Mr. Seamus McCarthy:

The audited account of the receipt of revenue of the State in 2013 was presented to Dáil Éireann in April 2014. I issued a clear audit opinion on the account. In addition, arising from our testing of Revenue systems for the assessment, collection and allocation of revenues, I have presented reports on the implementation of local property tax and on the taxation of rental income in the report on the 2013 accounts of the public services. Those reports are currently scheduled for consideration by the committee in April 2015. Accordingly, I will defer my outline of the findings of those reports until the later meeting.

The focus of this morning’s meeting is the special investigation undertaken by Revenue in relation to what are called the "Ansbacher accounts". There is no specific report in relation to that from my office, so I have looked back on previous reports on that matter to provide a background to the committee's proceedings. The existence of such accounts first came to public notice in early 1997 during the proceedings of the McCracken tribunal. The accounts involved a complex system whereby individuals in Ireland could have bank accounts offshore, held nominally by Ansbacher Cayman Limited, with no official bank record in Ireland of deposits in the accounts, and yet with ready access to their funds in the State.

The McCracken tribunal report was published in August 1997. In January 1998, the Minister for Enterprise, Trade and Employment appointed an official from her Department to examine the books and documents of Ansbacher Cayman Limited, under provisions of the Companies Acts. Following the completion of the examiner’s report, and a petition from the Minister, the High Court appointed inspectors to inquire further into the affairs of Ansbacher Cayman Limited in September 1999. In parallel with the High Court inspectors’ work, Revenue set up its own special project team in September 1999 to examine the tax affairs of 120 individuals who were identified in the examiner’s report. Including those cases, and others discovered by Revenue in the course of its inquiries and-or by the High Court inspectors, Revenue identified a total of 289 cases for investigation. The Accounting Officer will be able to inform the committee about the investigation process applied in those cases and the resourcing of those investigations.

By the end of 2013, Revenue had collected a total of almost €113 million from settlements in Ansbacher cases, consisting of tax, interest for late payment and penalties imposed. Figure 1 outlines the timing of receipts by Revenue arising from its investigations of Ansbacher cases. This indicates that the peak in receipts was in 2007, when a total of €35 million was received. Since then, a small number of cases have been settled each year, and yields have been commensurately lower. In 2013, around €80,000 was received in payment of Ansbacher settlements. Only a handful of the 289 cases identified remain to be finalised. The committee may wish to note that late payment interest and penalties amounted to €63 million, or almost 56% of the Ansbacher receipts. This is consistent with the use of Ansbacher accounts over many years to evade tax. In comparison, we estimated in a report on tax audit settlements presented last year that interest and penalties applied more generally in tax audits account for just over 20% of the yield. It is important also to note that in a significant number of the Ansbacher-related cases investigated, Revenue found that there was, in fact, no tax liability or that any tax due had been duly paid.

To put the Ansbacher investigation into a broader context, Revenue has carried out ten special investigations since the late 1990s. My predecessors reported each year on Revenue’s progress on those investigations over the period 1999 to 2010, by which time the special investigations were all substantially complete. By the end of 2013, Revenue had collected just over €2.7 billion from those investigations. It may be worth noting that, over the same period, Revenue’s routine tax audits and investigations yielded a total of around €2.6 billion.

Figure 2 shows the total financial yield from each of the special investigations. While the number of Ansbacher cases involving settlements was small, the average settlement in yielding cases was relatively high - an average of €790,000 per case. This compares to averages of around €1.5 million in 28 tribunal-related cases, €190,000 in NIB offshore investment cases and €120,000 in trusts and offshore structure cases. Unlike the Ansbacher cases, some of the investigation initiatives involved voluntary disclosure provisions, which provided incentives in appropriate circumstances for tax evaders to settle with Revenue. Where such incentives existed, the average settlements were lower.

Finally, because of the operation of Ansbacher accounts over a period stretching back at least to the 1970s, it is worth noting that many of the account holders would have had an opportunity to avail of tax amnesties in 1988 and 1993. By declaring the existence of such off-shore funds, account holders had the incentive in the 1993 amnesty to pay just 15% of the tax due, with no payment of interest or penalties. A small number of the Ansbacher account holders were not required to make settlements following the special investigation, on the basis that they had made declarations under that amnesty.