Léim ar aghaidh chuig an bpríomhábhar
Gnáthamharc

Dáil Éireann díospóireacht -
Thursday, 23 Oct 2003

Vol. 573 No. 2

Adjournment Debate. - Offshore Accounts.

As Members head off for yet another week of recess, compliant taxpayers are left reeling at the latest series of revelations regarding offshore tax evasion via accounts held in the Isle of Man. I refer to the prominent stories on the front page of last week's Sunday Independent which referred to €4 billion held on the island.

The Dáil is entitled to demand from the Minister for Finance an estimate of the amounts involved in the latest revelations. Given that the Exchequer has already benefited to the tune of over €110 million from the Bank of Ireland's Jersey trusts in recent months, it is not unreasonable to suggest that the sums involved in the latest revelations will be between €100 million and €600 million. I also want to know what steps the Minister for Finance is taking to examine the offshore activities of every Irish bank and financial institution over the last 20 years, not just on the Isle of Man, but other islands from Jersey to the Caymans. At a time when hospitals and schools are crying out for money, we need to know how much has been taken from the tax pool. Banks and financial institutions must be challenged as to how they enabled this widespread evasion and corruption to take place.

It is not good enough for Irish banks to sponsor corporate responsibility programmes and boast of responsible corporate citizenship when up to now they have actively pursued a programme, which facilitated an extraordinary amount of tax evasion. The banks must explain how so many Irish people came to believe that the appropriate home for their tax free money was their Irish bank's friendly subsidiary on some offshore island. It cannot all have been down to the initiative of bank clerks in country branches. Does the Minister propose to challenge the banks and their boards and the financial institutions to come clean?

The silence of the Taoiseach and the Minister for Finance, Deputy McCreevy, on the implications of these further revelations speaks volumes on the continued toleration by Fianna Fáil and the Government of tax evasion. It is imperative we develop a fair and transparent tax system, not only to fund essential services such as schools and hospitals but also to reassure compliant PAYE taxpayers that others, especially the well-off, are paying their fair share.

If there is one thing successive inquiries have shown, it is that the volume of money transferred from Ireland to offshore havens is greater than anyone could have supposed. Those who argued there was no pot of gold from tax evaders have been shown to be wrong time and again. Despite this, the Minister for Finance continues to be blasé about tax evasion. One gets the sense that placating contributors to Fianna Fáil rates far higher on the list of priorities than reforming the tax system.

Rates of personal taxation, income tax and PRSI in this country are now among the lowest in Europe while the Minister has repeatedly boasted of slashing capital gains tax rates. In such a low tax environment it is difficult to understand the continued tolerance of tax evasion. It seems Irish taxpayers now have as positive a relationship with taxation as the Germans had with inflation post the Weimar Republic and the war years.

My concerns centre on the significant number who, by using any of the various devices available, are effectively avoiding paying their fair share. There is a significant group of very wealthy people in Ireland who not only want a low tax regime but effectively want a no tax regime for themselves. This has a damaging impact on other compliant taxpayers, especially in relation to any sense of social or community purpose in funding services we all require such as education and health.

Taxation is a contract between the citizen and the State whereby we collectively pay for those services we deem essential. These revelations further poison that contract and the development of a mature economy with good public services.

I am making this reply on behalf of the Minister for Finance.

There is no tolerance of tax evasion on the Government benches and no question of any attitude of tolerance of tax evasion on the part of the Government. The Minister for Finance does not have a blasé attitude to it. No Minister for Finance since the foundation of the State has introduced so much legislation to tackle the problem. He has been in a position to do this because he has reduced basic personal income tax rates to levels acceptable to taxpayers. In that context, he has also introduced far stiffer powers and penalties to deal with those who engage in tax evasion.

It is understood that the recent reports to which the Deputy referred and the figure of €4 billion may refer to a KPMG study done in 1999. In so far as such funds may indicate tax evasion involving offshore structures, the priority is to determine the extent to which either the underlying moneys and/or the income earned thereon may not have been returned for tax in this country. The Revenue Commissioners are now actively investigating this.

There are two separate components relating to tax evasion, of which the first is the underlying funds and, the second, the income earned by them. Not all of the funds may have evaded tax. In some cases an Irish address account holder may not be resident for tax purposes for a particular tax year or years. In some cases tax may have been paid on both the underlying funds and the income arising from them. In some cases the underlying funds are clean but the income earned has not been returned for tax purposes. Clean underlying funds come from insurance settlements, inheritances, lottery winnings, foreign earnings, sale of a foreign residence when returning to live in Ireland, pension lump sum payments and so on. In many of these cases the interest or other income earned on the funds might not have been returned for tax purposes.

The Revenue Commissioners had been concerned for some time about Irish residents using the facilities of offshore subsidiaries of Irish financial institutions to hide money in trusts or deposits. Revenue has established an offshore assets group whose remit is to investigate the placing of assets offshore by Irish residents for purposes of tax evasion. The initial focus of the group has been on the Bank of Ireland trusts in Jersey. When the bank became aware that Revenue was interested in the trusts, it wrote to its customers to advise them of Revenue's inquiries. It reminded its customers of the standard voluntary disclosure arrangements available to anybody with a tax problem. The immediate consequence of these developments is that Revenue has had a fairly significant disclosure from 254 individuals who have paid €100 million. A further 30 people, approximately, who became aware that Revenue was starting this type of inquiry paid another €11 million.

In his recent appearance before the Committee of Public Accounts Mr. Frank Daly, Chairman of the Revenue Commissioners, pointed out that almost all of the developments in this area could be attributed to the 1999 powers introduced by the Minister for Finance which allow the Revenue Commissioners to examine financial institutions in a way that was not possible previously. The Finance Act 1999 provided substantial additional powers for Revenue, including the facilitating of greater access to material held by or in financial institutions; allowing access to the account of a named individual by way of an order issued by one of the three Revenue Commissioners where previously High Court approval was required; broadening the existing powers of access to financial accounts of named individuals and providing for access in the case of a group or class of unidentified persons; empowering Revenue to apply to the courts for search warrants to gain evidence of accounts for the purpose of criminal investigations; and permitting Revenue to conduct on-site audits of a bank's affairs, not just a PAYE or VAT audit as had been the case up to then, and enabling Revenue to obtain a greater range of information from third parties. The Act also provided for the closure of certain tax loopholes in regard to offshore trusts and companies and the transfer of assets abroad. Subsequent Finance Acts also provided additional powers.

All of these provisions have been used to good effect and in recent times brought in substantial revenues in tax, interest and penalties. Apart from the recent investigation in relation to offshore deposits already referred to, they have facilitated successful investigations into Ansbacher, the Clerical Medical National Irish Bank scheme, as well as the look-back audit of the financial institutions and the identification of bogus non-resident account holders. In addition, the Government has provided significant additional resources for Revenue, an additional 400 posts in recent years, and facilitated a restructuring of the organisation.

The Revenue Commissioners' statement of strategy, 2003-05, contains a strong emphasis on maximising compliance. Among the key developments aimed at improving tax compliance and tackling tax evasion, apart from the offshore assets group, are the establishment of an investigations and prosecutions division to deal with the prosecutions of persons involved in serious tax evasion and a large cases division with a specific focus on large companies and wealthy individuals.

While the ongoing investigations are yielding significant sums of money, a bigger strategic issue for the Revenue Commissioners is the creation of a culture of tax compliance. Citizens and all persons resident here have to realise that tax pays for services. The message is very clear that anyone who hides money or evades tax will be pursued by the Revenue Commissioners. Unlike those who had the opportunity to do so, the Government has backed the efforts to tackle evasion with important and effective legislative initiatives and provided extra resources for those doing this job.

Barr
Roinn