Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

I welcome that this Bill has been brought to the House. It is only appropriate that I should acknowledge the sentiments behind it because I support the objectives as set out by the proposers, as does the Government. However, while agreeing with the objective of the Bill, which is to address the illicit trade in excisable goods, I cannot support the means being proposed to meet this objective. It is accepted by all interested parties that smuggling, and shadow economy activities in general, pose a threat to legitimate and compliant businesses and to consumers, as well as depriving the Government of tax revenues. Tackling these illegal activities is, therefore, a key priority and Revenue has implemented wide-ranging programmes of action to combat them.

This Bill seeks to introduce legislation which would make it an offence to purchase or attempt to purchase alcohol, tobacco products or solid fuel on which excise duties or VAT had not been paid, where the purchaser knew, ought to have known, or was reckless as to whether these taxes and duties had been paid. The Bill also seeks to make it an offence to purchase alcohol, tobacco products or solid fuel from a supplier that is not included in the list of valid liquor licences, the national tobacco retailers register or the list of solid fuel suppliers, respectively.

Up to this point, the focus of the measures taken to deal with the trade in illicit goods and fuel fraud has been firmly on tackling the supply chain to limit illicit goods getting on the market. This approach, which has been implemented through Finance Acts and other supporting measures in recent years, has been working. For example, the measures which have been introduced to combat fuel fraud in various Finance Acts and Revenue initiatives have had a major impact on the illicit trade. In addition, there has been continued progress in containing the extent of the illicit tobacco trade, notwithstanding the high rate of tobacco excise and the incentives such a policy creates for the illicit trade. The approach outlined in this Bill, which aims to address the illicit trade by tackling purchasers of illicit goods rather than the suppliers, raises a number of serious issues.

In order for the offence to be detected, the Bill gives significant powers to authorised persons - An Garda Síochána or the Revenue Commissioners - to require any person who they know or reasonably suspect of purchasing illicit goods to, among other things, produce evidence of identity and allow for the inspection of the suspect goods, as well as any vehicle of which he or she may be in control. The Bill also provides that the authorised person can arrest without warrant any person who refuses to do so. The Bill also proposes the introduction of a fixed penalty system to be imposed on persons where there are reasonable grounds to believe the person has purchased illicit goods. The Bill also allows for substantive amendments to be made to its content by means of regulations.

I will now deal with the main aspects of the Bill. First of all, I am advised that in practice it is extremely difficult, if not impossible, to establish the evidence that would support conviction of a person for knowingly buying illicit goods. Even leaving aside the issue of trying to prove that the purchaser had the intention of purchasing illicit goods, it would be hard to support a conviction on the basis that it can be extremely difficult to distinguish genuine goods from illicit goods. The Bill assumes that consumers can readily establish whether certain goods are illicit or not. It places an onus on the purchaser to actively check current registers for tobacco, alcohol and solid fuel traders in advance of making a purchase. However, as an example, the list of current valid liquor licences runs to almost 3,000 pages and is only available on the Revenue website. Similar issues would arise with the registers of tobacco retailers and for solid fuel products. In the case of the latter, a person only needs to be on the EPA register for solid fuels if bituminous coal amounts to more than 50% of turnover and there is no requirement to register for peat sales. I also note that not all EU member states require a tax stamp for tobacco products. In such circumstances, putting a responsibility on consumers to prove that goods are not illicit is likely to raise serious issues of legality in terms of how the provision could be enforced in practice and prosecuted via the courts. By way of previous example, section 102(1)(c) of the Finance Act 1999 previously contained an offence of purchasing fuel from a person who did not hold a mineral oil trader’s licence. This provision was repealed in 2013 as it was not possible to prove any unlawful intent on the part of the person who purchases fuel at an unlicensed filling station.

The Bill provides for more onerous powers of arrest and search against purchasers of illicit products. Currently Revenue may only search receptacles for tobacco products and does not have the power of search of person for tobacco products. The introduction of the power of search of person would commit Revenue to a policy of increased physical confrontation with persons for which its officers are not equipped or trained. There always will be a likelihood of physical resistance and assault, and this is best left to An Garda Síochána.

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Apart from the fact that such powers inevitably will be challenged in the courts on the basis of proportionality to the alleged offences involved, I am advised Revenue does not have the capacity to arrest, hold or search persons under this proposal. Even if this power of arrest was assigned to Revenue, it would imply significant costs to put the facilities and infrastructure in place to protect the rights of the arrested persons while they were under arrest.

The Bill proposes to introduce a fixed penalty notice system for purchasers of illicit goods. Apart from the significant IT and staffing resources that would need to be reallocated from other enforcement priorities to oversee such a regime, the practicality and effectiveness of issuing fixed penalty notices to persons who may buy illicit goods is questionable. It is most unlikely that many offenders will voluntarily pay an amount that is well in excess of that which, even in the event of a successful prosecution, a court is likely to impose. In addition, many persons may give false names on being challenged and will not have identity documents. Both of these issues would result in increased arrests and referrals to the courts, which may result in a significant resource issue for all parties. These resources include Revenue staff and legal costs, as well as the accused’s costs, including, for example, any State provided legal aid to which he or she may be entitled.

Revenue acts against all aspects of the illegal tobacco trade, in order that the illicit products involved can be seized and those responsible for smuggling or supplying them can be prosecuted. A combination of risk analysis, profiling and intelligence and the risk-based screening of cargo, vehicles, baggage and postal packages is used to intercept illicit products. Action after importation includes checks at retail outlets, markets and private and commercial premises. This action has achieved considerable success, with the seizure in 2017 of 34 million cigarettes and 1,768 kg of tobacco. In March this year a joint operation with An Garda Síochána led to the closing down of a major illicit cigarette factory in Jenkinstown, County Louth. Over 20 million cigarettes and 70 tonnes of tobacco were seized at this facility, which could produce 250,000 illicit cigarettes an hour.

Revenue and An Garda Síochána work together on an ongoing basis in acting against fuel and tobacco crime and both bodies co-operate closely with their counterparts in Northern Ireland within the framework of the North-South joint agency task force. I am advised this co-operation plays a key role in targeting the organised crime groups responsible for much of this criminality, which operate across jurisdictions. On the alcohol side, duties provide a financial incentive for alcohol fraud but there is little evidence of large-scale illegal activity at present. Illicit trade in alcohol can occur through the illegal diversion of untaxed alcohol onto the market and also through the illegal production of counterfeit alcohol. Revenue is very alert to these risks. Revenue’s action is based on intelligence on criminal activity, risk-based examination of commercial traffic and of stock in retail premises.

As a result of the price differential with Northern Ireland, the collection of solid fuel carbon tax is heavily reliant on the regulatory regime covering the marketing, sale, distribution and burning of solid fuels in the State. This regulatory regime is operated by the Department of Communications, Climate Action and Environment and is enforced by local authorities. This regime, which imposes higher environmental standards on coal in the State than applies in Northern Ireland, enables local authorities to undertake enforcement action to prevent the sale or distribution of coal that does not meet our standards. I am advised that Revenue has engaged with the Department of Communications, Climate Action and Environment to discuss the effectiveness of the regulatory regime for solid fuel and to explore how Revenue could support the Department to improve matters in light of continuing concerns that fuel sourced from Northern Ireland is getting onto the market here. I understand that contacts are ongoing with a view to undertaking a number of joint operations and to explore the scope for follow-up action by Revenue on persons found to be in breach of these regulations. However, any such operations will be based on a clear understanding of the statutory responsibilities of the agencies involved. While the Bill does not specifically address the issue of fuel laundering, the steps taken by Revenue to combat the illegal fuel trade include the introduction of stringent new supply chain controls and reporting requirements, together with a rigorous programme of enforcement action, demonstrate how tackling the supply chain can produce the desired results. I understand the industry view is that the measures implemented to date have been successful in significantly curtailing fuel fraud in Ireland.

Ultimately, the Bill broadens substantially the scope of compliance activity by tackling purchasers of illicit goods rather than the suppliers as heretofore. In practice, it would be extremely difficult, if not impossible, to establish the evidence that would support conviction of a person for knowingly buying illicit goods. The proposals contained in the Bill are not just unworkable but would undermine the good work that is ongoing in this area by diverting resources from where they are most required. Accordingly, I cannot support the Bill.

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