I move amendment No. 31a:
In page 23, before section 27, but in Chapter VI, to insert the following section:
29.—(1) (a) In this section—
‘an authorised officer' means an inspector authorised by the Revenue Commissioners to exercise the powers conferred by this section; ‘business' means any trade, profession or business (other than banking business within the meaning of the Central Bank Act, 1971);
‘documents' includes books, accounts and records;
‘tax' means income tax or corporation tax.
(b) The persons who may be treated as ‘the taxpayer' under this section include a company which has ceased to exist and an individual who has died; and, in relation to such an individual, the reference in subsection (2) to the spouse is then instead to the widow or widower (the circumstance that she or he may have re-married being immaterial for the purposes of that subsection). (2) Where a person (in this section referred to as ‘the taxpayer') delivers to an inspector a statement of the income, profits or gains arising to him from—
(a) any business (past or present) carried on by him or his spouse, or
(b) any business (past or present) with whose management either of them was concerned at a material time.
and the inspector is not satisfied with the statement, the inspector may serve on the taxpayer a notice in writing stating—
(i) that he is not satisfied with the statement delivered to him, and
(ii) that he has requested an authorised officer to serve notice under this section on persons who, in relation to the taxpayer, are subject to this section.
(3) Where a notice under subsection (2) has been served on the taxpayer, an authorised officer may, for the purpose of inquiring into the tax liability of the taxpayer, by notice in writing served on any person who, in relation to the taxpayer, is subject to this section require him, within the period stated in the notice, or within such further period as the authorised officer may allow—
(a) to furnish him with particulars of any business transactions which that person had with the taxpayer during a stated period, and
(b) to deliver to him or, if the person to whom the notice is given so elects, to make available for inspection by an authorised officer such documents specified or described in the notice as are in his possession or power and as, in the first-mentioned officer's opinion, contain, or may contain, information relevant to any tax liability to which the taxpayer is or may be or may have been subject, or to the amount of any such tax liability.
(4) Nothing in this section shall be construed as requiring a person who is carrying on a profession, and on whom a notice under subsection (3) has been served, to furnish any particulars relating to a client to an authorised officer, or to deliver to, or make available for inspection by, an authorised officer any documents relating to a client, other than such particulars or documents—
(a) as pertain to the payment of fees or to other financial transactions, or
(b) as are otherwise material to the tax liability of the client.
and, in particular, he shall not be required to disclose any information or professional advice of a confidential nature given to a client.
(5) Where a person fails to comply with a requirement duly made on the person under subsection (3) within the period stated in the notice containing the requirement or such further period as may be allowed by the authorised officer concerned, the person shall be liable to a penalty of £500.
(6) The person who, in relation to a taxpayer, are subject to this section are any person who is carrying on a business, or was doing so at a material time, and any company whether carrying on a business or not.
(7) For the purposes of subsection (2), every director of a company is to be taken as being concerned with the management of any business carried on by the company, and a material time is any time which, in the authorised officer's opinion, is, or may have been, material in the ascertainment of any past or present tax liability of the taxpayer.
(8) Where documents are to be delivered to an authorised officer pursuant to a requirement duly made under subsection (3), copies of such documents may be delivered instead of the originals; but—
(a) the copies must be photographic or otherwise by way of facsimile; and
(b) if so required by the authorised officer, the originals must be made available for inspection by an authorised officer, failure to comply with this provision being treated as failure to comply with the requirement.
(9) An authorised officer may examine any documents furnished or made available for inspection under this section and may take copies of, or extracts from, them.
(10) When exercising any powers conferred by this section, an authorised officer shall, if so requested by any person affected, produce to that person a certificate of the Revenue Commissioners authorising him to exercise the powers conferred by this section.".
This new section authorises the Revenue, in cases where they are dissatisfied with the accounts lodged by a person carrying on a trade, profession or business other than banking business, to seek information from his business suppliers or customers so as to check the accuracy of the accounts submitted. Experience has shown that the absence of information from independent sources encourages tax evaders to understate their profits and also the extent of their business transactions. These evaders proceed on the basis that the Revenue will be unable to check the accuracy of their statements or accounts. Of course Deputies are aware that in the case of employees full information as to their earnings is supplied to the Revenue by their employers. There is no reason why the self-employed should be left in the position that there is to be no independent check of their accounts or returns of profits, particularly in cases where there is reason to be dissatisfied with the returns being made.
The section will be applied only where (a) the person carrying on the trade, and so on has lodged accounts with which the inspector is dissatisfied and acceptable reasons for the apparent deficiencies in the accounts have not been supplied; and (b) the specially authorised officer has reviewed the case and the inspector's reasons for being dissatisfied and decides that, in order to determine the proper tax liability of the person concerned, independent information as to his business transactions is required.
It is not intended that the section will be used in a great percentage of cases: it would be used only where a case is referred for special examination. Indeed the existence of the section is expected to have a salutary effect on the quality and accuracy of accounts being lodged in cases where taxpayers are at present understating their profits.
Banking business is excluded from the scope of the section since banks are subject to supervision by the Central Bank to which detailed returns of the profits and banking transactions are made.