The personal search provisions seem to be taken straight from the Criminal Justice Act, 1984. It is an amendment to the Principal Act regarding the inspection and removal of records. Paragraph (a) sets down the procedures for body searching and personal searching. A member of the Garda Síochána must be present if there is a suspicion that a person is carrying on his or her possession any records which will be required as evidence in criminal proceedings, presumably on tax evasion. Does the Minister not think the provision are somewhat extravagant? I understand the necessity for the provisions about searching property, but are the personal search provisions entirely necessary? The requirements that a Garda must be present, and that the person being searched will not be searched by a member of the Garda Síochána of the opposite sex are the same as provisions in criminal law to do with body searching and strip searching. They look a bit heavy handed in this kind of legislation.
SECTION 161.
That is a fair question. I will describe the background to this provision because I spent a number of hours going over it and cross checking before I was satisfied. It was not put in lightly.
Sections 160, 161, 163, 164, 166 and 169 of the Bill contain proposals for the introduction of new or enhanced enforcement powers in VAT legislation. It may be helpful, before we discuss the provisions of the sections, if I explain to the committee why these proposals are being put forward.
The Single Market in the Community will create new business opportunities for Irish firms and will also bring considerable benefits to customers. However, the new EC VAT arrangements which are part of the Single Market will also radically alter the tax compliance environment for businesses operating in he State. The outlook is one of considerable greater risk to the tax yield. The immediate area of risk is VAT but, unless this is dealt with successfully, the impact could be felt on the yield from other taxes. Last year the total yield from VAT was just over £2 billion. Of this £1.4 billion was collected on VAT on imports through the operation of custom controls and procedures. The balance of £0.6 billion was collected by the Collector General's Office, through the internal VAT system, from businesses trading in the State. So the abolition of VAT at the point of entry on intra-EC imports will alter the situation radically. For example, if VAT on imports from other EC countries had been abolished in 1991 only £0.3 billion would have been collected by the customs, the rest, £1.7 billion, would have been collected through the internal system. There is a big difference between the operation of the two collection systems. Payment of VAT at the point of entry provides a high degree of security. Imported goods are not released for circulation until the tax due has either been paid or guaranteed. There is also a record of the arrival of the goods in he State which is the starting point for the audit trail.
There is no room for complacency about the internal regime. Of the total amount collected in 1991, 35 per cent required some form of follow up action by the Revenue Commissioners before it was received and a further 7 per cent required enforcement action, mainly through the sheirff system. From the 1st January next, there will be two further dimensions to the risk for the VAT yield. Firstly, VAT free or zero rated goods will circulate freely within the Community and will be obtainable by registered traders or by people posing as such. Secondly, there will be no customs checks on the intra-Community trade and the enforcement and policing powers which currently apply, under the custom legislation, to VAT on imports will no longer apply to trade with other EC countries.
The proposals in the Bill are intended to deal with these risks. Section 163 makes legislative provision for the new VAT information exchange system between the member states which will enable the Revenue authorities to quickly access information in national data banks on the movement of zero rated goods. The other sections involve the transfer into VAT legislation of some of the powers currently applicable to imports under custom legislation, or, in the case of sections 164 and 166, give the Revenue power to deal with potential fraud at source.
I cannot overstate the risks arising from the free circulation of zero rated goods. In domestic trade, the opportunities for fraud are constrained to the extent that one trader's output tax is another's input credit. However, after January, the incentive to fraud will be much greater for traders who can lay their hands on zero rated goods from other countries. Evaders would have a competitive advantage of about one-fifth over the complying competitor. If this type of fraud is not dealt with speedily and effectively the damage that could be done will be considerable. Jobs will be lost and employing businesses and companies will go bankrupt. Tax revenues from VAT, income tax, PRSI and corporation tax needed to pay for essential goods and public services will be lost. Many of the tax abuses are organised professional operations, orchestrated by unscrupulous experts and carried through by people with connections to the criminal and paramilitary worlds, who have been quite prepared to threaten the lives of Revenue oficers. These operations include the smuggling of oil into the State under the protection afforded by paramilitaries, for a price. Construction industry inquiries have resulted in operations with participants with suspected criminal connections being unearthed. The bonded warehouse system has been systematically abused by goods being diverted from bond into the black economy, to emerge later in apparently legitimate pubs, where trade within a trade was being operated, an abuse facilitated by a failure of many vintners to maintain proper tax records, as required by law, and recent information acquired by Revenue officers in the course of sectoral inquiries indicates that there is criminal or quasi-criminal involvement in the running of 15 to 20 pubs around the country. Enquiries into the meat industry have resulted in various abuses of the tax system being discovered. It was because of such abuses in the VAT area that I felt we had to take this action.
I accept what the Minister is saying. Vast sums of money are involved. If the provisions are not adequate the particular skill Irish people have, their facility or talent for evasion, will be given new opportunities. Apart from the cash flow problem of losing £200 million when we switch from collection at the point of entry to the new regime, there is a huge possibility of fraud arising from the free circulation of zero rated goods. The fact that a private individual is quite entitled to have any member state good in his possession adds to the possibility for evasion. Once a non-excisable good is in a person's house, I cannot see how the Revenue will look behind the statement that he imported it himself, or that he brought it back from his holidays. Since no documentation is required to bring it in, I cannot see how the Revenue can challenge a person to produce receipts or other documents. One does not have to have any of those things when one is driving back from France or England with whatever goods one wants.
That is a fair point. The threat from the private individual is only a tiny percentage of that from the trade. It is not the private individual we are concerned about.
Yes, but the Minister is missing my point. I am agreeing with him, actually. There are people who would bring down goods in bulk from Northern Ireland and in one way or another get them across the Border. Once they dispose of them, by the middle of next year, the 30 television sets, for example, may be spread half way around County Clare, one in each house. At that point they will all be in the possession of private individuals. But, because private individuals have no obligation to maintain receipts or to go through any documentation bringing the goods in, once the VAT evader, has distributed the goods it will be impossible to track them as long as his customers say they brought them in themselves. The Revenue Commissioners cannot look behind that statement. The goods will come in zero rated. The obligation arises, once they are delivered, to declare them. If they are not declared, then unless the evader is found in possession of quantity, he cannot be caught.
I can see the problem. I agree that the provisions must be stringent. The only thing I am questioning is the power the Minister is taking for officers of the Revenue Commissioners and for the Garda Síochána to body search people who, they think, may be in possession of documentation; the idea of a revenue officer asking somebody to remove their jacket and cap and gloves or similar article of clothing and then frisking them. I presume it is intended that they would be body searched. If it is necessary, would the search provision not have to go further? The search provisions given are, at one level, intrusive, but at another level, may be ineffective. I do not think a person hiding documents is going to put them in his jacket or under his cap.
The Deputy could be right.
The audit programme carried out by the trained and motivated Revenue officers involved in this work has resulted in several serious under declarations of tax being discovered in specific cases. In many cases the amount of tax recovered was in excess of £100,000; in some, the amount was well in excess of this. In other cases, a symptom of the evasion now prevalent is that, of the returns selected for audit, 80 per cent were flawed.
To answer Deputy Noonan's point, we are not talking about the individual with a small amount of goods. If it were known that the individual's garage or the byre were packed with goods, that might be different.
Most of these powers are ones that Customs and Excise have at present. They can carry out these functions on the Border, but when there is no longer a Border they will have to move on. In the case of records of a company, a small diskette which would fit under a hat or into a shirt pocket can hold over 1,000 pages of detailed records. When the Revenue Commissioners turn up, such diskettes are pulled out of their sockets. Looking back on the days in the early seventies, when I did audits, I find it hard to visualise, but this is what the modern day Revenue worker is faced with. The non-compliant person removes the diskette and the Revenue officer might be searching until Christmas to find it.
I am asking the Minister if the powers are justified. But, if he thinks they are, they do not go far enough.
I think they are justified and that we should try them out. I was very anxious about this section, but because the Revenue Commissioners had these powers in the customs and excise and VAT area already, there is very little new in this. Rather than doing this on the Border, they will do it elsewhere. I have already made it quite clear that the people involved in this will have to be trained. They do not need a Garda with them. In the general regulations for tax they need a Garda. There is a difference. In this case we are up against the big time operators and the revenue officers involved in this will be hand picked and trained. The public can feel happy that any compliant taxpayer or any person who may not be a compliant taxpayer but has only arrived back with some goods from their holidays, will not find people from the Revenue Commissioners marching around the bedroom or looking under the floor boards. We can give a categorical assurance that is not what we are talking about. Initially, we have to try to make these powers work effectively. I agree with Deputy Noonan that there is a risk that this may not be enough, but what is enough?
The Minister will recall Colonel Oliver North had a secretary who brought documents out of the White House on one occasion. The powers of search given to the Revenue Commissioners would not have been adequate to find those documents.
If we were trying to legislate to catch every non-compliant taxpayer in the future, we would get the balance very wrong. We would then find ourselves in the business of harassing people who were very near compliance. My judgment of the appropriate balance would favour stronger powers but I have spent too much of my life fighting for liberties, fairness and justice on other causes. In this area, I do not think that the Revenue Commissioners are being given anything like major powers, but we are dependent, as in so many cases, on asking public servants to operate in extremely difficult circumstances.
The section I read out earlier was not an over-emotive one, but what is happening is horrific. I was not aware of much of what was happening six months ago. The new regime is open to more abuse, for obvious reasons. The gardaí and the security forces generally are not as near at hand as they have been in the circumstances to date. That is a matter of concern. There were certain protections at the Border controls, the customs and excise officers were on their patch and were able to operate on that basis. Balance has to be struck between the rights of the person and the need to combat VAT evasion. That is what we are trying to do. We can see how this provision works in practice and if necessary come back at some future date.
The powers in this Bill are available at present for customs and excise officers and because they will go I am restating them for the ordinary, trained, experienced VAT people.
I have given a lot of thought to the question of giving increased powers to the Revenue Commissioners. Some of the concerns people express about some of the powers in this section emanate from the view in society that taxation fraud or criminal fraud in that area is somehow different and more acceptable than other forms of crime. The view is widespread that it is acceptable to engage in that type of fraud or at least that the procedures we have in relation to other forms of crime should not be applicable to fraud in VAT returns and so on.
As the Minister has said, we are not talking about individual cases. We are talking about major organised crime, the carrying out of vast fraud on the State and on the people of the country. We should ask ourselves why should not the Revenue Commissioners have power similar to those of the gardaí in certain areas. We have learned in recent times that the powers and expertise of the gardaí in the area of fraud detection are somewhat limited. They would argue that their resources are also limited and we could agree with that, but the area of detecting fraud and its prosecution is still at an embryonic stage in this country. In other democracies the penalties for tax fraud are far more severe than ours. In the United States they are particularly severe, with jail sentences being meted out to very wealthy people who fail to file tax returns or who wilfully evade paying tax. We can over-react to these proposals. Given that customs already had these powers and given that because the role of customs has been removed because of the EC internal market, and a huge tax base is at risk here, there is an urgency and a necessity to ensure that we make every effort to protect that tax base. In that context, the measures are justified, and I would support them on that basis.
This section is the first step in providing a whole range of new powers which people have expressed concern about. It is important that we discuss them in full and that we approach them in the context of the changes the Minister has outlined. Those of us who are members of the Public Accounts Committee and who have had the experience of having internal crimes pointed out to us, have almost invariably found that the difficulties arose from the lack of legislation or lack of power. We have all asked for changes in that area. By coincidence, at lunchtime today, I met a gentleman who told me he was half way through writing a book on white collar crime. His name would be well known to most people. He said that if the system is set up correctly from the beginning, and the structures for internal audits are established, almost any crime could be prevented. There seems to be an acceptance that white collar crime cannot be controlled. That is ridiculous. It can be controlled if the proper steps are taken.
It is essential to have changes. The 80 per cent of people who are not involved in this, and who worry about it, must not be made to feel there is no response from the legislators or that we are willing to accept the position as it stands. The ordinary PAYE workers feel that in the area of company law, some of the individuals involved are almost untouchable. That has to change.
Having said that, this is the first instance of provisions for searching and so on. Strip-searching was one of the areas that led to a lot of emotive reaction in the North. I would ask the Minister if a situation could arise in which females could be strip-searched by male officers?
I would support the changes that are suggested in the general context. There might be specific areas to be looked at, such as that. The Minister has pointed out the necessity of protecting the tax base, and the community needs to know that there is policing and a regime of control over those in the higher echelons in companies. People have been able to walk away with and destroy records. We must no longer say it cannot be controlled, or that there is no legislation to deal with this. We must have legislation to deal with this and that is what the Minister is doing.
Deputy Rabbitte and I are involved with the Committee of Public Accounts. Having gone through various issues — some of which are now being inquired into by tribunals — we are aware of some very obvious weaknesses in the system, which need to be addressed. When fraud happens in a company, it is fairly minor at the shop floor level but at the top level millions of pounds are involved. As this could not be dealt with under existing law we need to make changes. I support the general thrust of this Bill.
I can well understand the general point Deputy Noonan is making. One has to have a balance between civil liberties and the pursuit and protection of the interests of the State. The additional powers involved here are not at all as they have been characterised. We must put any addition to the powers and the threat that there may be civil liberties in the balance when we consider what is actually at stake here. We have an attitude of mind in Ireland that, while it is wrong to steal from the individual, if you steal from all of the individuals, from the State, from the general population, it is a great stroke. In another part of this city we are spending millions or perhaps tens of millions of pounds looking at the perversion of the food industry by a small handful of individuals. It will cost millions to untangle that mess. We will never be in a position to redress the horrific ramifications that has had for compliant, law-abiding people in that industry.
The Minister has reminded us that in their sectoral inquiries the Revenue Commissioners have found tax abuses organised on a professional scale, orchestrated by people who have a paramilitary background. We have criminals operating pubs; we have the bonded warehouse system being abused systematically by goods being diverted from bond into the black economy. We have information that Revenue staff, in the course of sectoral inquiries, have come across criminal activities across a range of services. Then we read the kind of extraordinary drivel that was in the Sunday Business Post of 10 May 1992 which accused us of allowing the tax inspectors, the public servants who defend the interests of this State, to go over the top. I would refer the Minister and the Chairman, to an extraordinary article on page 8 of the Sunday Business Post that offends against common sense. It is somebody who clearly does not mind her name being mentioned. She is Suzanne Kelly of chartered accountants Pannell Kerr Foster and she says:
As totalitarian regimes are collapsing all over eastern Europe, Ireland, in the shape of the Minister for Finance and his department, has decided to overturn that trend in many of the 1992 Finance Bill provisions.
What did this person crawl out from under? Has she not been listening to what has been happening in this State? I have been speaking recently to decent people in the food industry who have told me how difficult it has been for them to overcome the way our nation as a whole has been tainted. We have somebody here referring to these measures, which are minor enough in terms of the extension of powers, as draconian and totalitarian. She goes on——
Chairman
Deputy, I am reluctant to refer to the fact that there is a latitude being taken with this particular section. Perhaps we could get back to the section.
With respect, Chairman, the issue here is the issue of search. The Minister has indicated that a small item, for example, a computer disc or, as Deputy Noonan said, even small discs can be used to store a phenomenal amount of information. We know that criminals will use every piece of technology available to them and we also know that while they will return flawed records to the Revenue Commissioners for value added tax they will keep good records for themselves. We know all that and this drivel should not be pumped out here where in another section of this article Miss Kelly stated that from the end of October 800 customs officers would become tax officials who will authorised under the proposed Finance Bill provisions to exercise all the new powers. It should be recognised that the culture of customs officials was developed to deal with smugglers and drug pushers. What are we talking about here but people who will destroy the economy of this State, people who will threaten customs officials and public servants, not just with bodily violence but with death, people who have paramilitary links which are well known? For example, the people who were involved in the smuggling of hydrocarbon oils across the Border were sufficiently well placed to buy land on both sides of the Border and to put a pipeline in place. These people will not cavil at sticking a computer disc into a back pocket and being frisked for it.
Has the Deputy sold the film rights?
I do not know. I suggest that Miss Kelly, if she has read such horrors into these relatively minor provisions in the Finance Bill, has a sufficiently fertile imagination to be able to conjure a full epic film out of the Finance Bill. The reality is that what is proposed here is distasteful but it is in response to something which is totally and absolutely unacceptable.
The characterisation of public servants as some sort of latter day Nazis wandering around the countryside willing to destroy the place and tranquility of the Irish populace is so perverse that it must be rejected because these sections, the nitty gritty of the Bill, are the realities. There is no point in passing laws here which are unenforceable. Unless we bring in provisions which will make the laws enforceable we might as well have stayed at home for the last three days. Miss Kelly and the plethora of tax specialists who crawled out of the woodwork to write this sort of stuff over the past weekend should wake up. They are taxpayers, we are taxpayers, they have legitimate interests, we have legitimate interests, but the taxpayers of this country must be heartily sick, tired and fed-up with what has been happening with regard to tax avoidance and evasion. I commend the measures.
What has the Deputy left for me to say?
I hesitate to make an observation. Members may have seen the dramatisation of the treaty debates screened before Christmas. There is an exchange in what is manifestly Bewleys between the actors representing Michael Collins and Arthur Griffith and they talk about a third character in that drama, Erskine Childers. Collins says you cannot trust him and Griffith asks why; the reply is that he is a convert. Griffith asks why you cannot trust a convert, and Collins replies that they have too much to prove. The extraordinary manifestation of righteousness from Deputy Roche makes me wonder whether this display of conversion to fiscal rectitude belies a certain attribute that certain other residents of Bray——
I was on the other side of this as an official for many years.
That is the first important thing he has said to me.
I tabled an amendment earlier on. None of us has any difficulty about dealing with the transformation of Revenue collection which will be forced upon us by the change in the VAT regime. The vast majority of public representatives in this Chamber this morning were given a primary education on the extent of the transformation. Civil servants, the Minister and representatives of the Revenue Commissioners are saying that what is involved is the simple transfer of powers from Customs and Excise officials to a broader range of revenue officials, that the powers being transferred to a new category of civil servants is no big deal because the same powers — not additional powers — are being transferred. No additional powers are being conferred. Therefore, to say there is no reason to feel alarmed is to miss the entire point of the concern I will express on section 169. The people who have written, who have lobbied and articulated their concerns are, by and large, representatives of the professional advisers to those who have to pay tax. Like any group of professionals, university lectures, architects or revenue tax practitioners, they trade on legitimate activities and advise people who want to pay their tax, albeit it the minimum amount.
My concern is that while the Minister may be extending the powers that currently exist from one group of civil servants to another, the perception of that extension of powers is being seen in a totally different light because very few people — not the taxation practitioners — come into daily contact with the Customs and Excise officers so their experience of how these powers are exercised is zero. They are looking at the existing body of Revenue staff exercising existing powers and in a very confined and limited extent in clearly definable areas because it is essentially a frontier function. They are seeing these powers coming across unilaterally without any adequate safeguards, as they perceive it. We are in the process of making law and we have an obligation as legislators, either supporting the Government or in Opposition to ensure that the law is good. Likewise, the people in this Chamber from the Department of Finance, the Revenue Commissioners, the legal services and the Houses of the Oireachtas equally share a commitment to making good law. The law should be coherent, non-contradictory and manifestly capable of being read and understood. The law should also be just.
We are talking about more than transferring powers and this is where I take issue with the Minister. It is not simply a transfer of power in that sense. It is a transfer of power that involves the giving of new powers to a group of people whose remit and territory is the entire country while the Customs and Excise officials primarily operate frontier functions. The people who have to make that law work, the taxation practitioners, are people who have not encountered this kind of activity in any detailed way and, therefore, they are apprehensive.
I have no concern for what was written in the Sunday Business Post or for the article that was quoted. I agree with Deputy Roche that the reference to totalitarianism and so on is completely over the top, but there has to be implicit in the system some kind of simple appeal mechanism. If the Minister does not ringfence the operation of section 161 and the other sections in the chapter on VAT, giving powers to the Revenue Commissioners to search, pursue and examine VAT and VAT related taxes, there is a fear — which has been articulated clearly to me by responsible citizens who are in the profession of tax practitioners — that the big person in the system will be able to fight the Revenue Commissioners through the courts, by appeals, by hiring professional advice etc. The small and medium size trader with a tax liability, who is justifiably arguing and negotiating with the Revenue Commissioners — either on their own or with the assistance of a tax practitioner — as to the full amount of tax owed, will ultimately be open to the possibility of abuse. We are talking about a law which can be abused. We are all human and it is possible that somebody may abuse the law, therefore, we have to design and build for the worst case. Deputy Martin, who is a practising solicitor, will accept that; we must all accept that this is possible. After our long debate and indeed the Minister’s closing statements last night I rechecked the views already expressed to me. People are concerned about the possible threat of excessive power in relation to a small business person or trader. This would force people to acquiesce in things which, in their heart, they believe not to be just, in terms of tax collection, because they simply do not have the muscle, either financially or legally, to take on the Revenue Commissioners except through the courts which can be very expensive. We need to collect more revenue. There is a good deal of uncollected revenue out there. Professional fraudsters, aided and abetted in some cases by smart professional practitioners, but they are a minority and we have to give our Revenue officials every possible instrument to pursue them with, no arm tied behind anybody’s back — to use the Minister’s phrase. I have no dispute whatsoever with that and I do not believe anybody has. They are a significant minority but, nevertheless, in my experience of business, a minority.
Some people have been lax in the way they run their affairs, but they have to improve and are slowly but surely doing so, hence the pleading for special time and so on. Time will be of benefit to them but I would give them time and nothing else. For the legal system to have the respect and consequently the support of the people particularly in the area of tax, we cannot introduce laws without introducing safeguards to protect against abuse of such laws. The culture of the Irish people is such that we do not pay tax to ourselves, it was always paid to the Government and until 1922 it was not to our Government and was certainly not perceived as our Government. We have exactly the same phenomenon as the Italians and in that sense we are unique in Europe. Due to the historical evolution of the Republic of Italy, the Government of Italy are not seen to be the Government of those who live in Lombardy, Latzio or Sicily. They are the Government of somebody else and the attitude to non-tax payment in Italy is probably more lax that it is here. The reasons do not justify it, but partially explain it.
We cannot as legislators in the national assembly of this Republic introduce laws without inserting safeguards which will assist hard pressed under-resourced officials to prevent abuse. We know that the Revenue Commissioners are under resourced and that abuse, perhaps due to scarce resources, would lead to a lack of respect for the process of tax collection. We have heard the Minister say we are transforming that process in three fundamental areas and, therefore, we are introducing new systems which nobody can get right the first time. Therefore, this measure will do nothing in terms of the integrity of the legislation which is to be put on the Statute Book with our assistance and, I suspect, without even our opposition today. It will do nothing to undermine, weaken, reduce or in any other way limit the thrust of the main body of that legislation if at every step on Report Stage — I will not attempt to describe or design it for you — a safety clause or cost-free appeal mechanism along the lines I suggested is inserted. I am not referring to the courts, which are not cost free, but to an internal tribunal appeal mechanism consisting of a nominee from the Department of Finance, the Revenue Commissioners and the courts — a combination of all three — that would allow somebody to air a grievance. Those people will come to every one of us, as Deputies, in the next 18 months complaining about getting a raw deal and when we go into the figures we will see that in some cases they have not, although in others they have.
There is a need for extra powers, and extra flexibility, but that extra power should be conveyed to the new institution with the support of the legislature and the understanding of citizens. The appeals mechanism I propose will not cost anything and will attract a great deal of public support for these new powers.
I understand the Deputy's argument on the appeals mechanism but in regard to his argument that the arrest powers should relate only to value added tax rather than all taxes, the practitioners who advanced this are misreading the Bill because the powers of arrest apply only to VAT.
I was endeavouring to make explicit in law something which is not explicit in the tax system and was brought to my attention.
I want to make the point that the way the Deputy would like it to be is the way it is.
All right, I accept that clarification.
The points Deputy Quinn made about balance and the right of redress are absolutely clear. To balance my own contribution, I would like to point out that the fear some of us have about the possibility that if you introduce powers into law which appear draconian on the surface — and Deputy Quinn is absolutely correct — you can never foretell how they may be abused. There are, however — and I would suggest to Deputy Quinn and others that it might be worthwhile considering this before Report Stage — strictures regarding the abuse of power or occasions where a power may be abused, specifically in the Ombudsman's Act. They have seldom been the subject of specific complaint. Deputy Quinn is correct in saying that where people feel there has been an excessive or an oppressive abuse or use of power there should be some right to free appeal and the Ombudsman's Act already provides that. Perhaps a similar provision to that contained in the Ombudsman's Act, to which the Minister adverted last night, would take care of the legitimate concerns expressed on all sides of the House in that regard.
I do not have much difficulty with the extra powers being implemented for the enforcement of VAT repayments. The vast sums of money involved — up to £2 billion — and the new opportunities which will arise justify what the Minister is doing.
Deputy Roche referred to what Miss Suzanne Kelly wrote in the Sunday Business Post. I did not read the Sunday Business Post but I was lobbied, like everyone else, by the profession. Miss Kelly telephoned me and from our conversation she appeared a pleasant, sane and moderate type of person. I do not know her personally but she seemed quite pleasant on the telephone, an ordinary member of the public; that remark should balance some of the extravagant views expressed by Deputy Roche.
Nothing personal was intended. It was the specific things that were in quotation marks in the article which struck me as extraordinary.
She seemed to know her law very well and also to be very informed on tax law. I do not know her personally, my views are based on one telephone call, but we should not give offence to outside practitioners. The rules are simple; the public are entitled to kick us all around the place and give any offence they wish, but we are not entitled to reciprocate. That is the first rule of being a Member of the Oireachtas. We are supposed to take abuse but not to give it back.
I wonder.
There has been a general debate dealing with the anti-evasion sections of the Bill, but there are a couple of points I would like to make. There is an invasion culture in existence here which I do not believe is related to a lack of powers. The Garda Síochána, the Revenue Commissioners and various other organs of State have a great deal of power, but there is a problem in regard to enforcement. The powers are there but the penalties are not applied right down the line. Lester Piggott was put into prison in England for tax offences, but when he came back here he was treated as a kind of national hero. If we had an honours system he would have been given top honours. That was an incredible attitude towards somebody who had evaded paying his taxes. Another example is that of a lady in the United States who owns many hotels, but who is also awaiting a prison sentence for tax evasion. The difference between here and other countries is that other jurisdictions carry through their powers of enforcement but we do not. Last week there were 21 people in prison because they did not pay their television licences. How many tax evaders were imprisoned in the past ten years? A total of 21 people were imprisoned because of non-payment of their television licences despite the fact that our prisons are overcrowded. I doubt if anybody who was involved in the series of scandals in August last will see the inside of a court, much less the inside of Mountjoy although the conclusions of the various inquiries are pointed.
We must balance the civil rights of the citizen against any powers given to the Revenue Commissioners. My main concern with the powers being given by the Minister to the Revenue Commissioners is that it is being done in the context of a money Bill. By its nature, the Finance Bill has to meet deadlines and be passed by a certain date; and there is insufficient time for proper debate. Once it is passed, as a money Bill it has a good deal of constitutional protection; if my interpretation is correct, it cannot be referred by the President for constitutional test to the Supreme Court. I presume there is a briefing note available on that. Will the Minister clarify if the enforcement sections have the same protection from referral as a Finance Bill under the Constitution?
I am concerned that the powers of search given in the anti-evasion sections to gather evidence against an individual, and the lack of powers of appeal would not stand up in normal criminal law. In my view, evidence is being gathered in a fashion which would not be permissible if one were talking about an ordinary crime. Some of the powers of search would not stand up in ordinary courts. The lack of appeal mechanisms against certain actions by officers of the Revenue Commissioners is contrary to natural justice. There is a strong case to be made for deleting the anti-evasion sections and introducing them in a separate Bill without the protection of a money Bill so that we can debate it fully. I am disposed to giving extra powers to the Revenue Commissioners. The PAYE workers have been ripped off by the evasion of other sectors in the community, and we all pay higher taxes as a result. There must be away of operating this in accordance with the law and subject to the scrutiny of this House. We must always strike a balance between the powers given to any State agency, the enforcement of those powers and the civil rights of the citizen.
One can make a case about anything. When we were in Government we brought in the Revenue sheriffs and we had a similar argument from the professions. This was the doomsday scenario; people would arrive into the yard and not alone would they take the horse, but they would take the horse box and put all your furniture into it. They would be obliged to leave a cooker behind but everything else would be shifted out of the yard. That would happen in every farmhouse in the country and when they were finished with the farms they would move to the pubs. Some of the revenue sheriffs have hit fairly hard, but nothing like the picture that was painted.
Worse in some cases.
Fair enough. There was absolute panic when the Revenue Commissioners were given the powers of attachment. The general feeling was that they would invade every private bank account and attach orders all over the place. I argued in the House that the powers were excessive. However, no instance of attachment which was deemed to be excessive has been brought to my attention since that went on the Statute Book. I am not saying that there is no merit in the case being made by the profession but, like all professions, they tend to be skilled advocates. When one is pressing a case one tends to over-state it, but there is merit in the arguments about the approach being adopted. The idea of waving extensive powers through here is not acceptable in circumstances where we only have a half hour to discuss them. That is not enough time to scrutinise the far reaching powers being demanded by the Revenue Commissioners.
In fairness to my predecessor in the Chair, the general principle of th new powers are being discussed rather than just the powers under section 161 relating to search. For that reason, it may have taken up more time.
I agree, we have also covered tonight's debate. It is understandable that people would want to express their views on this matter. At no stage did any of the professional groups lobby about the powers in the section dealing with VAT and they made that absolutely clear. They made the point Deputy Noonan made in regard to self-assessment, that there would be no valid objection to the spirit of this part of the Bill. That was mentioned in letters received from many companies. In private conversations with myself, my officials and the Revenue Commissioners companies indicated that they had similar concerns as ourselves, namely, that the VAT base could be eroded and that people working outside the system would create competition difficulties for them and that as a result they would lose out. They have made that point clear.
I opened a major seminar last Tuesday week, and many of the firms there made it clear that the European view is that the frontier is no longer the border — the land mass is. That is the new catchword of the Community. I find it difficult to get used to, but that is the way it is. The frontier is everywhere now. That is one of the concepts of the Single Market and we will have to accept it.
Deputy Noonan is correct when he says there are not many people in prison for tax evasion. I cannot say I would like to see them in prison because I would prefer to see them paying their taxes. When the Revenue and the State try to get people put away under tax legislation they fail to do so. The one gentleman in prison at the moment was convicted under the Larceny Act, 1916 because it is impossible to frame a case under present tax legislation. This proves that the powers are too weak and this continually comes up as one of the problems. There is no unwillingness on the part of the Revenue Commissioners or the law enforcers but we need to extend the powers.
Deputy Dennehy asked about strip searching and members of opposite sexes searching one another. While a VAT officer may search a premises for records and the trader is obliged to give reasonable assistance to the officer, the officer is not empowered to search a person for any records which may have been concealed. Customs and Excise officers have the power to search persons under a number of different headings. At present this power applies to VAT on imports but after 1 January 1993 it will not apply to intra-Community trade. The purpose of this power is to uncover evidence that an offence has been committed under VAT law, where a taxpayer may have business records or computer discs in his possession. An authorised officer would be empowered to ask the person to turn out pockets. If the person does not comply, the officer may then conduct a limited body search. The section takes due regard of the privacy of the person and the person being searched will not be requested to remove any clothing other than head gear, coat, jacket, gloves or similar clothing. No person can be searched by a person of the opposite sex and there is no question of strip searching. The provision is drafted in such a way as to limit the scope of the section to the search of pockets and clothing.
The question of the Ombudsman was raised by Deputy Roche. I talked about the Ombudsman's powers last night and the authority of the Ombudsman to investigate complaints against the Revenue Commissioners. I do not disagree with what Deputy Quinn has said. The exercise of the powers of inspection and arrest provided for in the Finance Bill, 1992, when enacted, will be subject to review by the Ombudsman. The Ombudsman may investigate any action by an officer of the Revenue Commissioners in the exercise of the powers concerned, after a preliminary examination, it appears to the Ombudsman that (a) the action may have adversely affected the person and (b) that the action was or may have been taken without proper authority, taken on irrelevant grounds, the result of negligence or carelessness, based on erroneous and incomplete information, improperly discriminatory, based on an undesirable administrative practice or otherwise contrary to fair or sound administration. So powers of inspection and arrest provided for in this Bill, when enacted, will be subject to his review. An investigation by the Ombudsman may be initiated following complaints by the aggrieved party or if it appears to the Ombudsman, having regard to the circumstances, that an investigation would be warranted.
Currently, the Revenue Commissioners have wide powers of inspection and audit under existing law. It is a measure of the care with which these powers are exercised that there has never been a complaint to the Ombudsman in this area. Indeed complaints on tax issues to the Ombudsman form a very small proportion of total complaints and relate mainly to taxpayers' entitlements and reliefs.
Regarding other review possibilities — I think this is the point Deputy Quinn is making — there is an internal revenue check provided for in the revenue charter. The appeal commissioners have powers to examine many aspects. The courts have all the powers necessary. There are therefore four distinct methods of appeal, the Ombudsman, the internal check under the charter, the appeals commissioners who have extensive powers and the courts, if it must go to that.
Deputy Noonan asked about the constitutional position. The new powers provided in sections 161 and 169 in relation to search, seizure and arrests transpose existing Customs and Excise provisions. These provisions have been examined in the Office of the Revenue Commissioners' solicitor, the Office of the Attorney General and the Department of Justice. It is in accordance with the Constitution to introduce these measures in a Finance Bill which is a money Bill. When we spoke about this yesterday I was not aware that it has been the practice since the foundation of the State, and emanates from Article 22.1.1. of the Constitution which provides that a money Bill means a Bill which contains only provisions dealing with all or any of the following matters, namely, the imposition, repeal, remission, alteration or regulation of taxes and matters subordinate and incidental to these matters or any of them. Since the foundation of the State it has been interpreted that powers given to the Revenue Commissioners were always included in a money Bill. When this was raised yesterday I was not aware that that was the case.
That is phrased to suggest that everything is perfect. It was examined by the State solicitor, by the Attorney General and the Department of Justice who all say it is in accordance with the Constitution. But that is a circular argument. All of these powers are in accordance with the Constitution by definition once they are included in a money Bill. They then have the protection of the Constitution and are above challenge. If powers which impinge on civil liberties are justified, they should stand on their merits and be put forward in an Act of the Oireachtas. No matter how extravagant they are, once they are passed in a money Bill, they become constitutional, because the personal rights sections of the Constitution cannot be invoked once powers are awarded in the context of a money Bill. I was not aware that this was the practice since the foundation of the State.
It is a feature of several Bills.
I thought the 1967 Act, which is the principal Act in respect of many taxation and enforcement measures was an Act of the Oireachtas rather than a money Bill.
The 1967 Act was a consolidation of income tax Acts.
It was an Act of the Oireachtas however rather than a money Bill and many of the principal enforcement measures are founded in that. I do not think the Minister's note is correct.
The 1967 Bill which was a consolidation of income tax debts would have been an Act of the Oireachtas like the Social Welfare Bill, 1981 which was a consolidation Bill.
The point I am making is that it was an Act of the Oireachtas and would not have had the constitutional protection of a money Bill, so the possibility was there to test many of the enforcement provisions at that point.
The point has been made to me that this does not mean that the provisons of the Finance Act are protected from the challenge of the individual. All it means is that the President does not refer it to the Supreme Court but an individual can challenge any section in the courts in the normal way.
I accept that.
Does Deputy Noonan believe that a money Bill has constitutional protection that does not allow an ordinary citizen to challenge it in the courts?
The sections in the Constitution to which I refer prevent the President from referring it to the Supreme Court. There is a time restriction on a Finance Bill which from the Minister's and officials' point of view creates a difficulty.
A citizen may challenge the provision again and again. If the President refers it to the Supreme Court and it is then upheld, it is upheld for all times. This provision is open to challenge but it has been the practice down through the years to include such provisions — Money Bills. I presume it is the practice used when the Attorney General or the State Solicitor look at it; they do so under section 22. I am not sure if what the Deputy says would make a substantial difference.
That covers all points. I have gone through all the amendments and we need only a short time to discuss this tonight. I have some amendments on the other section and we may touch on them briefly tonight.