Time for more tax dodgers to face the music

Another batch of letters has been sent out by the Revenue, writes Siobhán Creaton, Finance Correspondent.

If you are one of the 40,000 individuals who received a registered letter from the Revenue Commissioners this week, you would be well advised to deal with it sooner rather than later.

The letter means you have been identified as someone who is "highly likely" to have used a bogus non-resident bank account to hide money from the taxman, in some cases as far back as 20 or 30 years ago, according to the Revenue. The letter is your notification that the Revenue is determined to extract those funds and impose a hefty financial penalty in punishment for your crime.

It could be understating it to say that many of those who know they are guilty of defrauding the State of possibly hundreds of millions of euros have been under a bit of stress lately. Accountants and tax advisers say they are getting used to being contacted by tax cheats who are in the Revenue's sights. They are often in tears or in a seriously worried state when they call.

Receipt of this dreaded envelope effectively marks the beginning of a 60-day period during which the Revenue expects miscreants to make a full disclosure of their tax liabilities and to forward a cheque for the unpaid tax plus interest and penalties. These cheques should arrive at the Revenue by close of business on March 27th.

The letters are sent out based on a "broad sweep" as the Revenue gets information from the banks. Some sources have reported that one postman in the Munster region had 300 of these letters to deliver to individuals on one street this week.

Some people have been rightly upset to be on this mailing list and were mortified to have the postman knock at the door. They are largely claiming they have no case to answer as they were entitled to have funds in a non-resident account at the time.

The Revenue is unconcerned at the embarrassment and is insisting that if you are innocent, you will have documents to prove it. "There may be people who will get letters who legitimately held those accounts but we will require written proof of this. These individuals need to have something they can rely on to say that they do not have a tax liability. For example, if they say they were living in the UK, they should be able to provide evidence that they paid tax there for those years," the Revenue spokesman explains.

For many, this is not as straightforward as it seems. In one case an individual claimed the initial sum lodged in the account came from a flutter on the horses but, without the docket, this could not be proven. Another had a windfall on the Prize Bonds but had wisely held onto the ticket.

The Revenue has been seeking details of bank accounts with the largest amounts of money in them initially and working its way back. The financial institutions have, in turn, been writing to the individuals identified to alert them of a possible Revenue investigation.

That may have been the first time many of the account holders actually believed they would have to settle up with the taxman. Until then, they had ignored the various tax amnesties and, most recently, the special voluntary disclosure scheme that would have capped the amount of tax, interest and penalties due on these accounts.

"It was only when the letters went out last October that many of these individuals realised this was serious stuff. I suppose it has always been part of the Irish psyche to take a chance and to see how you get on," one accountant says.

The controversy surrounding these accounts blew up more than four years ago and led to the establishment of an Oireachtas committee inquiry into the massive evasion of Deposit Interest Retention Tax (DIRT) by Irish financial institutions in the 1980s and 1990s. The Revenue was ordered to carry out a comprehensive audit at all of the financial institutions to establish how much DIRT had been evaded. It subsequently collected €220 million.

During this process, the State's tax collection agency collected a huge amount of information on these account holders and it quickly began to lodge High Court orders for further details. When it became apparent that there were potentially thousands of offenders and hundreds of millions of euros to be collected, the Revenue offered a special amnesty inviting account holders to make a full disclosure and payment by November 21st, 2001.

It took almost a year for the tax officials to uncover the diehards who refused to pay their dues and it is now rounding up those suspects.

One woman contacted by The Irish Times this week said she simply couldn't cope with it and had buried her head. Now she is making contact with an accountant, unable to sleep and cannot contemplate how she will find the funds to settle what she expects will be a tax bill for more than €3 million.

Tax advisers have held long discussions with the Revenue to ensure they can speedily calculate people's tax liabilities for them within the 60 days allotted. Often the account holders run into great difficulties when they are trying to unearth documentation from the banks. Much depends on individuals working in the branch and the customers' own recollection.

It is clear from those who have already settled that this batch of tax cheats are facing a fairly penal financial punishment. If you had as little as €10,000 in the 1980s, you could now have to sign a cheque for between €50,000 and €60,000 for the Revenue. A number of individuals will end up handing over millions. The Revenue has pledged to issue a closure letter in due course when it accepts that all liabilities have been discharged.

Those who are now pensioners should be concerned that the discovery of their hidden wealth may affect their entitlement to a non-contributory State pension from the State.

Their embarrassment in meeting the postman this week will pale with that endured when details of settlements for more than €12,700 are published in the national newspapers in the Revenue's tax defaulters' list. A few, who fail to make a true disclosure, may even end up in court and could face a spell in prison.

A reaction group, formed by former bank officials, has been established and can be contacted for advice for a fee at 021- 4547011.