Ivor Callely (Dublin North Central, Fianna Fail)

I apologise on behalf of the Minister for Finance, Deputy McCreevy, who would like to be here but cannot attend because he is taking Committee Stage of the Central Bank and Financial Services Authority of Ireland Bill 2003 at present.

I support the Government amendment, which highlights the Government's commitment to, and support of, the work of the Revenue Commissioners and their increasing success in tackling tax evasion in recent years. The primary function of the Revenue Commissioners is to enforce compliance with the customs and taxes legislation through collecting taxes and duties. A key objective in this regard is to meet the annual budget target. To this end, the Revenue Commissioners have been assigned responsibility for the care and management of all duties and tax and have been provided with a range of powers to enable that mandate to be fulfilled. These powers are reviewed regularly to ensure they are adequate for the task. The Seanad will be aware that the Minister for Finance recently published the report of the Revenue powers group, which he established last year to carry out a review of the powers available to the Revenue Commissioners.

The Revenue Commissioners have made it very clear both by their actions and commitments that they have no tolerance of tax evasion. Their most recent statement of strategy for 2003-05 affirms their commitment to "making compliance easy while making non-compliance very unattractive" and to achieving this by a balanced approach combining a sharp uncompromising response to evasion and default while providing high quality services to compliant tax and duty payers. The statement of strategy has as its first goal maximum compliance with tax and customs legislation and this requires a balancing of Revenue resources between their various programmes so they are deployed effectively and efficiently in identifying and combating risk to the Exchequer.

This approach to risk has been extremely successful with over €1 billion having been recovered for the benefit of the Exchequer through the special investigation projects initiated in recent years. This sum is additional to the recoveries made under the normal audit programmes of the Revenue Commissioners. The majority of cases where evasion is discovered are concluded on the basis of a negotiated settlement with the taxpayer, which involves collection of the unpaid tax together with interest and civil penalties. The level of civil penalties imposed is usually far greater than the level of fines imposed by the courts in similar cases and settlements are published on a quarterly basis in the tax defaulters list in Iris Oifigúil if the terms requiring such publication are met. Generally, the amounts paid by tax defaulters under this civil penalty settlement process are a multiple of the tax evaded in the first place.

However, the Revenue Commissioners fully recognise that in addition to initiating programmes whose focus is largely on the recovery of unpaid taxes and the imposition of heavy penalties, offenders should also be prosecuted where this is possible. The statement of strategy for 2003-05 signals as one of its key strategies maximising compliance, the deterrence, detection and prosecution of evasion, smuggling and other breaches of the tax and customs legislation. This is regarded as a vital element in maximising compliance and ensuring the proper taxes and duties are paid on a timely basis to the Exchequer.

The approach of the Revenue Commissioners is increasingly to investigate greater numbers of cases for criminal investigation with a view to their referral to the Director of Public Prosecutions. To this end and as part of their restructuring programme, the Revenue Commissioners recently established a new investigations and prosecutions division. This division, which now combines tax and customs and excise investigators, is tasked with co-ordinating all criminal investigations activity by the Revenue Commissioners and has been provided with additional resources to enable it to conduct more criminal investigations into serious evasion. All other areas of Revenue have been mandated to identify cases that are potentially suitable for prosecution and to refer these to the investigations and prosecutions division.

These developments build on the approach which was adopted in 1996-7, when Revenue initially took on the function of investigating cases with a view to prosecution and referring them directly to the Director of Public Prosecutions. To achieve this, a number of officers in their investigation branch received training to develop the skills needed to investigate offences and meet the evidential requirements of criminal investigations. The initiative was undertaken in consultation with the Director of Public Prosecutions, who provided one of his professional officers to give guidance and advice to the Revenue investigators. Currently, the Director of Public Prosecutions has two officers available to Revenue investigators to discuss evidential matters and any other issues that arise in the course of investigations. Prior to 1990, the Revenue Commissioners referred cases to the Garda for investigation. As noted by the Comptroller and Auditor General in his report for 1995, the arrangements in place were not effective as only one case had reached the courts in the previous four years.

Since 1996, 28 individuals and companies have been convicted of a variety of serious tax offences, six of these in the past 12 months. In 11 of these cases, jail sentences were imposed, although seven of these sentences were suspended. Fines were imposed in the rest of the cases. Currently, there are 42 cases of serious tax evasion under investigation with a view to prosecution, including six cases which are currently with the Director of Public Prosecutions awaiting directions. Additionally, there are a further two cases in respect of which bench warrants have been issued by the court because the defendants have absconded. With the procedures now in place in the investigations and prosecutions division and the arrangements between it and other areas of Revenue, new cases are being identified and added each month. This represents a considerable ratcheting up by the Revenue Commissioners in a relatively short timeframe of their prosecution activity. In addition to the aforementioned prosecutions, over 6,000 individuals and companies have, in the same period, been convicted of offences of failing to file tax returns following action by the Revenue Commissioners.

Experience in the criminal investigation of tax cases to date indicates that there are very exacting evidential standards to be met to satisfy the criteria for a successful prosecution. Particular difficulties arise where vital documentation is not available, often due to the lapse of time or where witnesses are not available due to their location or reluctance to become involved where the suspect is an employer or business associate. This is in line with the experience of dealing with white collar crime generally. A selective approach must be adopted to avoid Revenue resources being tied up in what is an extremely labour-intensive process and where the outcome may ultimately be non-productive. Consequently, resources tend to be focused on cases in which it is reasonably clear from the outset that evidence of wrongdoing is available or likely to become available in the course of an investigation.

Equally, the courts must be satisfied that the standards applied by investigators in conducting the investigation and gathering the evidence meet the requirements all of us like to ensure of fair procedure and due process, because of the potentially serious consequences for a suspect. Revenue officers must take care that at all stages of the investigation, not just the evidential aspects, the appropriate standards are met. Investigating a case with a view to possible prosecution and then taking suitable cases through the courts can be a slow and resource-intensive undertaking, regardless of who is involved. The process can be lengthy and cases can often involve officers in a number of appearances in court at the various stages.

Another factor which influences the process of criminal investigations is the level of the powers available to the investigators. Revenue officers, in the course of their work in this area, have identified deficiencies which have curtailed their capacity to assemble the best evidence in some cases, and as a result of these experiences suggest matters for inclusion in Finance Bills.

As the Seanad is aware, the current Minister for Finance, Deputy McCreevy, has a track record second to none in introducing legislation to augment Revenue powers in Finance Acts. Appearing last year before the Committee of Public Accounts, the chairman of the Revenue Commissioners pointed out that almost all of the developments in the "offshore area" could be attributed to the 1999 powers introduced by the Minister for Finance, which allows the Revenue to examine financial institutions in a way that was not possible previously.

Most recently, the Minister for Finance received the report of the Revenue powers group, which examined the powers available to Revenue generally, but also considered the area of criminal investigation of tax evasion, and made certain recommendations which have a bearing on the matter. As my colleague, Deputy McCreevy, stated at the time of the introduction of the Finance Bill 2004 a few weeks ago, the recommendations of the group are being published to allow public debate and will be considered for next year's Bill.

The Revenue Commissioners are satisfied with the level of success achieved to date in criminal prosecutions for tax evasion in the courts, but are determined and confident that their new approach and the establishment of the investigations and prosecutions division will increase the numbers of such cases. The level or severity of the sentences imposed is a matter for the courts but it should be remembered that the impact on a defendant is not limited to the sentence imposed by the court. For example, in one of the cases accepted for investigation in 1999 in which a conviction followed in 2003, a total fine of €1,750 was imposed. However, the convicted man and his company settled the liability to Revenue by paying in excess of €1.65 million. The courts are influenced by the fact that the Revenue Commissioners impose heavy penalties.

The judgment of the Court of Criminal Appeal in the case of the Director of Public Prosecutions v. Redmond includes the following:

It is plainly not possible for a sentencing court in a case such as this to ignore the fact that other penalties, which may be much greater in amount than the cumulative sum of the maximum fines for those charges, have already been made.

Section 9 of the Waiver of Certain Tax, Interest and Penalties Act 1993 provides for an offence of failing to comply with the 1993 tax amnesty, that is, where a taxpayer who had knowingly and wilfully submitted false returns etc. either failed to make an amnesty declaration or gave a false amnesty declaration.

Contrary to recent reports the Revenue Commissioners have never taken a general decision not to prosecute cases for breach of amnesty legislation. They have, however, experienced difficulty with investigating such cases.

The 1993 amnesty legislation specifically prohibits access by Revenue auditors or investigators to amnesty declarations. Consequently it is not possible to examine these declarations to establish whether taxpayers are in breach of that legislation. Persons who made an incorrect declaration to the chief special collector would normally only be discovered during the course of a Revenue audit or investigation. The amnesty legislation provides that Revenue must apply for the consent of the appeal commissioners to conduct further inquiries into a case where it is suspected that the declaration is incorrect. The Revenue Commissioners have made approximately 20 such applications and consent has been given in about one third of the cases to date. Other cases have been investigated with the consent of the taxpayer, outside the 20 such applications to which I have referred.

I am informed by Revenue that it has not been possible in any cases examined to date to obtain the evidence necessary to meet the required standard of "beyond reasonable doubt" as regards amnesty non-compliance offences. It is generally the case, also, that where a taxpayer agrees to co-operate in an investigation and Revenue cannot otherwise access relevant evidence, the taxpayer's rights against self-incrimination will restrict the potential for a prosecution.

Those availing of the provisions of the Waiver of Certain Tax, Interest and Penalties Act 1993 benefited both by a financial saving — that is, the amount they had to pay to satisfy their debt to the Exchequer was less than it would otherwise have been — and by an assurance of confidentiality in their dealings with the special collectors appointed to deal with the amnesty. This provision of confidentiality restricts the ability of the Revenue Commissioners to gather evidence to support a criminal prosecution.

In the course of the large scale investigation projects undertaken by Revenue in recent years, such as the investigation into the bogus non-resident account holders, taxpayers have paid additional taxes relating to years for which amnesty declarations should have been made, and it is likely that some have not made any amnesty declaration. Due to the vast scale of these investigations and the potential they have to lock up Revenue resources for years, the approach has been a pragmatic one, aimed at collecting the undeclared taxes together with substantial interest and penalties in the shortest possible time. Had Revenue adopted a criminal investigation approach to these cases, it would not have been possible to achieve these results, as a taxpayer once cautioned, is not obliged to incriminate himself or herself.

This programme is continuing and will now focus on the small number of cases that have not come forward. They will be pursued and will be considered as potential prosecution cases and, where selected, will also face the prospect of being prosecuted as regards amnesty offences, if the relevant evidence can be assembled.

I am also assured by Revenue that if in the course of any investigations, amnesty offences are identified and the necessary evidence is available, they will be investigated with a view to taking a criminal prosecution for such offences. There have been some reports that a ten year rule applies as regards amnesty offences. The Revenue has informed the Minister for Finance that the legal advice available is that there is no time limit on an investigation of indictable offences and investigators proceed on that basis.

It can be seen from the results and the progress referred to already, that the Revenue Commissioners are serious about the pursuit of non-compliance with the tax code and the balanced approach being adopted has proven to be extremely successful. Their resolve to increase the number of cases being investigated and referred to the DPP is already bearing fruit, with the numbers of such cases at an all time high. The present arrangements are working effectively. The Law Reform Commission in its consultation paper on a fiscal prosecutor and a revenue court, published in July 2003, looked at the treatment of revenue offences, including the workings of the public prosecution system and surveyed the existing system for bringing revenue prosecutions. The paper includes a recommendation that the arrangements currently in place for the prosecution of revenue offences be maintained for a period and then reviewed in a few years. The Law Reform Commission's final report is due to issue later this year.

The message should be clear. Anyone who hides taxable income or evades tax will be pursed by the Revenue Commissioners. Unlike others who had the opportunity but failed to do so, the Government backed the efforts to tackle evasion with important and effective legislative initiatives, to which I referred earlier, and has provided significant extra resources and an additional 400 staff in the audit and compliance area. By comparison to earlier years and having regard to the excellent results achieved on general tax compliance initiatives by Revenue and the emerging results in prosecutions, the Government sees no reason to disturb the existing arrangements for prosecutions.

The Government's commitment to provide the Revenue Commissioners with the necessary resources and powers is clear. I, therefore, ask Senators to support the Government amendment.