Pearse Doherty (Donegal, Sinn Fein)
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164. To ask the Minister for Finance the number of annual prosecutions and corresponding tax, interest and penalties levied as a result of the general anti-avoidance rule since it was introduced in the Finance Act 2014, in tabular form; his views on the effectiveness of the Rule; and if he will make a statement on the matter. [15558/16]

Michael Noonan (Limerick City, Fine Gael)
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I am informed by Revenue that section 87 of the Finance Act 2014 inserted sections 811C and 811D into the Taxes Consolidation Act 1997. These sections are replacements for the existing general anti-avoidance rule contained in sections 811 and 811A of the Taxes Consolidation Act 1997. The new provisions reformed and simplified the arrangements Revenue have to follow in order to challenge a transaction as a tax avoidance transaction. The general principles as to what constituted a tax avoidance transaction remain, broadly, the same under both sets of provisions.

Sections 811C and 811D apply to transactions commenced after 23 October 2014. The provisions of sections 811 and 811A continue to apply to transactions commenced before that date.

At this stage, the provisions of sections 811C and 811D have not been applied by Revenue. The reason for this is that tax returns based on avoidance transactions covered by the new provisions will only start to be filed on or after 31 October 2016. There is, theoretically, a very small possibility of a transaction started and finished in the period 23 October 2014 to 31 December 2014 being reflected in a tax return filed on or after 31 October 2015 but the likelihood of this is small.

In any event, the filing of a tax return that reflects an underlying tax avoidance transaction (the tax avoidance transaction itself is not described in the return) is only the start of a process of challenging such a transaction. Once an underlying transaction is identified, it must be thoroughly investigated and all relevant facts (commercial, legal and contractual) relating to the transaction established. Once these facts are established the transaction in its entirety needs to be analysed to establish the precise tax provisions that are being abused or misused. Only at this stage, a process which can take some time, would Revenue be in a position to challenge the transactions under the new rules by issuing tax avoidance assessments under section 811C.

While tax and interest must be paid once a transaction is found to be a tax avoidance transaction under the general anti-avoidance rule, civil tax penalties, as such, do not apply. Instead, a tax avoidance surcharge of 30 per cent of the tax avoided applies in avoidance cases. This surcharge may be reduced if a taxpayer agrees a settlement at an early stage of the process. Tax, interest and the tax avoidance surcharge applies under both the new and old anti-avoidance provisions, but it should be noted that in the case of transactions commenced before February 2006 only the tax avoided is payable where a transaction is found to be a tax avoidance transaction.

I am advised by Revenue that there are no criminal tax offences involving tax avoidance that can be subject to criminal prosecutions.

It should be noted that 452 cases under the general anti-avoidance legislation covering a potential of €168 million in tax are being actively managed currently.