Seanad debates

Wednesday, 18 February 2004

5:00 pm

Derek McDowell (Labour)
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I move:

That Seanad Éireann notes:

1. the very small number of criminal convictions secured by the Revenue Commissioners in relation to tax offences;

2. the apparent reluctance on the part of the Revenue Commissioners to have revenue related offences prosecuted in the courts;

3. the failure in particular to seek or secure convictions for offences arising out of the 1993 tax amnesty;

therefore calls on the Government to take whatever action that may be required to ensure that the law is effectively enforced, including, if necessary, the transfer of responsibility for the prosecution of offences to a body other than the Revenue Commissioners.

This motion deals specifically with prosecutions arising from tax evasion. The resolution makes three points: that the provisions of the tax amnesty that were to act as a stick have not been enforced as rigorously as they should have been and even now, 11 years later, they should be more rigorously enforced; the general powers of the Revenue Commissioners to institute criminal prosecutions have not been used as often or as rigorously as they should and that they should be used more often in future than is currently the case; and if the Revenue Commissioners do not have the will power or are unable to do this, we should allow other State bodies, such as the Garda, the CAB or others, to do it

We are not talking about the small man making an innocent mistake or pushing small businesses to the wall if they are a couple of months late with their VAT returns. This resolution is about serious tax evasion and those who consistently develop schemes to evade tax and defraud the Revenue Commissioners and the taxpayer. We are talking about people who take it for granted that they, and they alone, are entitled to freeload on the services paid for by the rest of us — people who are criminals and should be treated as such and prosecuted.

I acknowledge the political background to the tax amnesty. The Labour Party was in power with Fianna Fáil when the amnesty provisions were introduced in 1993. I was on the Government backbenches at the time and many in the Labour Party were unhappy with the tax amnesty then and have become even more unhappy about it since. It is important, however, to remember that we voted for it because we knew the Exchequer was not as bountiful in tax resources as it is now and because we were reassured by the then Minister for Finance, who is now Taoiseach, that the enforcement provisions contained in the 1993 Act would be rigorously applied in the future.

The Act set out in detail tranches of liability for those people who failed to make a proper declaration, made an improper declaration or who did not use the amnesty. It stated that such people could and should be prosecuted. The amnesty was not voluntary — people who had unpaid taxes in 1993 were obliged by it to pay up, with a decent discount, and to come clean.

Failing to do that was, and remains, a criminal offence and should have been prosecuted as such. That is why it is difficult to understand why, based on the response the Minister for Finance gave yesterday in the Dáil, there has not been a single successful prosecution for failure to comply with the 1993 amnesty. Section 9 of the Act has never been used in the courts although there are tens of thousands of people who did not comply with the terms of the 1993 amnesty. Tens of thousands of people who had bogus non-resident accounts did not comply with the amnesty and thousands of them also did not comply with the 2001 voluntary disclosure scheme. I have every sympathy for the small business man who lets his VAT deadline slip by a couple of months but I have no sympathy for people who have been given the benefit of statutory schemes not once but twice to come clean. They have not just failed to do so, they have refused.

The Labour Party believes that such people should be prosecuted and pursued through the courts not just to get back the tax, but "pour encourager les autres", in the words of Marie Antoinette. Criminal prosecutions act as a serious deterrent to those who would evade tax. The penalties and interest are hefty but in cases of serious evasion, there should be prosecution through the courts. It is remarkable that has not happened.

The Minister for Finance said in the Dáil yesterday that it had not happened in amnesty cases as a result of the confidentiality requirement of the 1993 amnesty. The Minister knows that the 1993 Act also provides for an investigating officer of the Revenue Commissioners to go to the appeal commissioners to seek permission to go behind the confidentiality certificate issued by the Revenue Commissioners in circumstances where there are reasonable grounds for believing someone has not made a full declaration. It is remarkable that they have done so in only 20 cases and that in almost two thirds of those cases, they were not successful. It is also remarkable that they have tried to do so in so few cases and, although I do not know the details of the cases that failed, that the success rate is so low. It is unacceptable.

I read the Revenue Commissioners report for 2002 and it sounds strong on the issue, stating that it is policy to prosecute cases, particularly high profile cases. It gives examples of the cases where it would be appropriate, such as the use of forged or falsified documents, systematic schemes to evade tax, false claimants for repayment, failure, as distinct from minor delays, in remitting fiduciary taxes and deliberate and serious omissions from tax returns.

On the face of it, that policy is fine but it does not sit comfortably with the experience of so few successful prosecutions. The number of cases investigated in the last six years ranged from 18 to 30 in any given year. Of those, three or four per year were successfully prosecuted before the courts, giving a total of 21 for 1997-2003. In those cases, around half received a custodial sentence and, of those custodial sentences, half were suspended. The number of people who wound up serving time in jail was an average of less than one per year.

That does not sound like an aggressive policy of prosecution; it sounds like a lenient policy. If it is the case that the Revenue Commissioners are pursuing a lenient policy and do not feel comfortable or see it as a priority to prosecute, they should say so. They should come out and say their primary purpose is to raise money, to maximise the take to the Exchequer and that when it comes to prosecuting people in the criminal courts, they do not want to be a part of it and somebody else should do the job. If that is the case, the Garda or CAB should do the job, or they need a specialised unit within the Revenue Commissioners to do it. I accept that Revenue will still have to do most of the investigating but, nonetheless, the prosecution should be undertaken and dealt with elsewhere. However, it must happen on a far more widespread basis than is the case at present because the deterrent factor is important.

The Minister of State might say that in cases such as this there are a number of legal problems, and I acknowledge there are. In cases where people have not paid their taxes, the primary penalty is the interest and the civil penalty they pay. In terms of the monetary loss, in all cases, the penalty imposed on the individual concerned is likely to be far higher than any fine they might have to pay. Nonetheless, there is an importance in prosecuting. Whatever about the shame of having one's name printed in a newspaper for having made a settlement over a certain amount, there is a far greater shame and stigma attached to prosecution and to being convicted in the courts. It is necessary for the Revenue to take a view on occasion that what should be done in a particular case is to secure a criminal conviction. If that means delaying pursuing the matter of civil penalties, that is what should be done because it needs to be done simply on the basis that it is a deterrent.

There is an issue of self-incrimination. I was interested to hear what the Minister said on this issue in recent days. In effect, he said that if a person makes a voluntary full disclosure, he or she is immune from prosecution. I understand that argument. It would encourage people to make a voluntary full disclosure if they can at least be assured that they will not be prosecuted through the courts and the penalty will be simply a monetary one. The Revenue would seek to encourage people to move in that direction. However, I am strongly of the view that there needs to be a balance in this regard. While that approach might be good in most cases, it is not good in all, and it is necessary to make an example on occasion by foregoing the civil penalty and going down the road of criminal prosecution.

I acknowledge that the Revenue in recent years has very much sharpened up its act in terms of special investigations. A great deal of money has been brought into the Exchequer as a result of the special investigations carried out into the scandals that came to light during the course of the 1990s. I refer to Ansbacher Cayman, NIB and so on. The total take from those various investigations is approximately €1,000 million or a little less. Those investigations have sent out the right signal. That they have been carried out quite rigorously, in so far as we can judge from the outside, has made it clear to people, who might have been inclined in the past to hide their money offshore, that offshore is no longer out of sight, beyond the reach of the Revenue Commissioners or, for that matter, beyond the reach of Irish law. Good work has been done in this regard and it would be churlish of me not to acknowledge that the Revenue has done a fine job in recent years in this area.

The resolution we propose to the House is specifically on the issue of criminal prosecutions. It is to make the point, and I again make it forcefully, that in dealing with amnesty cases, in particular, and some high profile cases, of which we are all aware, this is a road which also must be taken.

Kathleen O'Meara (Labour)
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I second the motion.

I wish to pick up on a point Senator McDowell made regarding the efficiency of the Revenue. Nobody could argue with the fact that the Revenue Commissioners have become far more efficient in their role in collecting taxes due to the Exchequer and the State from the myriad sources from which they need to be collected. One must commend them on that. However, the efficient collection of taxes is only one of the roles of Revenue.

In recent times I have received serious complaints from two accountants who have complained to me as a public representative that they have found it difficult, particularly in the past year or two, to deal with the Revenue in regard to employers, in particular, attempting to get their affairs settled by the end of the year. They are experiencing difficulty with Revenue officials coming back to them; they have to make endless telephone calls, points have to be checked and so on. I would like to Minister to consider those complaints in the context of compliant taxpayers, people who want to ensure their employees have full cover and that their responsibilities as employers and taxpayers are fully met. We must remember that the vast majority of people are compliant taxpayers. Hopefully, the culture of tax evasion and the sense in past years that it was a good thing to get away with not paying tax is gone and that culture has at least faded.

The subject of this motion is worth exploring. We are questioning whether the Revenue Commissioners are carrying out their other function of the effective prosecution of offenders, a role they play on behalf of members of the public, which we, the legislators, have given them to ensure that tax offenders are properly investigated and prosecuted.

In the change of culture that has occurred around the issue of taxation in the past 20 or so years, it is necessary to have a sense that Revenue, in acting on our behalf, is doing so in a way that ensures that compliant taxpayers are fairly and efficiently treated and that the full rigours of the law are reflected in the outcomes in respect of those who do not comply. Hence, the strong powers given to Revenue when the tax amnesty legislation was passed, to which my colleague, Senator McDowell referred.

There is a sense in the public domain that somehow tax offenders get away with it. There are penalties and one recalls the fairly recent publication of the list of the tax offenders; it is no bad thing that the list is published. However, the public embarrassment of one's name being on such a list and the financial penalty one must pay falls far short of a prosecution in court and of a potential penalty which might be handed down by the courts. That practice is a reflection of how the Legislature and members of the public view tax offenders. This is a matter I would like the Minister to examine. In other words, is it enough to simply have a financial penalty and the embarrassment of one's name being on such a list, even though that is quite severe in its own way? Why did we put a provision in regard to prosecution in the legislation? We, who are elected by the people, have placed it there to reflect our view and that of the public that tax offending is a serious offence. In that sense, it is a disappointment that it is not being fully exerted, and I believe members of the public share that view.

If one is a compliant taxpayer and reads in the newspapers that the full powers of the Revenue are not being exerted in this regard, it causes one to question why one would be a good, honest and upright citizen. There is a sense abroad that the full rigours of the law should not only be used but should be seen to be used and that there should be rigorous enforcement of the tax code and of the powers that have been given to the Revenue Commissioners.

There is much to be said for the separation of the roles of the collection of taxes, on the one hand, and prosecution of offenders on the other. The culture of the Revenue Commissioners is largely centred around the issue of collection, hence the issue of settlement. If a person is a tax offender, negotiations are entered into and there is a settlement. In other words, it is a case of getting the money in whatever happens, and that should be the case because the State and members of the public are entitled to have such tax revenue and to know that what is required to be paid is being paid. However, the issue of the pursuit and prosecution of offenders is extremely important and there is no doubt that there is a sense abroad that it is not being pursued as actively as it could be. It will have to be asked whether it is part of the culture of the Office of the Revenue Commissioners to do so. When one considers the Criminal Assets Bureau, for example, although the context is entirely different, one will note that the establishment of this single, dedicated unit to pursue a particular set of offenders has not only been highly effective, but has also resulted in a public perception that there is a serious commitment on the part of the State and Legislature to ensure that those offenders are prosecuted.

Photo of Martin ManserghMartin Mansergh (Fianna Fail)
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I move amendment No. 1:

To delete all words after "Seanad Éireann" and substitute the following:

"notes the increasing success of the Revenue Commissioners in recent years in tackling tax evasion generally and the establishment by the Revenue Commissioners of a dedicated Investigations and Prosecutions Division in 2003, commends the Minister for Finance and the Government for the additional powers and resources made available to the Revenue Commissioners and endorses the Government's commitment to continuing support of the work of the Revenue Commissioners.".

6:00 pm

Photo of Ivor CallelyIvor Callely (Dublin North Central, Fianna Fail)
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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.

Jim Higgins (Fine Gael)
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I welcome and endorse this timely, opportune and valid Labour Party motion and agree with the thrust of Senator McDowell and Senator O'Meara's remarks in that regard. I am galled by the manner in which the Revenue Commissioners wastes so much time and resources investigating the small taxpayer. In my previous capacity as a Deputy and currently as a Senator I have been approached in my clinics by 20 or 25 people who received forms and queries in triplicate from the Revenue Commissioners regarding the holding of overseas bank accounts. I know the individuals concerned, some of whom are in receipt of small farmers benefit and non-contributory old age pensions. The majority of them have never worked outside the country or, if they did, they worked on building sites and returned here and invested whatever small savings they had for a rainy day. In none of the cases with which I have dealt and on behalf of which I have contacted the Revenue Commissioners is there any evidence of overseas bank accounts. When they replied to the Revenue Commissioners' queries, they received another series of registered letters in triplicate which frightened them. In some cases, the people concerned were suicidal as a result of the constant barrage of queries, yet there was no evidence to substantiate the claim.

The Minister of State said that since 1996 some 28 companies have been convicted of a variety of serious tax offences, six of them in the past 12 months. In 11 cases, prison sentences were imposed, seven of which were suspended. There have been only 28 prosecutions during the past seven years plus. That is derisory. We are speaking here of criminal prosecutions. The Minister of State referred in his contribution to "serious tax offences" yet prison sentences in seven of the 11 cases mentioned were suspended. Were any of the people involved in the other four cases ever sent to prison? Will they go to prison? Are they currently in prison? While 28 convictions were obtained, prison sentences were imposed in only 11 cases, seven of which were suspended. What happened in the other 17 cases? If the offences committed were serious, the people concerned should have received custodial sentences as in the case of Lester Pigott.

Photo of Ivor CallelyIvor Callely (Dublin North Central, Fianna Fail)
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That is a matter for the courts, not the Revenue Commissioners.

Jim Higgins (Fine Gael)
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I fully appreciate that point.

Photo of Ivor CallelyIvor Callely (Dublin North Central, Fianna Fail)
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The Senator is somewhat selective in the figures he is quoting.

Jim Higgins (Fine Gael)
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As Senator O'Meara said, there is a culture of acceptance within the courts and the Revenue Commissioners. We will not get to grips with the situation until such time as people who commit serious tax offences are imprisoned.

The Minister of State referred to yet another review of the powers of the Revenue Commissioners. Its powers have been reviewed time and again. An announcement by the Revenue Commissioners in 1997 that it was going to vigorously pursue tax dodgers received banner headlines in the media. The compliant taxpayer and, in particular, the PAYE taxpayer who has carried the can for so long, who watched tax evaders availing of creative accountancy and obtaining higher education grants while they had to pay to put their children through college, felt that at long last they would get a fair deal and the tax dodger would get what was coming to him. That has not happened. The figures speak for themselves.

The Minister of State and Senator McDowell spoke about the 1993 amnesty. The Minister said:

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.

A section of the legislation which seeks to dig out tax dodgers undermines the thrust of that legislation. Why should the Revenue Commissioners have to seek from the appeals commissioners further information on whether a person falsely availed of a tax amnesty? That is a farce.

The underlying arrogance of the Revenue Commissioners was discussed in the House in relation to the Ombudsman's report to both Houses of the Oireachtas on tax refunds due to two widows in Cork. The matter was also dealt with by an Oireachtas joint committee and eventually refunds were made. Senator Mansergh, who is a member of the Oireachtas Joint Committee on Finance and the Public Service, will be aware of another case involving a major stand-off between a recommendation made by the Ombudsman and the failure of the Revenue Commissioners to comply with that recommendation even though it was found to be out of court.

There is no comparison between the Revenue Commissioners and the Criminal Assets Bureau which investigated John Gilligan, Ray Burke and other major transgressors. It dug its teeth in even though tax evasion issues is not its primary function. Such issues only arise if there is evidence of serious corruption. The time has come to handover these powers to the Criminal Assets Bureau, to give the Garda working within that bureau the powers they so effectively use so that at last this issue can be addressed. The Revenue Commissioners, which has had these powers for long enough, has not confronted the problem.

Photo of Martin ManserghMartin Mansergh (Fianna Fail)
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While I support the Government amendment, I welcome this important Labour Party motion. I do not necessarily agree with the thrust of every recommendation it makes but this is a matter well worth airing. I would like to pick up on a point made by Senator Higgins. I strongly believe that the Ombudsman's recommendations should be observed and carried out by the Revenue Commissioners or any other public authority. If there is a lack of legal power to ensure they do so, annual legislation should take care of it.

I welcome the success and progress in recent years in tackling tax evasion. It has been a factor in the significant revenue buoyancy we have enjoyed. In a little more than a decade, revenue has tripled, due mainly to economic growth, higher employment and broadening of the tax bands. Also, there is more compliance with tax laws than was previously the case. One cannot measure the success of the Revenue Commissioners by the number of people it catches. One must consider those it deters, something we cannot measure. Increased revenue, as we all know, helps to fund services and to reduce the weight of the tax burden born heavily by a limited number of people, in the PAYE sector in particular.

I welcome the more rigorous, without fear or favour, approach taken by the Revenue Commissioners. We have to take note in this discussion of the statement by the Minister for Finance, Deputy McCreevy, in the Dáil yesterday in reply to a question on refocusing the establishment of an investigations and prosecutions division:

If in the course of 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.

In addition to the Revenue Commissioners, there is the Criminal Assets Bureau but I accept this operates in a different context.

I understand that the Revenue Commissioners adopt a certain pragmatism. The objective is to maximise revenue. They not only collect from the non-compliant but they also encourage compliance by others. It costs €85,000 per year to imprison somebody. Generally speaking, tax offenders are in a different category from other offenders in that they have a large amount of income and assets.

Photo of Brendan RyanBrendan Ryan (Labour)
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Welfare offenders are sent to prison.

Photo of Martin ManserghMartin Mansergh (Fianna Fail)
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I would prefer to take money from these people than spend it on them. However, I accept in that in certain limited instances it may be a case of pour encourager les autres. The idea of jailing large numbers of people would, in financial terms, be totally counter-productive. The naming and shaming of tax evaders is quite effective.

Jim Higgins (Fine Gael)
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These people have no shame.

Photo of Martin ManserghMartin Mansergh (Fianna Fail)
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Let us take as a model the health campaigns in respect of tobacco and state that tax evasion can seriously damage your reputation and your pocket.

I have a number of reservations which I will try to express reasonably quickly. There is no doubt that officials of banks and other financial institutions encouraged people — they often germinated the idea in those people's minds in the first instance — to open non-resident accounts. The idea of prosecuting them seems to have been brushed aside but I hope that some individuals will take civil cases and that some of these will be successful.

Another point which must be borne in mind and which is often forgotten is that we are operating in a totally different context than was the case 20 years ago. At that time we had a high tax regime which — it does not justify it in any way whatsoever — encouraged evasion, as every country has discovered. It was difficult when we had a currency of our own to pursue hot money because there was a danger of creating black holes, particularly in terms of withholding tax. The single currency has helped us to adopt a much more rigorous approach because the effects of money leaving the country are no longer the same as they were previously.

Senator McDowell gave a fair account of the 1993 tax amnesty. I agree that it was a marginal exercise. If memory serves, it raised approximately £230 million and followed a much more successful amnesty in 1988 which raised £500 million. Part of the reason for its success is that confidentiality was promised and guaranteed.

There are signs, with the establishment of the new branch, of a realisation that a great deal of expertise is needed to deal with the type of issue highlighted by the tribunals. I am sure that the tribunals have only shown the tip of the iceberg. Labyrinthine accounting practices have been used which make it extremely difficult to know who holds income and where.

I recall being shocked approximately ten years ago, when my party was in government with Labour, at a dinner at which a senior executive of a well known media organisation was present. He and several others began giving out about a man much in the news at present, namely, the then Commissioner Flynn, in respect of his socialist tendencies in Europe. The topic of conversation was the social charter. The individual in question said to me that he hoped the Government was not pursuing tax evasion too seriously.

There is a large and complex task to be undertaken in respect of a few people on higher incomes. The Revenue Commissioners have a great deal more to do. As Senator Higgins stated, the Revenue Commissioners are, on the whole, successful in capturing evasion by relatively small people or businessmen. I wish we could be convinced that they were equally successful in dealing with all the bigger individuals.

Photo of Joanna TuffyJoanna Tuffy (Labour)
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I wish to raise the issue of tax reliefs. The chairman of the Revenue Commissioners was quoted recently as saying that in extreme cases exploiting legal tax loopholes is not very different from a guilty man walking free because of a legal technicality. Despite those remarks, the recent Finance Bill introduced a number of new tax shelters and reliefs which will benefit the very wealthy. The Minister for Finance, Deputy McCreevy, has done little to remove tax loopholes. For example, nothing has been done about reliefs for the bloodstock industry and numerous other reliefs in order to try to stop that type of tax avoidance. People who avail of these shelters are denying the country revenue which could be used to pay for public services, etc. Everyone suffers as a result.

Little has also been done in the past couple of years to remove more people from the higher income tax rate. I understand that more than half of taxpayers will be paying at the higher rate in 2004. An array of non-income related taxes have been introduced under the Government's policies. An obvious example, about which I feel strongly, is the waste charge county councils must pay. This charge shows up the difference in way people are treated. Ordinary people are treated in a totally different way when they do not pay their tax. The Government introduced a provision where if people do not pay their waste charges, councils can refuse to collect their rubbish. The people who are affected could be totally compliant as regards their income tax but they might be on low incomes or there could be many other reasons for their not having paid their waste charges. However, non-payment means that they are being denied an important service.

The type of people who avoid paying millions in income tax receive all their services and are able to settle with the Revenue if they are caught. In general, these individuals do not face jail. I do not support or agree with the kind of protests that have been mounted against waste charges. However, it is sickening to see those involved in these protests jailed while others who have effectively robbed the country of millions can travel abroad and enjoy themselves. Ordinary people are becoming extremely angry about this type of tax evasion and that is why they get annoyed about additional charges such as the bin tax.

The Government seems to have decided that it will take this route in order to obtain the additional taxes. It is not prepared to deal with tax evasion or close the loopholes which aid tax avoidance. It is determined to hammer those on middle and lower incomes for everything it can. The Government will probably come forward with proposals in the future to bring back third level fees. It charges fees for every type of service etc., which do not bear any relation to people's incomes but it will not properly pursue those who do not pay sufficient income tax.

Liam Fitzgerald (Fianna Fail)
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I second the Government amendment to the motion.

The motion measures success and effectiveness in the enforcement of the tax laws solely in terms of the number of criminal convictions secured on the basis of those laws and the 1993 tax amnesty. To be fair to Senator McDowell, in the course of his contribution he covered a much wider area. However, I must interpret the motion on the basis of its text. The motion calls for the transfer of responsibility for the prosecution of offences to a body other than the Revenue Commissioners. While his analysis of that was quite reasonable, Senator McDowell did not justify the proposal to transfer jurisdiction in these matters. The proposal has echoes of a recent proposal to transfer powers to deal with institutionalised child abuse from the Department of Education and Science to the Department of the Taoiseach.

One is tempted to ask if we are witnessing the emergence of a pattern whereby people who put forward arguments which do not seem to be cogent are tempted to propose that responsibility for the matter under discussion should be transferred to another agency to let someone else deal with it. I do not accept the validity of that argument. I apologise to Senator Higgins as it is my own fault I could not hear him. While Senator McDowell's arguments were very balanced, I do not accept that the logical conclusion is that there is clear justification for transferring those powers. I would not like to see that tactic becoming pervasive in the Houses of the Oireachtas. It would take from the reasoned exchanges of which Senator McDowell is more than capable. He does not need me to tell him that.

The Government amendment is a clear acknowledgement that we have had a problem of tax evasion for many years. It is still with us as Senator Mansergh pointed out. It is being dealt with although it is a long way from being fully addressed. The amendment further acknowledges that the powers and resources available to the Revenue Commissioners must be reviewed constantly and increased as appropriate. As the evidence shows, the Government has assiduously set about that task since 1997. That cannot be contradicted. The work the Government has done and its initiatives have had significant and growing success which has been acknowledged by all sides this evening. Major changes have been made to the powers of the Revenue Commissioners, the most significant of which were introduced in the Finance Act 1999. It must be acknowledged that the capacity of Revenue to investigate tax evasion has been substantially improved.

Some of the most significant changes in the 1999 Act related to financial institutions and the taxpayers' information which they held. Among other measures, the Revenue Commissioners were given powers to carry out on-site audits of banks whereas previously they were prohibited from entering bank premises. They were also given powers to carry out proper audits of DIRT returns by getting behind non-resident declarations to check their bona fides. This was unheard of up to that time. The Revenue Commissioners were given powers of access to bank accounts of named taxpayers and to a class of unidentified taxpayer with the consent of the appeal commissioners or the High Court.

In the same year, the Revenue Commissioners were given much freer access to third party information for the purpose of validating tax returns. A number of miscellaneous powers were enacted including the introduction of a requirement that the donor of a gift, as well as its recipient, should make a return to Revenue detailing its particulars. These extensive and previously unenvisaged powers have had profound effects on the successful pursuit of institutional and individual tax evasion. It cannot be denied that they have struck at the core of the culture of secrecy employed so effectively by institutions and individuals in a manner which allowed fraud and evasion to thrive and spread for decades. The evidence of this fraud and evasion is emerging now.

The 1999 measures, additional powers granted since then and new structures within the Revenue Commissioners, including the establishment of the dedicated investigations and prosecutions division last year, have resulted in the recovery of upwards of €1 billion under different headings. Under the DIRT heading alone, some €800 million has been recovered. All speakers have referred to the recent report of the Revenue powers group which I wish to refer to in detail later if there is an opportunity. The report states that certain recently introduced Revenue powers have clearly been used to considerable effect.

The report also states that Revenue figures show a clear link between the power to access information on DIRT from financial institutions and the substantial yields from settlement of cases arising from the use of these powers. It further states that the powers have been cited by the Revenue Commissioners as essential to their success in the DIRT look-back audits, follow-up projects investigating the underlying depositors and the inquiries into Ansbacher and other offshore entities. According to the chairman of the Revenue Commissioners when addressing the Committee of Public Accounts last October, the aggregate figure in the context of these matters comes to approximately €892 million.

To be fair, no Minister for Finance in the history of the State has provided the Revenue Commissioners with as many additional powers as the current office holder. If any Minister has been the bane of tax experts and analysts, history must record it has been him. The name and shame campaign has been referred to and, with some reservations, I believe it has been successful, although some might say that success has been moderate. The Minister for Finance's programme of providing additional powers and resources to the Revenue Commissioners on a review by review basis together with the establishment of the investigations and prosecutions division will reap rewards in the years ahead. The division refocuses the thrust of the Revenue's programme of investigation.

Photo of Joe O'TooleJoe O'Toole (Independent)
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The motion has prompted many levels of agreement on all sides of the House, but we should cast our minds back. It is not that long since a Taoiseach addressed a St. Patrick's day group in Washington with the infamous words that income taxation was still something of a novelty in Ireland. As we have been finding out ever since, that is part of the problem. There was a macho view until very recently that it was a great thing not to pay taxes. That view continues to be maintained in many places. I dislike the focus in this debate on those decent public servants who work in the Revenue Commissioners and do their utmost in the face of all sorts of difficult circumstances. Those circumstances are often created by Members of the Houses of the Oireachtas who make regular representations at senior level on issues of tax which they should not go anywhere near.

Since I saw the film "Al Capone", I have held a view on the best way to deal with such people. He was finally brought to justice by the US Department of the Treasury rather than by armed agents of the FBI. I spoke recently to the senior Northern Ireland police officer dealing with the establishment of a copy-cat version of our Criminal Assets Bureau. He said that in all his investigations and discussions with people he has come to one conclusion, namely, that in terms of dealing with violent criminals or with those criminals who are not tax compliant, he would prefer to see the latter poor and out of prison than rich and in prison. I feel strongly about that and would prefer above all to see such people stripped of their assets.

I appreciate the point made earlier by Senator Higgins suggesting a closer tie-in — I accept it is there, and growing — between the Criminal Assets Bureau and the Revenue Commissioners. They should work hand in hand. We should recognise too that this is partly a resources problem. On three occasions in the last year I have raised in this House the lack of support within the Criminal Assets Bureau. The situation has marginally improved in recent times, but when I checked within the last year, there were only either two or three detectives attached to the Criminal Assets Bureau to deal with the biggest crime growth area in our country. That is a reflection on the political system for which the Government must take responsibility. It is not good enough that this situation should be allowed continue.

We also need to look at the issue of naming and shaming. There have been improvements but we need to consider the issue further. Naming and shaming is very effective nowadays but would not have been so 15 years ago. Let us be honest with ourselves. People who evaded tax 15 or 20 years ago were almost heroes. People did not know or did not acknowledge that the money was ultimately coming out of their own pockets. There has been a sea change in attitude. I agree with the motion in that there has been a certain duplicity in the political view of this issue. That comes into play very often when one talks of compliance and is dealing with the issue of paying taxes and giving powers to the Revenue Commissioners; people then talk of the difficulty of attracting foreign direct investment. That argument has been used time and again.

The other argument is that the country would fall apart if one of the major banks were found to be involved in any type of fraud or activity that was less than compliant. That attitude still exists. I came across a lot of it when dealing with the audit review group. In his speech, the Minister of State said we are now part of Europe, and could look at the matter. That is no help. In Germany, listed companies on the Dax, the German stock market, might have to comply with four different sets of compliance from different backgrounds, states and places. There is no co-ordination between the auditing standards boards of the US Securities and Exchange Commission in Washington and the equivalent groups in the UK and the euro area. Those are three huge areas which cannot get together.

I do not know how many years it took us to get people to decide on the colour of a passport. This matter is similar. The idea that we cannot do it is quite extraordinary. There are people in this city working in auditing for the Revenue Commissioners and others who have different standards with which they must comply depending on who they are doing the work for. It is a mess. The only positive aspect I can see is that in recent times many people who work for Elan — not far from the constituency of the Minister of State, Deputy de Valera — were saved by this. As Elan had to comply with the more stringent compliance regulations of the Irish authorities, it was able to prove it was not on the same wavelength as those companies perpetrating the major frauds that were going on in the US at the time, regarding the selling of advance royalties back to themselves and paying the money over again. There are huge problems in this area which will not be dealt with until we get some sort of co-ordination. That is an issue in which I would like our EU Presidency to show some interest.

I agree with the tenet of the motion, that not enough people have been jailed. More should be jailed, and if that does not happen, we will all look like fools for putting up with the situation.

I do not agree with the criticism of the Revenue Commissioners. They have been invested by us with the power to make judgment calls, which they can and do make. We do not know the inside stories. For every case we might hear of, I could match it with another. Within the last two weeks I was talking to a Minister who told me of someone in his constituency who was going to lose his farm because of his offshore involvements some ten years ago. That is an example of the Revenue Commissioners holding a line. The significant fact is that every politician who was in that circle of discussion felt sorry for that ordinary farmer who was going to lose his farm. I do not blame them, and I felt sorry too. On the other hand, it was the Revenue Commissioners who were taking a stand on the issue and who were not prepared to back off in such situations, just as they never do. Every time they take a strong line they are equally criticised.

This is not an easy issue. The motion has been hugely important and I congratulate the Labour group on tabling it. As Senator Mansergh said, it raises issues which we must address. I do not know the easy answers. More resources are called for, along with a cleaner system of reportage back to both Houses, so that we have a clearer understanding of what the Revenue Commissioners do. They have not helped themselves by their rejection of the Ombudsman on two occasions in the last year. That does not help their public image.

Tom Morrissey (Progressive Democrats)
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This motion is ill-timed because it comes at a time when the Revenue Commissioners have successfully completed the roll-out of a dynamic new customer-focused risk-based regional operating structure. After a period of fundamental redesign, restructuring and upskilling of a complexity never before attempted in the Irish public service, the Revenue Commissioners and their staff have enthusiastically and with great flexibility responded to the ever-changing needs of a modern economy. This process of change continues and deepens apace under the umbrella of Sustaining Progress, and benchmarking.

The Revenue Commissioners have willingly embraced changes in work practices, fully integrating Customs and Excise with the mainstream taxes service, and launching new specialist operating divisions dealing nationally with the largest and most complex cases, as well as a new investigation and prosecutions division.

This motion is also ill-timed because it comes after a period of intensive capability building, where Revenue Commissioners chairman Frank Daly and Commissioners Fehilly and O'Grady have undertaken Trojan work to energise staff at all levels and rebuild morale after the trials of the Committee of Public Accounts hearings of 1999.

The Progressive Democrats is committed to ensuring the Revenue Commissioners are given all necessary resources, financial and human, to discharge their onerous duties. My party in Government will guarantee that the programme of modernisation already successfully started, and now copperfastened by the benchmarking flexibilities, is fully implemented. This motion asks us to respond to Revenue's initiative and change by launching an unveiled disingenuous attack on their professionalism, ability and commitment.

This motion is more than merely mis-timed. It is seriously ill-informed and ill-judged because it displays a breathtaking ignorance of critical elementary legal principles. All taxpayers are obliged to pay the proper amount of tax due on their income or capital whether corporate or personal. Where a taxpayer fails to do so, Revenue vigorously pursues 100% of the tax underpaid, plus interest due from the date it should have been paid, and a tax year penalty payment. This penalty is the punishment for failure to take due care, for error, omission, gross carelessness or negligence. These civil penalties are robustly but fairly and successfully enforced by Revenue.

This motion ignores this highly successful aspect of Revenue's audits programme, looking instead at a very different issue called evasion. The motion misunderstands the legal reality faced by Revenue. Tax evasion is a crime. The prosecutions that the Opposition representatives call for are criminal in nature, and if they are to succeed, they must meet the heavy burden of proof required in such cases. Most importantly, the motion fails to realise that the Revenue Commissioners do not have the right or authority to prosecute. That responsibility lies with another agency, the Director of Public Prosecutions. It is the DPP who directs whether a case should be prosecuted. The DPP will rightly only permit proceedings to be initiated if satisfied on the available admissible evidence that there is a case to answer and where the evidence is sufficiently robust to prove beyond doubt that an offence was committed.

It may have slipped the minds of my colleagues on the opposite side of the House but under our sound legal system, the accused, even those accused of tax evasion, are innocent until proven guilty. That guilt must be established beyond reasonable doubt. To successfully prosecute a case the Revenue must establish that a tax is not only underpaid but that the evader set out wilfully and knowingly on a pre-determined course of action, with deliberate intent to evade lawful tax. The mere fact that the tax due was not paid is not sufficient. That could be as a result of neglect or gross carelessness as opposed to the evil intent of the wilful evader.

The burden of proof rests rightly with the prosecution, the Revenue Commissioners. This is the fundamental issue facing Revenue. It must know a taxpayer is evading and how he or she is doing that but it must also establish that it is a wilful act of deliberate criminal intent beyond reasonable doubt. No matter where responsibility for tax prosecutions rests, this remains a mountain to be climbed. Indeed, one might consider the larger strategic question as to whether it would be in the national interest for Revenue or any other State agency to initiate prosecutions for criminal wrong-doing where it had little prospect of securing a conviction due to a lack of credible evidence as to criminal intent. What message would a series of acquittals send to those who might consider wrong-doing?

I urge the House to reject this unworkable, illogical proposal which would add a further layer of bureaucracy between the investigating officer and the prosecution service. Does anyone seriously believe this proposal will improve efficiency or the chances of successful prosecutions by divorcing investigation from prosecution?

Photo of Eamon ScanlonEamon Scanlon (Fianna Fail)
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I welcome the Minister of State.

I understand from the Revenue Commissioners that in many cases examined to date it has not been possible to obtain the evidence necessary to meet the required standard of beyond reasonable doubt in 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.

Apart from the amnesty aspect, however, Revenue has been successful recently in collecting outstanding tax and interest and imposing civil penalties on many tax evaders in its ongoing investigations. Individual tax evaders have made considerable retribution for their offences as a direct consequence of the large monetary settlements resulting from investigations.

Revenue's criminal investigation programmes have been refocused recently with the establishment of an investigation and prosecutions division. If, in the course of investigations, amnesty offences are identified and the necessary evidence is available, they will be investigated with a view to taking criminal prosecutions for such offences.

On the matter of the prosecution of officials from financial institutions who may have assisted in placing funds in bogus non-residential accounts, the primary responsibility for ensuring that a tax return is correct rests with the individual making that return. There is a statutory offence in the tax code of knowingly aiding or abetting another person to make an incorrect tax return. In the case of third parties generally, however, the standard of evidence required to incriminate them for alleged wrong-doing by a taxpayer who has failed to declare correct income or gains is very difficult to meet.

I understand from the Revenue Commissioners that while in their experience aiding and abetting offences are notoriously difficult to prosecute, it will be their general policy to pursue such cases if such evidence becomes available.

As Senator Fitzgerald mentioned, it should also be noted that no Minister for Finance in the history of the State has given the Revenue Commissioners more powers in Finance Acts to preclude tax evasion than the current Minister, Deputy McCreevy. The Finance Act 1999 in particular gave the Revenue Commissioners a host of powers that were not previously available to them, and the Minister has added to those powers in other respects.

Tax avoidance is the legal use of sections of the Finance Acts or other legislation for purposes for which they were not intended. No Minister has acted as quickly as the current Minister for Finance to close off the unintended uses of legislation. He acted in this manner in the recent Finance Bill and in announcements he has made since the publication of the Bill. The Revenue Commissioners are charged with operating the tax code and are currently engaged in the investigation.

Having been a self-employed business person for many years and having taken out loans in various banks, particularly in the 1970s and 1980s, I am aware that when one inquired about borrowing money there was no mention of the tax man. However, if a self-employed person tries to borrow money from a bank today, the first question they are asked is whether they are fully compliant in terms of their tax affairs. That is a welcome development. From personal experience of the people I deal with in business on a weekly basis, I do not know anybody who is not fully compliant with the tax code.

Photo of Labhrás Ó MurchúLabhrás Ó Murchú (Fianna Fail)
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Will the Deputy Leader indicate if it is proposed to extend the time for the debate as we started late?

John Dardis (Progressive Democrats)
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It may not be necessary but because we lost 20 minutes of Private Members' time due to two divisions, it might be appropriate to continue past the time allocated for the debate.

Photo of Labhrás Ó MurchúLabhrás Ó Murchú (Fianna Fail)
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It may be necessary if Senator Ryan is to have eight minutes at the end of the debate.

John Dardis (Progressive Democrats)
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I will try to be brief and not breach the time available. There is not much difference between both sides of the House in what we hope for from the implementation of the tax laws by the Revenue Commissioners. There is a general determination on all sides that illegality, impropriety and evasion should be rooted out and dealt with severely. The question arises as to the method by which that might be best done in the interest of the State and its citizens, and in the interest of fair play.

Coming back to a point made by Senator O'Toole, there have been major improvements over the past 15 years. The culture has changed dramatically. Perhaps there is still some way to go but at that time people who evaded tax were regarded as heroes in some quarters. A name and shame policy would not have been effective. It is effective now and there is a general desire on the part of the public to ensure everybody pays their taxes. Part of the reason for that is that the burden of tax on individuals has been greatly alleviated through successive Governments and the rates are lower. When we started talking about the need to reduce personal rates of taxation there was a general negative reaction to it on the basis that services would be reduced. The proposition put forward of increased revenue to the State was widely rejected at the time. Fortunately, that culture has changed.

There should be no need for further amnesties. The purpose of amnesties was to draw a line and it is correct to say, as Senator McDowell said — I can vividly recall it when the legislation was going through the House — that the penalties for false declarations would be so draconian nobody would make any attempt to avoid their responsibilities. That was put into the legislation to ensure the reservations in the Labour Party and elsewhere were dealt with. The Revenue has enormous powers with regard to those false declarations.

I also accept the proposition that some of these matters would be more appropriately dealt with through the Criminal Assets Bureau than by Revenue. The Revenue Commissioners do a very good job. Revenue is far more user friendly than many Departments. It is a model in terms of the clarity of the advice one gets, the fact that one gets rapid decisions and that it is very helpful, from my experience as a taxpayer, when one has reason to contact them. They are also sensitive to individuals.

To some extent Senator Higgins wants it both ways. He wants the poor man who came back from England with a few bob in his pocket and who is living in the west to be dealt with——

Jim Higgins (Fine Gael)
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No. I do not want false charges made against him.

John Dardis (Progressive Democrats)
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——leniently. I accept that but there are also individuals who came back and who appeared to live in frugality but when they died one read in the newspaper what they left in their will and they were obviously wealthy.

It is appropriate that the Revenue Commissioners have the type of flexibility and sensitivity needed to deal with each case on its merits as it arises. I do not see anything wrong with that. They do that to a reasonable extent. The late Senator Paddy McGowan got apoplectic about the ruthlessness of the Revenue Commissioners in Donegal. Perhaps there are cases where individuals are less sensitive than others. That can be dealt with, but the best place to hit wealthy people who are greedy is in their pockets.

Photo of Brendan RyanBrendan Ryan (Labour)
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In their egos.

John Dardis (Progressive Democrats)
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In their egos, perhaps, by naming and shaming. They are hurt by the fact that their names might appear in the paper.

Photo of Brendan RyanBrendan Ryan (Labour)
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And in court.

John Dardis (Progressive Democrats)
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Whether a jail sentence is an effective deterrent in the case of very large sums of money is questionable. I know of one case with regard to the misuse of hormones in cattle where the person chose to go to jail rather than pay the fine because, in his view, it was worth £20,000 per week, or whatever, to go into relative luxury in a jail in the west and remain their for the period. We need to be aware of what these people are about.

On the issue of offshore accounts, I accept there are double taxation treaties. I accept that if people are resident outside the country, they pay the tax in the country in which they are resident. Apparently, Portugal has tightened up its property laws with regard to people avoiding — not evading — capital taxes. Somebody somewhere has to recognise that what is good business is not good citizenship and that citizens have a responsibility to their country. There are wealthy individuals who accept those responsibilities but there are others, who are extremely wealthy, who do not and questions have to be asked.

My final point, which was raised on the Order of Business this morning, relates to the taxation of the bloodstock industry. The first thing that has to be said is that the exemption is on the stud fees of stallions. While the flagships of Coolmore and Godolphinare in the public eye, many others are struggling to make ends meet in the industry.If this country means anything to many countries abroad, it is the quality of its bloodstock industry. We saw last night on "Horse Operas" Aidan O'Brien going to America with Johannesburg and High Chaparral and winning, effectively, the world championship of racing. The comments made by the leading American trainers about the quality of the Irish bloodstock was something to behold. This industry was dying on its feet because the best stallions in the world were being exported. Now, at least, we have Saddlers Wells and the one we are not meant to speak about because of the dispute which is taking place at present, Rock of Gibraltar. These are world class animals and they should stay in this country so that our world class industry survives and prospers. I am not critical of the exemption on stallion fees. In my county of Kildare, there are far more people involved in the horse industry, 10,500, than in farming. It is a hugely important industry and it has provided jobs to people who had little going for them. Let us be clear about it — it is an exemption on stud fees. It is represented as an exemption on all the activities of the industry but it is not.

Photo of Brendan RyanBrendan Ryan (Labour)
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I thank Members for what was a reasonably serious debate. What prompted me to raise this issue, and I did so on the Order of Business, was a report, which I have not heard contradicted, that the Revenue had concluded that there was no evidence that any bank encouraged people to set up bogus offshore accounts of which there were 145,000 in their heyday. I am supposed to believe there is no evidence that people did other than go into banks and open bogus accounts, on their own initiative, without any assistance, advice or encouragement from the very banks which were advertising ostensibly the benefits of a non-resident having an account in Ireland. I do not believe that is true. I am not saying the Revenue is doing anything improper; I am saying that in the way it does its business it concluded it could not find evidence. I do not believe that is the case.

I do not think most citizens believe one could have 140,000 non-resident accounts and not have the banking system, to some extent, involved in encouraging it. One starts from that position about the Revenue Commissioners that they have come to that conclusion. I shall quote a little of what the Minister of State said, but Senator O'Toole has been disingenuous because I do not want this to be an attack on good public servants. It is an assessment of the capacity of one group of public servants to do a particular job and a judgment call about whether it could be done better by other people. If Members of the Oireachtas are not able to do that about the public service generally, we might as well forget about our job altogether. That is all it is about. There are no attacks on people. In his contribution the Minister of State referred to the "approach which was adopted in 1996-7, when Revenue initially took on the function of investigating cases with a view to prosecution and ... a number of officers in the investigation branch received training..." He stated further:

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... Currently, there are 42 cases of serious tax evasion under investigation with a view to prosecution...

That is in this period when they began to do it.

John Dardis (Progressive Democrats)
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And 6,000 people have been convicted of offences for failing to file a return.

7:00 pm

Photo of Brendan RyanBrendan Ryan (Labour)
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We are talking about serious offences here. In the same period, between 2,000 and 3,000 people have been convicted of welfare offences. What I would like to highlight is that there are very exacting evidential standards to be met in order to satisfy the criteria for a successful prosecution. Why is that not the case when 300 or 400 people per year are prosecuted successfully for welfare abuse?

A selective approach must be adopted to avoid Revenue resources being tied up in what is an extremely labour-intensive process. Why is that not the case? The reason is that the average citizen who is charged with Revenue offences — not all, but most of them — does not have access to high quality accountants, high quality lawyers and all the other high quality advice about their rights. They are, therefore, easy targets to prosecute. I am not saying the Department does anything illegal but the average citizen does not know what he or she does not have to say or what he or she can avoid doing. They do not know any of that and, therefore, it is comparatively easy to prosecute.

Effectively, what the Revenue is saying is that it cannot prosecute them because the difficulty of proving it is so great. The difficulty of proving it is that these people, as they are entitled under the Constitution and under our law, use all the devices every citizen has to ensure they are dealt with fairly. However, what it looks like to society, correctly in my view, is that it is essentially a system of one law for the rich and one law for the poor.

People mentioned imprisonment. The word "imprisonment" is not mentioned in our motion because I am not greatly enthusiastic about locking people up. For instance, I am not a great enthusiast for locking old people up, whatever their offences might have been during their political careers, but I am an enthusiast for the process of trial and conviction. As I have said before in the House, I would not have liked to see General Pinochet locked up; putting an 80 year old man in jail does not appeal to me. However, the fact of prosecution is an enormously significant matter in the context of the point made by Senator Dardis regarding the view rich people have of themselves and the view of rich people that other people have.

I agree with Senator Dardis that we, in this country, are moving on. However, if we are to move on, the citizens must believe that everybody is equal before the law and has similar rights before the law, and that everybody's rights are taken equally seriously by those who enforce the law. People notice that while, of course, some are now paying over large sums of money, for the past 15 or 20 years most people were told there was no great pot of unpaid tax money. It turned out there was an enormous pot of real money, bigger than most on the Left ever suggested, deliberately hidden, with malice aforethought, to prevent people paying tax.

That ought to have been evident in the first year after the DIRT tax was introduced, when the first year's revenue from that tax was three times higher than the Revenue Commissioners had forecast, even though interest rates had dropped relative to the previous year. That was a signal that something did not match and that estimates of income, bank deposits and revenue were way out of kilter. From then on, citizens have watched a succession of issues emerge and matters arise. At the end of it all, after the best part of 20 years, some 28 individuals or companies have been convicted of serious tax offences, six of them in the last 12 months — we are getting a little better.

That does not make a case for retaining the present situation but for an independent vigorous body to deal with the issue of the criminal prosecution and criminal conviction of those who commit what is a criminal offence. We should remember it is a double offence: it is a criminal offence not to pay tax and also scandalously non-civic minded, having not paid tax, to use all the services that society provides for which such people do not pay.

Senator Dardis referred to those who try to avoid their civic duty of paying tax by moving in and out of the country. While we may not be able to force such people to pay what they ought and what most of us feel morally obliged to pay, the least we could do is to avoid giving such people the adulation of allowing them to preside over large charitable fundraising efforts, from which the charity does not raise a fraction of the amount of tax that such people have avoided paying.

Amendment put.

The Dail Divided:

For the motion: 24 (Eddie Bohan, Michael Brennan, Peter Callanan, Brendan Daly, John Dardis, Timmy Dooley, Geraldine Feeney, Liam Fitzgerald, Camillus Glynn, Terry Leyden, Don Lydon, Marc MacSharry, Martin Mansergh, John Minihan, Tom Morrissey, Pat Moylan, Francis O'Brien, Labhrás Ó Murchú, Mary O'Rourke, Ann Ormonde, Kieran Phelan, Eamon Scanlon, Jim Walsh, Diarmuid Wilson)

Against the motion: 17 (James Bannon, Paul Bradford, Fergal Browne, Ulick Burke, Noel Coonan, Michael Finucane, Brian Hayes, Mary Henry, Jim Higgins, Michael McCarthy, Derek McDowell, Joe McHugh, David Norris, Kathleen O'Meara, Joe O'Toole, Brendan Ryan, Sheila Terry)

Tellers: Tá, Senators Minihan and Moylan; Níl, Senators McDowell and Ryan.

Amendment declared carried.

Motion, as amended, agreed to.