Written Answers. - Tax Evasion.
Thomas P. Broughan
Ceist:
122
Mr. Broughan
asked the
Minister for Finance
if he will report on his efforts to determine the extent of so-called offshore tax evasion fraud; and if he will also report on his review of the performance of the Central Bank and the Revenue Commissioners in failing to monitor and arrest this fraud.
[2315/98]
Tax evasion involving offshore tax havens is a worldwide problem. The liberalisation and globalisation of capital movements, the increase in the number of tax havens — there are now more than 40 — and the development of electronic commerce and sophisticated communications technology means that funds can be transferred to a wide range of offshore financial institutions at the stroke of a keyboard. By definition, the extent of the problem is impossible to determine. Efforts are being made at OECD and EU level to adopt a collective approach towards tackling this problem — unilateral action by any one country, while it may make it more difficult for its residents to use offshore havens, is unlikely to be wholly effective and, depending on the action taken, may have serious adverse effects for the economy or financial system of the country concerned.
The difficulties faced by the Revenue Commissioners in seeking to deal with offshore tax fraud by Irish residents must be looked at in this context. Revenue's jurisdiction does not extend to places such as the Cayman Islands or the Isle of Man and these havens will not enter into tax treaties which provide for exchange of information.
The Deputy will be aware that the Moriarty Tribunal is required by its terms of reference to make whatever recommendations it considers necessary or expedient "for the protection of the State's tax base from fraud or evasion in the establishment and maintenance of offshore accounts, and to recommend whether any changes in the tax laws should be made to achieve this end". Following the publication of the McCracken report I also asked the officials in my Department and the Revenue Commissioners to review existing powers and to come back to me with proposals if they considered that existing powers needed to be augmented. If any additional powers are shown to be desirable and likely to be effective, then appropriate proposals will be brought forward.
With regard to the Central Bank, the House is already aware that I had asked the Governor to advise me if the board of the Central Bank is satisfied that the bank has the necessary legal powers for the effective execution of its regulatory role, that the procedures and practices necessary to effectively exercise these powers are in place and that these procedures and practices are being implemented effectively.
Deputies will recall that I placed the contents of the Governor's reply on the record of the House when responding to a parliamentary question from Deputy Rabbitte on 19 November 1997. In that letter, the Governor confirmed that the board is satisfied with its legal powers; that the board keeps under review the bank's supervisory practices and its approach to supervision; that the board endeavours to ensure that these are in line with international best practice and subject to continuous modernisation and adaptation to meet the needs of a changing global environment. He also confirmed that the board is satisfied that the supervisory procedures and practices are being effectively implemented by the bank.
However, the Deputy will be aware that the terms of reference of the Moriarty Tribunal include a remit to make whatever broad recommendations the tribunal considers necessary or expedient for enhancing the role and performance of the Central Bank as regulator of the banks and the financial services sector generally. I await the tribunal's report on this matter and will, of course, give careful consideration to any recommendation it might make in this regard.
While the Central Bank is subject to a very strict confidentiality regime, provision is made for the disclosure of information as required by a court in connection with criminal proceedings. In addition, the bank, under section 49(2) of the Investment Intermediaries Act, 1995, may disclose to the Garda, where it has reasonable cause to believe that a criminal offence has been committed, any information to enable further investigation of the alleged offence. Further, under the provisions of the Criminal Justice Act, 1994, the bank is obliged to report to the Garda a suspicion that any entity it supervises has committed or is committing the offence of money laundering or certain related offences; money laundering embraces tax evasion.
