Revenue to be told of tax evasion schemes

NEW MANDATORY tax reporting rules which will require companies and individuals to disclose any transaction that enables tax avoidance to the Revenue are to be introduced under a late amendment to the Finance Bill.

Under Section 141 of the Finance Bill "promoters" of such schemes - such as lawyers, bankers and financial advisors - will also be required to notify the Revenue about the existence of any tax-avoidance structures.

Those failing to comply with the new rules will be fined up to a maximum of €4,000, as well as additional penalties of up to €500 per day.

Details about what exact tax-avoidance structures are involved are not yet available - although Section 817q of the legislation suggests that this will be a decision for the Revenue Commissioners with the consent of the Minister for Finance.

However, it is most likely to include artificial structures which avoid tax, although offshore structures may also be included.

According to a spokesman for the Department of Finance, the aim of the scheme is to ensure that all taxpayers contribute their fair share. The Minister for Finance believes that the mandatory disclosure scheme strikes "the right balance between Revenue powers and the rights of the taxpayer" .

"Mandatory disclosure will provide Revenue with an important instrument to tackle tax-avoidance schemes which are leading to a significant loss of taxation."

He pointed out that similar schemes exist in the UK and Australia.

Mark Redmond, chief executive of the Irish Taxation Institute, expressed caution at the new measures, and called for "clarity and certainty"on a number of issues.

"We will require very clear definition on the legislation and precise interpretation of the new regulations that will arise from that," said Mr Redmond.

Noting that employers and businesses "cannot afford unnecessary burdens in what is already a very tough environment", he said that the new legislation must not lead to any uncertainty for Ireland's business sector or taxpayers engaging in normal commercial transactions.

Sonya Manzor, a senior partner with law firm William Fry, questioned the need for the legislation "given the existing reporting obligations and significant tax geared penalties for non-compliance".

Currently the issue of tax-avoidance is covered under Section 811 of the Taxes Consolidation Act 1997, which was designed to counteract certain transactions which have little or no commercial reality but are carried out primarily to avoid tax. In 2008 a form of protective notification was introduced - Section 811a - which allowed those who benefited from tax-avoidance schemes to notify the Revenue. The 2010 Finance Bill requires mandatory disclosure of these schemes to the Revenue.

Ms Manzor said that Section 811A should be repealed in light of the 2010 legislation.