Dáil Éireann - Volume 445 - 11 October, 1994

Adjournment Debate. - Tax Amnesty Analysis.

Mr. Rabbitte: Thank you, a Cheann Comhairle, for giving me the opportunity to raise this important matter. It has been said that the best servants of the people, like the best valets, whisper unpleasant truths into their masters' ears. It is a matter of some regret that in the case of the Tánaiste his advisers did not heed this advice; rather they allowed him effectively to endorse the codification of tax fraud, and the country is still paying the price. The Exchequer may well have lost out financially on other tax revenues which could have been collected were it not for the diversion of staff. Overall the Exchequer has possibly lost out to the tune of several hundred million pounds — the difference between the 15 per cent bargain basement rate and what would have been collected if these staff had not been diverted. It is hardly surprising that the details are being kept under wraps.

The most damaging political blow wielded by Fianna Fáil on the reputation of the Labour Party during the past ten days was the deliberate and calculated leaking by sources close to the Taoiseach of the quiescent stance of Labour Ministers at Cabinet when the tax amnesty came up for approval. We have the Taoiseach's word for it that with the exception of the Minister for [1442] Finance not one Minister complained about the implementation of the tax amnesty. Labour Party supporters and compliant taxpayers will find it unbelievable that not one of the six Labour Ministers around the Cabinet table raised a murmur of dissent when this charter for cheats and criminals was put in place, a charter which was subsequently availed of by the Goodman organisation which professionally organised the biggest tax evasion scam in the history of the State.

This is not just a question of financial loss to the State, it also relates to the damage caused to our moral credibility. The granting of an amnesty to those who deliberately set out to avoid paying their fair share of tax was wrong in 1989 and in 1993 when the Labour Party gave it its imprimatur. Tax evasion is not a mere misdemeanour, it is a crime. Every pound in tax avoided is an extra pound on the tax burden of compliant taxpayers, ordinary citizens whom the Government promised to champion.

Last year was a bad one for the taxpayer. There was a threat that the tax system would be undermined as a result of the implementation of the Waiver of Certain Tax Interest and Penalties Act, 1993. The Constitution is a masterpiece of brevity and clarity on this point. It clearly sets out the powers of the Comptroller and Auditor General — he shall be appointed by the President on the nomination of Dáil Éireann and shall report to Dáil Éireann. It is clear that the constitutional status of the office held by the Comptroller and Auditor General cannot be undermined by laws passed by this House.

In regard to his report, the Comptroller and Auditor General has said he was informed by the Revenue Commissioners that “whatever about the formal legal position, it was their view that the publication of the carrying out of such an exercise and of the comments based on it would call into question the fundamental confidentiality arrangements on which the incentive amnesty was based”, This is a reference to the [1443] attempts by the Comptroller and Auditor General to carry out on a random sample basis an analysis of certain data concerning the efficacy of the tax amnesty. It appears that he has been obstructed from doing his work in the manner he is entitled to do as a constitutional officer of the State.

The Minister for Finance was alone among his Cabinet colleagues in opposing the tax amnesty. This explains the timidity with which he put the measure through the House. However, he managed to extend it without ever giving us a credible explanation as to why he was doing so. Having regard to the information which has come to light, one wonders why he did.

This is an issue which requires more explanation. Can the Minister assure the House that, irrespective of any requirements of confidentiality legislated for by this House, the Comptroller and Auditor General, as a constitutional officer of the State, will not be obstructed in carrying out such analysis as he feels is necessary to measure the effectiveness of the tax amnesty as against people who previously availed of the 1989 tax amnesty and what would have been yielded if the ordinary tax collection system of the State was allowed to do its job in the normal fashion?

Minister for Finance (Mr. B. Ahern): I am glad of the opportunity to set the record straight on this matter and I thank Deputy Rabbitte for raising it. There is no question of the Revenue Commissioners hampering or refusing to assist the Comptroller and Auditor General in carrying out his duties. Before going into detail, it is necessary to recall the background to the amnesty.

The recent tax amnesty scheme was provided for, and implemented in accordance with, the Waiver of Certain Tax, Interest and Penalties Act, 1993, which was passed by the Oireachtas in July of that year. As Deputies are aware, the amnesty arrangements [1444] resulted in the securing of £260 million for the Exchequer.

It is important to bear in mind that the amnesty scheme effectively contained two types of amnesty: an incentive amnesty, for individuals only, under which they could settle their tax liabilities up to 15 April 1991 by paying 15 per cent of the relevant income or gains and a general amnesty under which both companies and individuals could settle liabilities by paying the tax in full but without interest or penalties. There were a number of exclusions, broadly related to cases at investigation or enforcement at the time the amnesty was announced.

It was recognised that a key to the success of the amnesty, especially as regards people with undisclosed income who did not avail of the 1988 amnesty to any significant extent, was to provide guaranteed confidentiality for participants. This was to give an assurance that people could put their tax affairs in order through the 15 per cent incentive amnesty without any question of being marked out subsequently for Revenue attention.

To give effect to this fundamental aspect of the amnesty, special arrangements were put in place under the legislation. These involved the establishment of a special office distinct from revenue's normal operations — the office of the chief special collector — to deal with applications for the incentive amnesty. The arrangements are set out in section 7 of the 1993 Act. The special office was headed by the chief special collector and staffed by special collectors, all of whom were required to make declarations of confidentiality over and above the normal Revenue confidentiality obligations. There was to be no contact with, or provision of information to, normal Revenue officials except in clearly defined circumstances, that is, the validation of declarations and payments under the incentive amnesty.

[1445] Notwithstanding the confidentiality requirements, the legislation allowed information on the operation and outcome of the amnesty to be made available in certain circumstances. It allowed certain information, in aggregate form, to be given to the Minister for Finance or the Revenue Commissiones. It also allowed the provision of such information to the Comptroller and Auditor General or the Accounting Officer of the Revenue Commissioners as they might reasonably require to ensure that special collection functions have been discharged in accordance with the Act. Section 7 (5) states that, where such information is provided, it may be used only to ensure that special collection functions have been carried out properly. The proviso to section 7 (5) indicates that the relevant provisions shall not prevent the Comptroller and Auditor General from carrying out his functions, including exercising his reporting duty to Dáil Éireann. This proviso was inserted by my Department after consultation and in agreement with the Office of the Comptroller and Auditor General. Thus, the provisions were intended to protect the position of the Comptroller and Auditor General, while safeguarding confidentiality for the reasons I have outlined.

It is in the operation of these provisions that the difference of opinion to which the Deputy refers, and which is elaborated upon in the recently published 1993 Report of the Comptroller and Auditor General, has emerged. As well as carrying out an audit of the Office of the Chief Special Collector, the Comptroller and Auditor General sought to use the outcome of the incentive amnesty to check on the effectiveness of Revenue's normal procedures for collection of taxes. He did this by using sampling methods which compared information obtained from the Chief Special Collector's Office with data on Revenue's normal records. I should make it clear that, as he has [1446] stated publicly, the Comptroller and Auditor General was not obstructed in any way by the Revenue Commissioners in carrying out this sampling. Indeed, the Revenue Commissioners first became aware of this sampling when they were asked for comments on the draft report prepared by the Comptroller and Auditor General.

In subsequent correspondence, the Revenue Commissioners expressed concerns about the carrying out of the sampling exercise and the proposed publication of material based on it. The Commissioners made clear that, in expressing these concerns, they had no desire to challenge the role and functions of the Comptroller and Auditor General and that the decision on material to be included in the report was a matter for him. The Revenue Commissioners have always co-operated fully with the Comptroller and Auditor General in his assessment of the normal Revenue collection procedures and the Comptroller and Auditor General has full access to all the data available on the normal activities of Revenue.

In this instance, however, the Commissioners had to be conscious of the fact that the amnesty legislation is placed under their care and management. They were concerned that sampling of information in the manner envisaged and publication could, directly or indirectly, lead to a breach of the embargo on the communication of data from the Office of the Chief Special Collector to other parts of Revenue or elsewhere. The Revenue Commissioners raised a question about whether the legislation envisaged solely an audit of the operations of the Chief Special Collector's Office or could be used for the purposes of a wider check of Revenue's normal operations which, as I have mentioned already, are in any event subject to ongoing audit by the Comptroller and Auditor General. [1447] They also questioned the appropriateness of publication of comments and analysis based on the sampling exercise. The Chief Special Collector expressed similar concerns and indicated that he had pointed out to the auditor that the access he had allowed to information in his office was solely for the purpose of the audit of the operations of his office.

It will be very clear from what I have said that there is no wish on the part of either Revenue or the Government to frustrate the Comptroller and Auditor General in his important duties. It is also clear that Revenue had reasonable grounds for raising the points it did in regard to the operation of section 7 of the Act.

The Comptroller and Auditor General has indicated that he is seeking legal advice on the relevant provisions of section 7 of the 1993 Act in this regard and Revenue has welcomed this. We must await the outcome of that consultation. It is important to note that, whatever that outcome, the Comptroller and Auditor General has emphasised in a public statement that there is no question of publication of information on details of individuals who availed of the amnesty.

I hope that this has helped clarify the position to the satisfaction of the House.