thankfully, my views on legal opinion were given well before the events of 1994.

I had an interesting and salutary experience, having left the Opposition, been in Government and found myself back in Opposition within a few months. I would never have anticipated it.

The Deputy is coping well.

I always cope well.

Deputy Cullen was the cause of all the trouble.

The suggestion about the Companies Act was the only course of action in the last round of discussion which recommended a specific course of action on reporting procedures so that they could and would be expanded to include not only the Company Registrar but the Revenue Commissioners. That is an obvious course of action which should be incorporated in company law.

I do not have the benefit of having read the Minister's reply, which was comprehensive and detailed, but I understand that parts of section 153 are unconstitutional, the section deficient and that there are uncertainties about how he might proceed. This cannot be put right in the next few days and given the experiences not long ago, we know differing advice can lead to problems. On that basis, and what Deputy McCreevy and others said, it is unwise.

I sense from this committee that there would be no attempt to make political capital from a slowing down of the implementation of section 153. If there was to be a review in any context or, as has been suggested, a second Finance Bill or a companies Bill or a combination of both, that would be acceptable. Since the section is so badly askew at this stage and so much time was put into preparing it, to suggest that it can be corrected in three days is to stretch the imagination.

I understand the question of materiality but implicit in that is defining big and little sins, or mortal and venial sins. That might send the wrong signal. Who will be the arbiter of what is a big transgression? Is it that a large sum is involved or is it the consequences to employees, which may not be as large in monetary terms but could have serious effects?

The Minister may have misunderstood me earlier. I said the impression was given that the whole private sector, apart from PAYE workers, was defrauding the taxation system and but I did not say the blame lay with the professional bodies. Perhaps those bodies contributed to that impression but they were not alone.

Deputy Broughan's comments yesterday were extreme and unhelpful to the good conduct of the debate here. If the professional bodies contributed to that impression, Deputy Broughan's comments reinforced it. This is not the first time that impression has been given by that Deputy and I reject it, as the Minister has. To suggest that all those other than PAYE workers are spending all their time trying to defraud the system is totally incorrect; neither are those who advise them pursuing that course of action.

The final point, which the Minister did not address, is that many companies without any qualifications now provide a plethora of insurance, mortgage, banking, tax, and accountancy advice. Perhaps, like me, people would have done three or four examinations in accountancy and never completed the course. They set themselves up as advisers, have no professional standing and their numbers in the marketplace are growing If alterations are to be made to section 153, some attempt should be made to bring these people into the net. The effect of section 153 will be a potential growth in that area for those who might not want to work legally within the system. I am deeply concerned that this Bill does nothing to deal with that area of growth. Given the Minister's comments on the constitutionality of section 153 and the uncertainties and deficiencies that exist, perhaps the Minister should stand back and look at the possibility of a second finance Bill and a new companies Bill. He will be fully applauded by this side of the House and he should have no fear of the trade union movement or those who represent PAYE workers, if it is properly explained that we want good law and not law based on faulty premises.

As an addendum to Deputy Cullen's point and with regard to putting section 153 into a companies Bill, I presume, because of the agreement of the Dáil that it go into the Finance Bill, that it has to be so. Is there any other reason why it could not be inserted in a companies Bill? Would it dilute it or make any great difference?

The recommendation was that it be in the Finance Bill and that is why it is being addressed in this debate.

Section 153 does not apply to the unqualified people who have set up as financial advisers because they are not auditors. Those people should be considered at some stage, because there are so many of them now it affects those of us who had to go through all the examinations etc. I agree with Deputy Cullen's remarks on that issue.

In respect of the point both Deputy Ahern and Deputy Cullen made about unqualified people not being covered by the provisions of section 153 as it stands, I would refer both Deputies to section 153 (1) (b) on line 1 of page 163, where the definition of relevant person is given as a person who:

assists the company in the preparation or delivery of any information, declaration, return, records, accounts or other document which he or she knows will be, or is likely to be, used for any purpose of tax:

Therefore, they are covered by the section.

I am more concerned that it is limited to auditors.

We know that section 153 as it stands is defective for the reason I have already given. In respect of extending the obligation, we have a definition of relevant person in the section that would cover the category of people to whom the Deputy referred.

An assisting person is already caught by section 94 of the Finance Act, 1983.

Deputies Ahern and Cullen referred to the plethora of financial advisers and people calling themselves accountants. People who are members of institutes and have gone through the qualification process always feel aggrieved that others can set up and call themselves advisers at the drop of a hat. They are all over the place and are regarded as unfair competition. You cannot set youself up as a solicitor unless you are a solicitor recognised by the courts but you can set up as an accountant although you have had only a fleeting glance at a book once in your life. This could be considered in the context of a companies Bill more than anything else and that would naturally eliminate unfair competition. Apart from everything else, the fly-by-nights and the rogues will not be affected by this section.

When the Minister considers this over the next few days he may come to the conclusion he should withdraw section 153 and put it in the mechanism I have been suggesting for nearly a week. It could be in a companies, finance or a separate revenue powers Bill. If the Minister does not do that before Report Stage and comes back with a revised section 153, rather than have us all confused, the existing section 153 should be removed. Whatever amendments are put forward should come in the form of a new section so that we can follow them. Hopefully, it will not come to that but if the Minister must go down that road, that is the easy way to do it.

We need to focus on the procedures. It is clear from what the Minister said that there will be substantial amendments to this section. There are few procedural options open to us. We are bound by the Orders of the House to put one question at 6 o'clock. The question will be that the section stands and that the amendments in the name of the Minister to all the sections under consideration be accepted. On Report Stage in the Dáil each speaker is confined to one contribution. There is a provision under Standing Orders whereby before the end of Report Stage any matter can be recommitted. I suggest that is probably the best route. The amendments the Minister envisages for this section would be recommitted, either to a committee of the whole House or to this committee meeting in special session next week, to allow a teasing out of the procedure and not affecting the timetable for the rest of Report Stage. Obviously, if the Minister must have this passed next week, we should accommodate that if it is so deemed. Report Stage consideration cannot, of necessity, be as thorough as Committee Stage.

On a point of order, if the Minister says he is advised by the Attorney General that the section as it stands is unconstitutional, is it right for a committee of the Dáil to say it can stand on the basis that we pass it? It would be far better if we deleted the section and asked the Minister to bring back a section to achieve the ends he is determined to achieve on Report Stage and recommit that to committee rather than adopt a formula we know infringes the Constitution.

That is not a point of order; it is a point of law. I would like the Deputy's advice.

If Deputy McCreevy wants me to introduce legislation for the registration of accountants, I will be happy to do so on the basis that he would also support registration of architects as they suffer from similar problems. It is a serious problem. In fact, I intended to deal with that matter in the Department of Enterprise and Employment.

The Minister did so when Minister for Enterprise and Employment.

To return to the business of the committee, it is my intention to bring in a substantially amended section 153, as I indicated already, for reasons I stated and to facilitate Deputy McCreevy, who has been reasonable in suggesting we would introduce it as an entire section so that it could be comprehensively read and understood rather than a series of amendments. I would be loath, not withstanding the legal observation the Deputy offered, to delete sections.

In the light of the Minister stepping back from it, I agree but will the Minister accept my amendment, for the time being, to remove the offending paragraph?

No, I do not. What I propose to——

Mr. McDowell

Amendment No. 128 proposes the deletion of lines 1 to 13.

This has been a constructive debate from my point of view as Minister for Finance, and I have learned much from it. We have spent the past three days developing an understanding which may not necessarily have been shared by our colleagues elsewhere. Some of us have more friends than we need on occasion.

You doubled your number of friends in the last election.

I propose that the amendments to section 153 be retabled by Opposition Deputies on Report Stage. I do not propose to accept any of them. To accept one against any other would be invidious. I undertake to return with a new section 153 on Report Stage which we believe will meet many of the points raised.

Would you be agreeable to that part of the Report Stage debate being recommitted?

We have done a lot more work which has to be checked, for self-evident reasons. Deputy Cullen made the point that if it took so much time to complete this Part of the Bill, it would surely take more time to change it. I invite Members to wait until the amendment is circulated early next week and to form an opinion then. If recommittal time is necessary — I do not believe it will — then that can be considered in due course.

On a point of order, could you explain what that would mean, Chairman?

It means that on Report Stage, Members will be allowed to speak once.

I know that.

It means that it can be held in the House at the same time.

That section could be discussed, back and forth, as it is on Committee Stage rather than on Report Stage where there is only one operation.

It means that the Minister could be questioned and the issues debated. It is in the interest of ensuring that any new proposals are properly discussed. That is our job.

That is a good suggestion.

I wish to make a formal proposal that the committee proceeds in that regard. I think the committee, as a whole, has formed the opinion that that is the best way to arrive at what is desired in section 153. I propose that we proceed in that regard.

I propose that, in the light of the discussion, we move to the next section, noting the invitation that all existing amendments be resubmitted at Report Stage and, as a committee, we request that the Minister's new proposals be recommitted for consideration. In other words, the format will follow that of Committee rather than Report Stage.

On section 153?

I second that proposal.

Can I just clarify your intention? I have no problem with ensuring that we have a full and effective debate but there are time constraints involved.

We understand that.

Would it be within the same overall time constraints?

It would be.

We understand that the Bill has to be passed by next week but the committee would not be doing its duty if it did not request that format. I thank the Minister for being so accommodating.

Amendment, by leave, withdrawn.
Amendments Nos. 128 to 132, inclusive, not moved.
Question proposed: "That section 153 stand part of the Bill".

A division on this question has been challenged and it is postponed until 6 p.m.

NEW SECTION.

I move amendment No. 133:

In page 166, before section 154, to insert the following new section:

154.—(1) Part XXVI of the Income Tax Act, 1967, is hereby amended——

(a) in section 416——

(i) by the substitution of the following subsection for subsection (1):

‘(1) (a) A person aggrieved by any assessment to income tax made upon him by the inspector or such other officer as the Revenue Commissioners shall appoint in that behalf (hereafter in this section referred to as "other officer") shall be entitled to appeal to the Appeal Commissioners on giving, within thirty days after the date of the notice of assessment, notice in writing to the inspector or other officer.

(b) If on an application under paragraph (a) the inspector or other officer is of opinion that the person who has given the notice of appeal is not entitled to make such an appeal, the inspector or other officer shall refuse the application and notify the person in writing accordingly specifying the grounds for such refusal.

(c) A person who has had an application under paragraph (a) refused by the inspector or other officer shall be entitled to appeal against such refusal by notice in writing to the Appeal Commissioners within 15 days of the date of issue, by the inspector or other officer, of the notice of refusal.

(d) On receipt of an application under paragraph (c) the Appeal Commissioners shall request the inspector or other officer to furnish them with a copy of the notice issued to the person under paragraph (b) and, on receipt thereof, they shall as soon as possible——

(I) refuse the application for an appeal by giving notice in writing to the applicant specifying the grounds for their refusal, or

(II) allow the application for an appeal and give notice in writing accordingly to both the applicant and the inspector or other officer, or

(III) notify in writing both the applicant and the inspector or other officer that they have decided to arrange a hearing, at such time and place specified in the notice, to enable them determine whether or not to allow the application for an appeal.',

(ii) in subsection (2)——

(I) by the substitution of the following subparagraph for subparagraph (ii) of paragraph (b):

‘(ii) in a case where it appears to the inspector or other officer that an appeal may be settled by agreement under subsection (3), he may refrain from giving notice under this paragraph or may, by notice in writing, and with the agreement of the appellant, withdraw a notice already given.',

and

(II) by the insertion of the following paragraph after paragraph (b):

‘(c) Where, on application in writing in that behalf to the Appeal Commissioners, a person, who has given notice of appeal to the inspector or other officer in accordance with the provisions of subsection (1) (a), satisfies the Appeal Commissioners that the information submitted to the inspector or other officer is such that the appeal is likely to be determined on the first occasion on which it comes before them for hearing, the Appeal Commissioners may direct the inspector or other officer to give the notice in writing first mentioned in paragraph (b) and the inspector or other officer shall comply forthwith with such direction and, accordingly, subparagraph (ii) of the said paragraph shall not apply to that notice of appeal.',

and

(iii) in subsection (6), by the substitution of the following clause for clause (B) of subparagraph (ii) of paragraph (c):

‘(B) such a return has been made but——

(I) all the statements of profits and gains, schedules and other evidence relating to such return have not been furnished by or on behalf of the appellant,

(II) information requested from the appellant by the Appeal Commissioners in the hearing of the appeal has not been supplied by the appellant,

(III) the terms of a precept issued by the Appeal Commissioners under section 422 have not been complied with by the appellant, or

(IV) any questions as to an assessment or assessments put by the Appeal Commissioners under section 425 have not been answered to their satisfaction,',

(b) in sections 421 (1), 422 (5), 423 (1), 424 (a) and 427 (e), by the substitution of ‘inspector or such other officer as the Revenue Commissioners shall authorise in that behalf' for ‘inspector' in each place where it occurs,

(c) in section 428——

(i) by the substitution in subsection (1) of ‘inspector or such other officer as the Revenue Commissioners shall authorise in that behalf (hereafter in this section referred to as "other officer")' for ‘inspector', and

(ii) by the insertion in subsection (2) of ‘or other officer' after ‘inspector',

(d) in section 429——

(i) by the substitution in subsection (1) of ‘inspector or such other officer as the Revenue Commissioners shall authorise in that behalf (hereafter in this section referred to as "other officer")' for ‘inspector',

(ii) by the insertion of the following subsection after subsection (2):

‘(2A) The provisions of section 421 (2) shall, with any necessary modifications, apply in relation to a rehearing of an appeal by a judge of the Circuit Court as they do in relation to the hearing of an appeal by the Appeal Commissioners.',

and

(iii) by the insertion in subsection (6) of ‘or other officer' after ‘inspector', and

(e) in section 432, by the substitution of the following subsection for subsection (2):

‘(2) The Appeal Commissioners shall hear and determine an appeal to them under subsection (1) as if it were an appeal against an assessment to income tax and all of the provisions of section 416, with respect to such appeals, together with the provisions of this Act relating to the rehearing of an appeal and the statement of a case for the opinion of the High Court on a point of law, shall apply accordingly with any necessary modifications.'.

(2) Section 2 of the Finance Act, 1969, is hereby amended by the substitution of the following subsection for subsection (5B) (inserted by the Finance Act, 1989):

‘(5B) The Appeal Commissioners shall hear and determine an appeal made to them under subsection (5A) as if it were an appeal against an assessment to income tax and, subject to subsection (5C), all of the provisions of the Income Tax Act, 1967, relating to such appeals and to the rehearing of an appeal and the statement of a case for the opinion of the High Court on a point of law shall apply accordingly with any necessary modifications.'.

(3) The provisions of subsection (1) shall, with any necessary modifications, apply to an appeal in relation to capital gains tax as if the appeal were against an assessment to income tax.

(4) (a) Paragraph (a) of subsection (1) shall apply and have effect as respects appeals against assessments made after the passing of this Act.

(b) Paragraphs (b), (c) and (d) of subsection (1) and subsection (2) shall apply and have effect as respects every hearing of an appeal by the Appeal Commissioners or the rehearing of an appeal by a judge of the Circuit Court, as the case may be, after the passing of this Act.".

This amendment proposes to substitute an amended section 154 into the Finance Bill to give effect to some changes in the income tax appeal machinery contained in Part XXVI of the Income Tax Act, 1967, which have been suggested by the Appeal Commissioners. These changes are also in line with the better customer service which Revenue has been developing over recent years.

Under existing law notices of appeals to the Appeal Commissioners are sent for administrative reasons to the Inspector of Taxes. The inspector decides whether the grounds for appeal are valid and, if so, when the appeal is to be listed for hearing by the Appeal Commissioners. The inspector may refrain from listing an appeal or withdraw an appeal already listed for hearing if he is of the opinion that the appeal may be settled by agreement without recourse to a hearing before the Appeal Commissioners.

The changes now being made are as follows: first, where an Inspector of Taxes proposes not to accept a notice of appeal as being valid he will have to notify the appellant in writing of his reasons; second, a taxpayer will be entitled to appeal directly to the Appeal Commissioners against an inspector's refusal to accept a notice of appeal; third, where an inspector proposes to withdraw a listing of an appeal on the grounds that the appeal might be settled by agreement without recourse to an appeal hearing, he must get the agreement of the appellant; fourth, where a taxpayer feels there is a delay by the inspector in listing an appeal the taxpayer will be able to apply directly to the Appeal Commissioners for an early listing; and, fifth, the grounds on which the Appeal Commissioners may dismiss an appeal are being expanded to cover situations of non co-operation by the appellant with requests for information by the Appeal Commissioners.

The amended section also includes the existing proposal in section 154 of the Bill which secures that, in rehearing a tax appeal, a judge of the Circuit Court will be statutorily obliged to hear, on behalf of an appellant, an accountant or a member of the Institute of Taxation representing the appellant. This measure is designed to reduce the burden of the cost of appeals on taxpayers by securing that appellants do not necessarily have to incur additional costs of engaging counsel and taking an appeal to the Circuit Court but can instead rely on the assistance of their normal tax adviser in processing their appeal.

In the same vein, the section also provides that an officer nominated by them for the purposes may take an appeal on behalf of the Revenue Commissioners before the Appeal Commissioners. Currently, only inspectors of taxes can take appeals on behalf of the Revenue. However, there are appeal situations which are increasing in which inspectors are not directly involved and because of the restriction the Revenue Commissioners have had to incur the cost of engaging counsel to take the appeal on their behalf if they wish to pursue the matter.

As a barrister, fully support this amendment. As a matter of law it is not the Circuit Court that hears an appeal; it is a Circuit Court judge who takes a separate oath. He is a statutory appeals tribunal and not the court. I have never believed that there was a monopoly of appearance before the Appeal Commissioners or before the Circuit Court judge sitting as an Appeal Commissioner. Some Circuit Court judges refused to sit on their bench and sat at the bottom of their court to make it clear that they were not sitting as a judge and that, therefore, the monopoly for solicitors or barristers, such as it was, never existed.

I also support the proposed tidying up provisions. My late father was an Appeal Commissioner and, without breaching his oath of confidentiality, he told me on many occasions that he had 200 cases listed before him on a morning. The situation should now arise that cases listed before the Appeal Commissioners will be cases where people genuinely want to hear them and that nobody ever attends at the Appeal Commissioners or the Circuit Court again with 300 accountants milling around wondering whether any of the cases will go on.

As a matter of interest, that does not happen now. Figures released recently show that the figure of 40,000 appeals has been reduced to 800. That happened in the old days when everybody attended the court when the Circuit Court was sitting. The first cases to be heard were family law cases. The rest of the day was taken up with tax cases. All of them were adjourned sine die so everybody had to go there again the following month. That continued indefinitely. Since the new arrangement that no longer applies.

Section 154 as originally drafted was a brief section to allow for the activities referred to by Deputy McDowell. I accept the Minister's advice. I cannot contradict him because, at the last minute, the Revenue advised the insertion of an amendment dealing with appeals which is over four pages long and which nobody has had a chance to consider. I will, therefore, take the Minister's word, but with a view to reconsidering the matter on Report Stage. However, it is not a good principle to propose an amendment such as this at such an advanced stage. If it was a good idea last week, it was a good idea a month ago.

I take the Deputy's point. If he satisfies himself with regard to this matter, he may propose amendments on Report Stage. However, it has been negotiated with the agreement of the Appeal Commissioners and the Revenue Commissioners.

Amendment agreed to.
Question, "That section 154 be deleted" put and agreed to.
Section 154 deleted.
Top
Share