| The ‘It’s not an amnesty’ amnesty |
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| Faced with a handful of unpopular banks, the PAC demanded blood (or rather, lots of money, which for a bank is the same thing). Faced with an estimated 50,000 voters/taxpayers the PAC accepted pragmatism. Is the reaction a correct one? Is the manner of delivery appropriate? |
Not an amnesty?
The Revenue Commissioners have issued a statement of practice on the manner in which they will deal with an estimated 50,000 tax evaders who made false declarations of non-residency to open bank accounts in the State.
This statement of practice promises that there would be no prosecutions by the Revenue, no publication of names of the evaders, and a capping of interest and penalties at 100 per cent of the tax. This treatment is dependent on those having bogus non-resident accounts paying their taxes by mid November, and making an appropriate declaration.
It has been stated that this is not an amnesty. If it is not an amnesty, then what is it? Surely an offer not to prosecute criminals amounts to an amnesty? It can hardly be argued that the prosecution would be a formality on the grounds that the tax evaders will have paid penalties in their settlement. There is no certainty that they will have paid any penalty as part of their settlement. Since the overall total of interest and penalties is capped at 100 per cent of the tax, some persons may not even pay the full amount of interest, let alone any penalties.
This is more than a quibble over words. If those who approve of the proposed course of action feel unable to face up to it’s true nature, as an amnesty, it suggests we should look more closely at what is being done, and in particular at how it is being done.
Peculiar features
The proposed treatment of those tax evaders who made use of a false non-residency declaration with an Irish Bank has some peculiar features.
The first peculiar feature is the evaders are not being called upon to pay their full tax liability. They will be not be paying their full tax liability because they are being given credit for withholding tax which they never suffered or paid. One of the features of a non-resident account was that DIRT was not operated on the interest paid. Yet the account holder upon settling his tax liability, will be allowed to take credit for the DIRT which he evaded.
It is true that the banks have made settlements with Revenue in respect of the DIRT which was not withheld. But that DIRT was paid by the banks, and the cost of it was borne by their shareholders. It was not paid by the account holders and no part of the cost of it fell on them. The offer to them of a credit for this notional tax seems generous in the circumstances. It is difficult to reconcile with the claims by politicians that what is involved is not an amnesty.
The offer not to prosecute, and not to publish names has been made without regard to the circumstances of the individual account holder who evaded tax. Anecdotal evidence would suggest that non-resident accounts were opened, not so much to evade taxation on the interest on those accounts, but to conceal the proceeds of tax evasion in relation to other income and gains. Yet no distinction is made between an individual who may have systematically evaded taxes for his entire lifetime or perhaps on the totality of his income, and done so in a most deliberate and organized manner over the full range of taxes (income tax, capital gains tax, capital acquisitions tax, value added tax, PRSI, and levies) and an individual who succumbed to temptation on a single occasion, for example in relation to a taxable gift on which he did not wish to pay tax.
Even more strange is the distinction made between those who may avail of the amnesty (sorry, statement of practise), and those who may not. The sole qualification required to bring a tax evader within the terms of the statement of practice is that he should have made a false non-residence declaration to an Irish Bank. This false declaration is now his passport to avail of the new arrangement in respect of all tax irregularities, even irregularities unconnected with the bank account in question.
If an individual had a multiplicity of accounts in the Isle of Man and the Channel Islands, the statement of practice appears to apply to the monies he squirreled away there as much as it applies to whatever sum he left onshore. In contrast, a tax evader who didn’t make a false non-residence declaration to a bank, but lodged the proceeds to his normal bank account, held in his own name as a resident, is excluded from the benefits of the statement of practise. If his evasion is detected, there would be no capping of interest and penalties, no freedom from prosecution, no shielding from the shame of publication. Why? Because he failed to make a false non-residence declaration to a bank.
The excluded
Not all of those who made false declarations are shielded by the statement of practise. Those whose affairs may come under the scrutiny of the tribunals, or who had an Ansbacher account, may not avail of the offer.
There is of course no reason why people should all be treated the same, if their circumstances differ. But there is no apparent attempt here to differentiate between the guilty on the basis of their circumstances. Neither the amount of their defaults, nor the period of time over which they occurred, nor the steps taken to conceal them in terms of false accounting are taken into account. All that is taken into account is the presence or absence of a non-residence declaration, and whether the individual will be reviewed by the tribunals. This is hardly a sophisticated method of sifting sheep from goats, even by the standards of a foot and mouth cull.
None of the matters referred to above necessarily means that the proposals in the statement of practice are not perfectly sensible and justifiable. No doubt those in the Revenue Commissioners who worked to produce these proposals believe them to be in the best interest of the tax paying public and of the State. However, the issues raised above are serious.
So also is the potential impact of this amnesty on any future attempt to prosecute persons excluded from it. The courts may well baulk at the crude methods used to distinguish between those who are to be prosecuted and those who are to remain anonymous. There also must be worry as to what message is given both to those that pay their taxes (whether they like doing it or not) and to those who have in the past evaded taxes. The message they may receive could be that evasion is okay and that it will be alright on the day if you are unlucky enough to be caught, because after all, everyone does it.
Legislation needed
The 1993 Amnesty was to be the last and final amnesty. It was bitterly criticized at the time by some politicians, as is their right. But it at least had the justification that at the time there were believed to be large amounts of ‘hot money’ in offshore accounts whose detection would be next to impossible if the account holders did not voluntarily come forward. No such excuse exists at present. Those who have made false non-residence declarations are certain of detection. In November the Revenue will go into the banks (as they are entitled to do right now, without waiting) and will have access to the full list of the account holders, and their bank statements.
What is being done has serious implications for the whole tax system. It involves disregarding existing law in a range of areas. The Revenue Commissioners have powers of ‘care and management’ to make pragmatic decisions on the collection of taxes. They are not obliged to waste their resources on chasing small sums of money with little hope of collection. But adhoc decisions on individual taxpayers are a very different matter from the present statement of practise, applying as it does to perhaps 50,000 taxpayers without regard to their circumstances. Surely this is something that should be dealt with only by legislation.
The solution may be right. But it is a solution that our politicians should show that they are willing to stand over, by publicly walking through the voting lobbies in support of it. It is not appropriate that such a major measure should be carried through by the public service alone, even with messages of support from politicians.
When the DIRT system was first legislated for the Revenue Commissioners were pragmatic in their response. This whole system gave them almost no powers to police it. Pragmatically, they didn’t waste their time where they were powerless. For that pragmatism they were roundly condemned by the same politicians who had legislated for a very flawed system. The Revenue Commissioners would be wise to keep their pragmatism in their hip pocket on this occasion, and let the politicians stand up and be counted. |
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| Article appeared in the May 2001 issue.
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