Dáil Éireann - Volume 554 - 09 October, 2002
Written Answers. - Fiscal Policy.
Mr. F. McGrath Mr. F. McGrath
395. Mr. F. McGrath asked the Minister for Finance whether cuts in public expenditure were agreed after just 12 days in office. [15572/02]
Minister for Finance (Mr. McCreevy)
Minister for Finance (Mr. McCreevy): At the start of 2002, I introduced a new monthly reporting procedure – based on the monthly Exchequer statements – to keep the Government informed about the public finances. This was to ensure that as the year progressed the Government would have full and timely information on emerging trends and would be in a position to take decisive action if or when problems were identified to them.
In the first four months of the year, the year-on-year increases in overall voted spending by Departments, as published in the Exchequer statements, were January 22%, February 22%, March 17% and April 21%. The end-April expenditure management report which I submitted to Government on 8 May stated that the increase in spending to end-April was affected by timing factors, such as the once-off cost of the 1% lump sum payments under the PPF and the carry-over costs of the budget and PPF measures. The level of spending to end-April was actually slightly below the spending profiles – consistent with full-year spending allocations – submitted by Departments at the start of the year.
Immediately after the submission to Government of the end-April expenditure management report, my Department initiated meetings with a number of Departments to emphasise once again the need to manage within approved allocations. At meetings with the Departments of Health and Children, and Environment and Local Government, held on 9 May and 14 May respectively, those Departments indicated that they were fac ing spending pressures on a number of programmes which could result in overruns on their Votes. Officials in my Department immediately organised a series of further meetings, held between 20 May and 31 May, to examine spending trends on these programmes, ascertain the full extent of the pressures and establish whether and to what extent any potential overruns could be avoided.
On 10 June 2002, I submitted the expenditure management report for end-May based on the end month Exchequer statement published on 5 June. At end-May, the year-on-year increase in expenditure was running at 27% in comparison with a projected annual increase of 14%. In the expenditure management report, I referred to excesses of €300 million across a number of spending areas and I stated my concern that if these trends were uncorrected that they would lead to a significant overrun this year. In order to ensure that spending for the year came into line with the original planned increase some action had to be taken. Mid-year adjustments are a frequent occurrence and they happened on three previous occasions in my term in office.
On 18 June, the Government agreed that additional funds should be provided to meet certain spending pressures including: – additional spending on demand led schemes managed by the Department of Health and Children, spending pressures on roads and homeless recoupment in the Department of the Environment and Local Government, extra costs of the supervision and substitution arrangements in schools, and additional spending on prison officer overtime. In order to ensure that additional funds could be provided for these areas – and yet live within the 14% increase – it was agreed that necessary expenditure adjustments should be implemented across a number of other areas.
Mr. F. McGrath Mr. F. McGrath
396. Mr. F. McGrath asked the Minister for Finance if he will examine economic strategies to tax the €5.5 billion in offshore accounts; and his views on whether there needs to be a close watch on Irish banks and their financial transactions. [15576/02]
Minister for Finance (Mr. McCreevy)
Minister for Finance (Mr. McCreevy): I believe that the sum referred to by the Deputy may have been derived from a sum claimed by Deputy Jim Mitchell in a priority question on 17 May 2001, on the basis of a report by an accountancy firm, to be held by Isle of Man branches of Irish banks. As I said at the time I was aware that such a figure had been put into the public domain.
The issue in relation to offshore accounts is an international one. It is being actively tackled on a number of fronts internationally, particularly by the European Union and the OECD. As regards existing powers and initiatives aimed at deterring and detecting evasion and avoidance using offshore havens, the position is broadly as follows. Since 1974 Irish resident individuals have been liable to income tax in respect of income from  assets or moneys transferred abroad, notwithstanding that the assets or money may have been placed in a trust or holding company. Revenue have powers to seek information from professionals or banking intermediaries acting in relation to such transfers. Since 1992 Irish intermediaries – banks or professional advisers – who act for or assist Irish residents in opening a foreign bank account are obliged, without being asked, to make a return of this fact to Revenue.
In 2001, Revenue assigned a group of its investigation branch tax inspectors to investigate Irish residents who held assets overseas and to establish the extent to which these assets were used to shelter income or gains from Irish tax. One of the priority projects undertaken by the group relates to bank accounts held by Irish residents in the Isle of Man.
The Revenue Commissioners have recently commenced negotiations with the Isle of Man authorities on a bilateral tax information exchange agreement. The agreement is aimed at facilitating information exchange including bank information relevant to criminal tax matters by end-2003 and for civil tax matters by end-2005.
There have also been developments in this area at EU level. Agreement in principle has been reached on a draft EU savings directive which it is intended will be transposed into law by 1 January 2004. The draft directive, through exchange of information, is aimed at ensuring the effective taxation of savings income in the form of interest payments made in one member state to individuals resident for tax purposes in another member state. Member states have committed that their associated and dependent territories such as the Isle of Man will adopt the same measures as those in the draft directive.
The Deputy will recall that the Moriarty tribunal has, as part of its terms of reference, been asked to make whatever recommendations it considers necessary or expedient “for the protection of the State's tax base from fraud or evasion in the establishment and maintenance of offshore accounts, and to recommend whether changes in the tax laws should be made to achieve this end”. The tribunal was also asked to make recommendations “for enhancing the role of the Central Bank as regulator of the banks and of the financial services sector generally”. I await with interest any recommendations the Moriarty tribunal may wish to make in this regard.
In the meantime, on the matter of Irish banks, I am considering proposals in the context of the Central Bank and Financial Services Authority of Ireland legislation which would enhance the ability of the Central Bank to share relevant information with the Revenue Commissioners, subject to the constraints imposed by EU law.
Finally, it should not be concluded that all money held in offshore accounts represents tax evasion. Offshore branches or subsidiaries of Irish banks deal with customers who are not tax resident in Ireland, including UK and international corporate depositors. Furthermore there  may be entirely legitimate reasons as to why Irish corporates and individuals will have funds deposited abroad. In this connection, the Deputy will be aware that there are many billions of euro deposited in Ireland from abroad on a legitimate basis.
Dáil Éireann 554 Written Answers. Fiscal Policy.