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Dáil Éireann díospóireacht -
Thursday, 17 May 2001

Vol. 536 No. 4

Ceisteanna – Questions. Priority Questions. - Offshore Accounts.

Jim Mitchell

Ceist:

1 Mr. J. Mitchell asked the Minister for Finance if his attention has been drawn to the fact that out of £24 billion sterling in deposits held in Isle of Man banks in 2000, over £4 billion was held by the Isle of Man branches of Irish banks; if, in view of the repeated indications arising at the tribunals of Isle of Man accounts being used for tax evasion purposes, he will now agree to establish an investigation into the efficacy and purposes of these accounts in order to minimise the possibility of them being used for tax evasion purposes. [14306/01]

Minister for Finance (Mr. McCreevy): I am aware that the figures referred to and which I understand are based on a recent report by a leading accountancy firm have been put into the public domain. It would not be reasonable to conclude that these global figures for Isle of Man deposits, held by branches of Irish banks, represent a scale of tax evasion by Irish residents using such accounts. First, these branches may deal with both Irish residents and persons not resident here. Second, they will deal with international corporate depositors. Third, there are many legitimate reasons Irish customers, personal and corporate, will have funds deposited abroad. The Deputy is aware there are many billions of pounds deposited in Ireland from abroad on a legitimate basis.
Any use of offshore accounts for tax evasion purposes is clearly a concern. Arising from the various revelations in recent years the Moriarty tribunal has been asked to make whatever recommendations it considers necessary or expedient "for maintaining the independence of the Revenue Commissioners in the performance of their functions while at the same time ensuring the greatest degree of openness and accountability in that regard that is consistent with the right to privacy of compliant taxpayers" and "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". The tribunal was also asked to make whatever recommendations it considers necessary or expedient "for enhancing the role and performance of the Central Bank as regulator of the banks and of the financial services sector generally." As this whole issue is within the remit of the Moriarty tribunal, it would seem appropriate to allow the tribunal to complete its task in this regard.
The use of havens for the facilitation of tax evasion is a worldwide problem which is being actively tackled on a number of fronts internationally, particularly by the European Union and the OECD.

I am disappointed with the Minister's "do nothing" response to a manifest problem. We do not have to be told that the Isle of Man is being used for tax evasion purposes. There has been much evidence through the tribunals to this effect. There have been bags of money brought in and out. It is a problem. I have before me the KPMG report. I put it to the banks at the DIRT inquiry—

A question, please.

The banks have acknowledged that they have these sums in the Isle of Man. There is twice as much per capita from Ireland as the United Kingdom in the Isle of Man. Should this not ring alarm bells in the Department of Finance? Does the Minister agree that he should undertake an investigation or discussions with the banks as to whether they are the good corporate citizens they claim to be?

Since 1992, in the context of the abolition of exchange control, Irish intermediaries – banks or professional advisers – who act for or assist Irish residents, individuals or companies in opening foreign bank accounts are obliged to make a return of this fact to Revenue. Irish residents are obliged to report the opening of foreign bank accounts to Revenue in their annual returns of income. Since 1974 Irish residents have been liable to income tax in respect of income arising from assets or moneys transferred abroad and certain information about such transfers may be sought by Revenue.

Tax evasion is a worldwide problem. EU and OECD measures have been taken. As recently as last November we adopted the savings directive, the basis of which will be that member states will exchange information. There were various proposals but the final conclusion was that there should be a recommendation that member states exchange information.

The EU Presidency and the Commission are to enter into key discussions with key third countries such as the United States, Switzerland, Liechtenstein, Monaco, Andorra and San Marino. Furthermore, all member states must commit themselves to the adoption of these measures in all relevant, dependent or associated territories such as the Channel Islands, Isle of Man and dependent and associated territories in the Caribbean. Recently, the OECD also drew up a report and made recommendations.

This issue has been looked at on a worldwide basis. The EU savings directive will tackle the problem as the Isle of Man is a dependent or associated territory of the United Kingdom. There are legitimate reasons for many people having bank accounts abroad. In Ireland there are billions of pounds in the system from residents of other countries in legitimate operations. Irish residents are not permitted to have accounts in an IFSC company but accounts are held by residents of other countries.

Has the Minister learned anything from the DIRT inquiry? The Department of Finance, the Central Bank and the Revenue Commissioners sat idly by as the banks conspired in tax evasion. They now claim they are good corporate citizens. I want this tested because the evidence of the Isle of Man banking sector report by KPMG – review of accounts 2000 – shows that Irish banks have twice as much per capita on deposit in the Isle of Man as British banks. Is this not a cause for concern in view of the evidence from the tribunals? Would it not be prudent of the Minister to make some inquiries?

Time is up. The Minister may wish to make a brief reply.

I have every confidence in the Revenue Commissioners to pursue people in this country who are evading their taxes. There are sufficient powers available to Revenue to so do.

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