Time for new system to fight tax evasion

We are now about to enter the last lap of the DIRT Inquiry. Four weeks from today is the deadline for former holders of bogus non-resident accounts to make a voluntary disclosure.

If they do, they will benefit from a concession (the Revenue refuses to call it an amnesty) whereby they will: remain anonymous; be charged a maximum of 100% interest plus penalties, and not be prosecuted.

If they do not, the Revenue Commissioners have warned that: their names will be published; they will pay the full interest and penalties which could be as high as 400 per cent, and criminal prosecution will be pursued.

Of the 300,000 non-resident accounts identified by the DIRT Inquiry, the Revenue chairman, Mr Dermot Quigley, has said that up to 50,000 may have been bogus. Yet to date, only around 300 account holders have voluntarily come forward to the Revenue and between them have paid £10 million (€12.7 million).

A figure of £700 million has emerged from somewhere as the estimate of what might be due to the Revenue.

I do not know the basis for this figure. It is difficult to establish any firm means of calculating the order of outstanding sums. Two possible formulae might be considered.

In the case of the Miltown Malbay branch of the Bank of Ireland, the Revenue, based on information received, managed to recoup £200,000 in outstanding DIRT plus £1.8 million in other taxes evaded. This indicates a multiple of nine. If this were a valid methodology the Revenue might be expected to recoup nine times the £173 million already paid back by the financial institutions in respect of DIRT evaded by their customers. This is an unlikely high figure.

Alternatively, if we take as the basis the fact that the Revenue have received £10 million for all evaded taxes from 300 bogus account holders, then an average of £33,300 per account is due.

As there are up to 50,000 accounts, this would indicate a due figure of £160 million. However, even this figure might have to be reduced bearing in mind that some of the account holders may have taken advantage of either of the Fianna Fβil tax amnesties of 1988 and 1993. Nonetheless, £160 million seems to me to be surprisingly small.

The Revenue Commissioners are almost certain, within days of 15th November, to seek a High Court order under Section 908 of the Taxes Consolidation Act which would force the financial institutions to reveal the full details of all bogus non-resident accounts. Under the same Act, the Revenue have powers to access any bank account they suspect to be bogus.

However, they must have some reason for believing this. After November 15th the banks will be required to reveal all and have indicated through public advertisements, placed by the Irish Bankers Federation, that they will do so. It will be interesting to see the effects of this move.

In reality, any former holder of a bogus non-resident account has only days in which to act, as they need to get full statements from their bank regarding their accounts for the period of years in which they were opened. This takes time.

Clearly, Irish society is heading towards a new phase in the enforcement of tax law.

Regrettably, even with a High Court order and armed with all the attendant evidence that that will produce, the Revenue Commissioners cannot guarantee prosecution in any one case.

While the practice was changed some years ago, as a result of which it transferred from the Garda S∅ochβna to the Revenue the responsibility for assembling the evidence, it is still the law that the Director of Public Prosecutions has to decide on whether to proceed with each and every criminal prosecution.

It is true that, since the DIRT inquiry, there has been a streamlining of relations between the Director of Public Prosecutions and the Revenue.

It remains a fact, however, that the number of criminal prosecutions brought each year is still only a handful.

For instance, there have been only 15 criminal convictions since 1995 for breaches of tax law and only 37 cases are currently being considered.

The truth is that the Revenue Commissioners have had a culture of non-prosecution for many years. Until now this does not appear to have changed.

In Northern Ireland and Great Britain there have been many high-profile jailings following successful tax evasion prosecution but not one in the Republic. The question is: why?

It seems to me that the time is now ripe for the establishment of a separate Fiscal Prosecutor and a separate Revenue Court, both with the necessary specialist expertise to facilitate the speedy, certain and effective prosecution of serious tax evaders from now on.

Can any Fianna Fβil Government be expected to have the necessary political will?

Jim Mitchell is deputy leader of Fine Gael, and the party's finance spokesman. He is a former chairman of the Public Accounts Committee.