Written Answers. - Bogus Non-Resident Accounts.
Gerard Murphy
Ceist:
251
Mr. Murphy
asked the
Minister for Finance
his views on the fact that the Central Bank failed to monitor properly the activities of financial institutions which were openly encouraging customers to open bogus non national accounts.
[24976/03]
Gerard Murphy
Ceist:
252
Mr. Murphy
asked the
Minister for Finance
his views on whether, because bogus non national accounts were being opened on advice of financial institutions, the Government has to share some of the blame for not ensuring that the Central Bank enforced the conditions of the licences they bestowed on these institutions.
[24977/03]
Gerard Murphy
Ceist:
253
Mr. Murphy
asked the
Minister for Finance
his views on the fact that the Central Bank turned a blind eye to the activities of the financial institutions in regard to bogus non national accounts.
[24978/03]
Gerard Murphy
Ceist:
254
Mr. Murphy
asked the
Minister for Finance
his views on whether ordinary people, especially those on PAYE with no financial experience, were entitled in good faith to assume the advice they were getting from financial institutions was legal.
[24979/03]
Gerard Murphy
Ceist:
255
Mr. Murphy
asked the
Minister for Finance
his views on whether the financial institutions bear at least some responsibility for wrongly advising their customers in regard to bogus non national accounts.
[24980/03]
Gerard Murphy
Ceist:
256
Mr. Murphy
asked the
Minister for Finance
his views on whether the State, due to the inadequate supervision the Central Bank gave to financial institutions in the matter of bogus non national accounts, bears some of the responsibility.
[24981/03]
Gerard Murphy
Ceist:
257
Mr. Murphy
asked the
Minister for Finance
his views on whether, due to the State's negligence through the Central Bank, the State should now set up a commission which will be paid for by the banks to determine the share of the burden of blame which should be shared by the banks and the holders of bogus non national accounts; and his views on the portion of the interest and penalties which should be paid by the banks.
[24982/03]
Gerard Murphy
Ceist:
258
Mr. Murphy
asked the
Minister for Finance
his views on whether the setting up of a commission to adjudicate on the share of the costs banks should pay as a result of their misleading advice on bogus non national accounts is the only way ordinary PAYE workers will get redress.
[24983/03]
I propose to take Questions Nos. 251 to 258, inclusive, together, all of which deal with financial institutions and bogus non-resident accounts.
As the Deputy is aware, there has been an intensive effort, initiated by a committee of this House, in recent years to tighten up on the payment of tax on deposit income. In 1999 and 2000 Revenue conducted on-site DIRT look back audits on 37 financial institutions. This exercise, which was reported on to the Dáil Committee of Public Accounts, resulted in the payment by the financial institutions of €220 million in respect of tax, interest and penalties.
The focus of these audits was the extent to which the financial institutions had or had not complied with the DIRT legislation and it is clear from the outcome of the Revenue audit programme that there was a significant non compliance position on the part of the financial institutions. However, the audit also revealed that many Irish-resident taxpayers held bogus non-resident deposit accounts.
In the case of bogus non-resident account holders, Revenue provided an opportunity for those who had underpaid their taxes to make voluntary disclosures of the undeclared income, together with payment of the resulting tax liability and an amount of interest and penalties, capped at 100% of the tax liabilities, before 15 November 2001. This voluntary disclosure scheme, with its favourable settlement arrangements, was very widely publicised, and led to 3,675 account holders choosing to avail of the scheme and paying €227 million in total.
It is important to note that a PAYE taxpayer who held a bogus non-resident account and who otherwise paid his or her tax liabilities would, in such a case, have had the relevant DIRT liability paid by the financial institutions as part of the settlement made with Revenue. If the money on deposit originated only from income that had been taxed under PAYE, or a source on which appropriate taxes had otherwise been paid, there would be no further liability for a standard rate taxpayer; for interest accrued before 1993, a higher rate taxpayer would have a liability additional to the DIRT charged. This would be the position also in all other cases where appropriate tax, other than DIRT tax, had been paid on the money in the deposit account.
I have no particular evidence or knowledge in regard to arrangements between the financial institutions and their individual clients and it would not be appropriate for me to comment on the question raised about redress. If Revenue has sufficient evidence that any financial institution or member of staff conspired with customers to evade tax, Revenue will consider if a prosecution under tax legislation would be possible.
As part of the process of tightening up arrangements, I have introduced legislation to ensure that those responsible for financial services regulation will pass on to the Revenue Commissioners any information or suspicion relating to tax evasion that they may obtain in performing their regulatory functions. It is important, when assessing the role of the banking supervisory authorities in these matters, to bear in mind what was the legislative position at the time of the events in question and not to draw any conclusions based on later statutory reforms.
Prior to the establishment of the Irish Financial Services Regulatory Authority, IFSRA, banking supervision was carried out by the Central Bank of Ireland. The rules on confidentiality which applied to the bank would not have permitted the transmission of information from the Central Bank to the Revenue Commissioners. Thus, even if the bank suspected that some activity of a supervised entity merited the attention of the Revenue Commissioners, the statutory requirement of confidentiality placed on the bank gave no clear way of passing its suspicions on to the appropriate authority.
The Central Bank and Financial Services Authority of Ireland, CBFSAI, Act 2003 fundamentally changes this situation. Any suspicion of criminal activity, such as tax evasion, must, in future, be passed on to the appropriate authorities. Specifically, this legislation changed the law regarding laundering of illegal funds – including the proceeds of tax evasion – in order that where cases come to the attention of the regulatory authorities, these must now be reported to the Revenue Commissioners, as well as to the Garda. The only limits placed on disclosure of information by this Act are those contained in EU law. I am satisfied that these arrangements provide an excellent legislative framework for co-operation between the Revenue Commissioners and the Irish Financial Services Regulatory Authority.
The Deputy's idea that the State should bear a portion of the blame for people avoiding paying their due tax is, in my view, wrong. As the Deputy is aware there is a statutory obligation on taxpayers to make correct returns of their tax liabilities and pay the correct taxes due for all years of assessment.
