Taoiseach must settle account on tax amnesty

Five years ago, I was strolling across the courtyard of Dublin Castle when I met a senior official of the Revenue Commissioners…

Five years ago, I was strolling across the courtyard of Dublin Castle when I met a senior official of the Revenue Commissioners, which has its headquarters there. He was a walking illustration of all the cliches that journalists use to describe people in shock: ashen face, glazed expression in the eyes, head shaking involuntarily in utter disbelief, voice hesitant and barely audible.

He had just been informed that the Cabinet had decided that day to bring in another tax amnesty. After a "last chance" amnesty a few years before, after immense efforts to convince the public that the tax system was now credible and fair, the Fianna Fail/Labour coalition government had decided, out of the blue, to reward schemers, cheats and chancers for their contempt for both the law and social obligation.

It has always seemed to me that much of the corrosive cynicism about politics that is now so evident in Ireland can be traced to that moment. It wasn't just the decision itself that was disastrous: it was the timing. It came at a moment of hope. A few months previously, in the 1992 election, Labour had been given its historic 33 seats.

Dick Spring had emerged as a figure of real substance, an alternative to the sleaze and opportunism that had characterised the use of power by Charles Haughey and his cronies. The new government was committed to a series of radical reforms. Openness, accountability and transparency - remember them? - were the watchwords.

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The tax amnesty was the hollow, sneering answer to all of that foolish hope. Its effect on public trust is still with us. It became clear that there was no crisis in the public finances so urgent that desperate measures were required.

It became clear, too, that some of the nastiest people in Ireland - drug-dealers, bank robbers, gangland generals - had benefited from the amnesty, and that the State had effectively facilitated organised crime.

We have learned also that senior members of the business and political establishment were up to their necks in tax evasion. The McCracken Tribunal found that "Mr Ben Dunne knowingly assisted Mr Michael Lowry in evading tax". We have learned that offshore accounts were held by Charles Haughey, Michael Lowry and others and that respectable banking institutions had a regular practice of funnelling their clients towards the Cayman Islands, the Isle of Man, and other paradise islands where the money is hotter than the weather.

As all of this has emerged, the 1993 tax amnesty has stayed alive in the public mind, kicking in the teeth anyone who contends that honesty and justice can be the basis of public policy in Ireland.

The great mystery of the tax amnesty is why it happened. In his recently published political memoir, Fergus Finlay, Dick Spring's closest adviser, does not provide an explanation for what he calls "an amnesty for every sleazebag in the country". He confesses frankly his inability to illuminate the origins of the amnesty. On the contrary, he provides details that make the whole thing seem darker and even more mysterious.

According to Finlay's account, the proposal was strongly opposed by Bertie Ahern, who was then minister for finance. But it was so strongly supported by the then Taoiseach, Albert Reynolds, that Dick Spring feared a confrontation that would threaten the stability of the government at that early stage of its existence. The apparent passivity of Spring and the other Labour ministers is inexcusable. But Finlay's account suggests that they believed that the amnesty would not get through Cabinet because of Bertie Ahern's passionate objections.

As he tells it, however, those objections were suddenly dropped: "On the day the Cabinet was to make a decision on the amnesty, Greg Sparks (another Labour adviser) reported to the meeting of Labour Ministers that, unusually, he had received a phone call at one in the morning from Bertie Ahern. Bertie was absolutely resolute, Greg reported, and determined to ensure that the amnesty didn't go through . . . Three hours later, the Cabinet adopted the amnesty Bill. As far as I know, no arguments were put forward on behalf of the Department of Finance . . ."

The suggestion, presumably, is that something suddenly persuaded Bertie Ahern to keep his objections (and of course those of the Revenue Commissioners, whom he represented at the cabinet table) to himself. This may be a completely inaccurate suggestion.

Fergus Finlay, after all, did not attend Cabinet meetings. But it is now in the public domain and it does come from someone who was extremely close to the inner workings of that government. If it is allowed simply to hang there, it will further deepen cynicism.

It is not, of course, that there is any suggestion of improper conduct on the part of the Taoiseach of the day or of anyone involved in putting forward the amnesty. Presumably, those who supported it did so because they thought it was the right thing to do in the national interest.

Equally, Bertie Ahern's apparently angry objections to the whole notion do him great credit. But in a public atmosphere of mistrust and cynicism, there is an obligation on those in power, and particularly on Bertie Ahern, to clear up the mystery.

The public needs to be assured, for example, that the amnesty had nothing to do with the Beef Tribunal, which was then taking evidence. Such an assurance is necessary because, by the time the amnesty was introduced, Goodman International had admitted to the tribunal that it had engaged in long-term, systematic tax evasion. On foot of these revelations, the company was then in negotiations with the Revenue Commissioners.

As the Hamilton Report subsequently noted, "from June 1993 onwards, these negotiations took place in the context of the provisions" of the tax amnesty. This meant that a company which had enjoyed a very close relationship with Fianna Fail did not have to pay interest of 1.25 per cent a month on massive amounts of tax evaded between 1983 and 1991, saving it (and costing the Exchequer) many millions of pounds. Since no one was ever prosecuted for this huge fraud, it must be assumed that the amnesty was also used to stave off possible legal consequences for those who conspired in this way to flout the tax laws.

The public needs assurance, too, that the tax amnesty had nothing to do with the fact that senior political figures such as Charles Haughey and, allegedly, Ray Burke had received substantial payments from business people which had not been declared for tax. There is nothing to suggest that any such motive played a part in the amnesty, but it would be good to have that confirmed on the record.

The one pleasant aspect of this mystery, though, is that it does not need an expensive tribunal to clear it up. There is one person who can tell us quite simply whether Fergus Finlay's account is accurate and, if it is, what happened to change Bertie Ahern's mind. Since that person is the Taoiseach and he has a privileged forum in the Dail, we can look forward to a statement that will undoubtedly do much to restore public confidence in the state of political leadership.